The wolf is howling outside the door

Sunday, January 27, 2008

Thanks to Hans Noeldner for calling attention to an article by Chuck Taylor from Supply Chain Quarterly. Taylor clearly understands the implications that will ripple through our lives as cheap oil becomes fades to a distant memory:

. . . what most profoundly shaped my view was my experience in 1973, when I was working for a tank-truck carrier in Houston and saw oil prices triple as a result of the Arab oil embargo. I watched as rising oil prices and shortages caused high inflation, recession, unemployment, rationing, plant closings, transportation equipment shortages, and long lines at gas stations. At that point, I knew at a gut level that oil is the lifeblood of our economic system; that high oil prices have an undeniable impact on that system; and that as a supply chain professional, I should know what was going on in the oil patch.

I am now convinced that, unlike the events of 1973, the situation we face today is not a short-term predicament. It's a multifaceted problem. It is unlike anything we've encountered before. It is non-negotiable. It will not be easy. It will change everything.

The time to prepare is short because reducing our dependence on cheap oil will take decades. Supply chain professionals will have to examine alternatives to current practices and consider new strategies in preparation for the end of the era of cheap oil.

To put it bluntly, the wolf is howling outside the door and may already be in the room.

Hubbert's Peak is about what goes on underground, but global demand, geopolitics, the health of the oil industry, and the environment are aboveground factors that add complexity and risk. This article will look at each of these factors, examine alternatives, and suggest mitigation strategies in the context of supply chain performance.

A sidebar to Taylor's article lists what "supply chain professionals should realize" as the end of cheap oil nears:

- Cheap petroleum energy has been a main driver of supply chain productivity. It is gone.
- This is not the end of civilization, but we are in an uncharted bridging period and without prompt and decisive action, human suffering will be high.
- Conservation and changed priorities is the only short-term bridge.
- As the energy and environmental crisis deepens, governments must and will intervene.
- Strategies and networks designed for the good old days won't work.
- There will be winners and losers.
- Winners will embrace conservation and cooperation.
- Winners will seek to influence policy.
- Winners will start implementing their supply chain plans "Now"!