In a early edition of PurchTips entitled “Autopsies of Dead Supplier Relationships,” I discussed how opportunistic behavior can drive a buyer and supplier apart forever.

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Today, we are seeing this happen on a macroeconomic level with gas prices.

The oil companies are indeed pushing the limits with their prices. And profiting, as I described in my earlier post “Gas Prices, Supply and Demand.”

But I believe that they are killing their future opportunities. They have awoken a sleeping giant.

I believe that consumers will conserve. Maybe not today, or tomorrow, or next week. But wait ’til their next vehicle purchases. SUV’s aren’t flying off the lot anymore. And they and their low MPG brethren won’t for a long time.

And corporate purchasing will respond as well. Alternative fuels, hybrid vehicles, and the like are finding their ways into the sourcing strategy of many a professional buyer.

Imagine huge fuel consumers with strong purchasing departments like the US Postal Service and Wal-Mart found a way not to be so dependent on gasoline. How much fuel do they purchase? What will happen to oil companies’ profits a few years from now if these and other big players say “enough is enough?”

Sure, these big players play the forward buying/hedging game, but they are still seeing cost increases.

I believe that purchasers (both consumer and corporate) are going to respond with a massive adjustment to the demand part of the equation. And oil companies’ profits will be a casualty of that response.

Respectfully,
Charles Dominick, SPSM
President
Next Level Purchasing, Inc.
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Charles Dominick, SPSM, SPSM2, SPSM3

Charles Dominick, SPSM, SPSM2, SPSM3 is an internationally-recognized business expert, legendary procurement thought leader, award-winning entrepreneur, and provocative blogger. Charles founded the Next Level Purchasing Association in 2000, oversaw its incredible growth, and successfully led the organization to its acquisition by the Certitrek Group in 2016. He continues to blog and provide advisory services for the NLPA on a part-time basis as he incubates his upcoming business innovations. Charles is also the co-author of the wildly popular, groundbreaking book, "The Procurement Game Plan: Winning Strategies & Techniques For Supply Management Professionals."

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