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The Oil Price Squeeze
News is Good and Bad for Grocery Retailers
The sharp increase in oil prices along with the early-August shutdown of BP’s Prudhoe Bay oil field and pipeline in Alaska continues to pinch pocketbooks across the country. In a bind particularly are lower-income consumers who have been hardest hit by sticker shock at the pump and who will feel the squeeze even more during this year’s heating season.
Unfortunately, record oil prices have become a fact of life in a nation so reliant on fossil fuels. Meanwhile, variables such as enormous increases in demand by China along with hostilities in the Middle East of supply disruptions in Nigeria had oil tipping the scale at $70 per barrel during the summer, and there is little likelihood it will go down to a more comfortable $30 to $40 per barrel any time soon – if ever. On a more hopeful note, energy experts say the situation is not as dire as it was in the 1970s during the Arab embargo, when price controls at home disrupted the U.S economy.
Negative Impact on Food
However, the extent of the economic damage might not be totally visible for months because any run-up in oil prices negatively impacts everything related to the food industry, including harvesting, production, shipping, packaging and ultimately shelf prices….
“Four years ago, oil was trading for under $20 per barrel. There’s no doubt supermarkets have felt the impact directly or indirectly. Oil impacts natural gas, which in turn impacts electricity,” said Chris Albrecht, director of energy procurement, strategic accounts for Cadence Network Inc., a utility expense management firm based in Cincinnati….
Also Included: Three Strategies Grocers Can Use to Keep Energy Costs in Check
It’s no secret that rising energy prices have put a strain on the supermarket industry, as increases in oil prices continue to cause increases in natural-gas and electricity costs. But there is hope. There are three major ways retailers can fight back and reduce their energy costs….
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