Oil is closing in on an inflation-adjusted all-time high, as it reached $97 a barrel today, based on a number of factors. The all-time high would be at around $100 a barrel, based on the adjusted numbers of early 1980.
Some of the key reasons for the hike are a weak dollar, perceived lower inventories, increasing demand, continual attacks on pipelines, and weather-related shutdowns - like recently in Mexico.
The Energy Information Administration says oil consumption will continue to rise, even with increasing prices, and inventories probably will fall. If that happens, it means there's really no way of knowing where the prices will end up, and how long consumers will continue spending on gas and at what price level demand will decrease.
Projections are all over the map as far as where it will end up, as some say prices could increase to between $3.50 to $4 a gallon by next summer. Others see the price of oil going for anywhere from $50 a barrel to $120.
From another viewpoint, there are a number of analysts that are saying speculators are artificially driving the prices up at this time.
Can we do anything about this from a management perspective? Not much. The information is too volatile and unruly at this time to be able to make any realistic decisions on where anything is going.
About the only thing we can do is plan out some different scenarios based on either end of the spectrum, concerning if these things could have an effect on our businesses.
Another thing to realize is this isn't new ground we're breaking, as we've had this same scenario back in 1980, when oil prices were the same when adjusted for inflation.
In the end, business has went through difficult periods and survived, and they will do it again. At times like these one thing that can make a difference is cutting down on our debt load in case our business is hurt from rising energy prices. That way we are ready if people or companies start to tighten up their wallets until things settle down.
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