Oil Prices: Cause and Effect

Why is crude oil so expensive? Why does it matter?

The price of crude didn't rise from $12 in early 1999 to nearly $60

because the world suddenly ran out of oil. On the contrary, the

world supply of petroleum has risen 10 percent since then,

according to the International Energy Agency (IEA), from 65.8

million barrels a day in 1999 to 72.5 million in 2004. Cambridge

Energy Research Associates estimates global oil production

capacity will increase at least twice that rapidly over the next five

years -- by as much as 16 million barrels a day by 2010.

 Oil prices did not quintuple after 1999 because Americans

suddenly switched from mini-cars to SUVs. On the contrary, if all passenger cars, pickups and

SUVs were replaced with bicycles, the United States would still import a lot of oil.

 We import nearly 58 percent of all petroleum, yet only 45 percent of each barrel is used to 

produce gasoline, and a significant portion of that gasoline is used in delivery vans and taxis.

Commuter and leisure driving accounts for little more than 40 percent of the oil we consume -- 

far less than the amount we import. The rest of each barrel of crude is used for heating oil 

and diesel fuel for trucks, busses, farm machinery and ships (23 percent), petrochemicals 

(17 percent), jet fuel (9 percent), asphalt (4 percent) and propane (4 percent).

U.S. industries use petroleum to produce the synthetic fiber used in textile mills making

carpeting and fabric from polyester and nylon. U.S. tire plants use petroleum to make synthetic 

rubber. Other U.S. industries use petroleum to produce plastic, drugs, detergent, deodorant, 

fertilizer, pesticides, paint, eyeglasses, heart valves, crayons, bubble gum and Vaseline.

When the cost of oil goes up, production costs are increased and profits reduced for industries 

that depend on oil. Producer costs -- not consumer gasoline costs -- are the reason high oil

prices threaten to shrink industrial production of goods directly affected and also of energy-

intensive products such as aluminum and paper. This threat affects all new and old industrial 

economies, whether those nations import or export oil. The United States may be least

vulnerable because of superior energy efficiency and a larger service sector.

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Using your sales force to jump-start

growth

There’s a reason it’s called a sales force. Here are four innovative ways 

companies can use their sales reps to drive growth.

There’s no escaping the impact of the sales force on

your company’s growth trajectory. This is the frontline group best

placed to gain an intimate understanding of existing customers,

to observe the forces at work in an industry, and to identify

potential new business. During the past year, we interviewed

about 100 sales executives around the world, across a range of

industries, to identify the critical elements that distinguish true

sales leaders from also-rans. This article highlights four

intriguing ideas the executives described for leveraging the sales

force to jump-start growth. Together, these suggestions offer

practical insights for sales groups, as well as a starting point for discussions among CEOs and other 

senior managers hoping to get more from sales and marketing investments.

 

Look over the horizon

The sudden arrival of a truly disruptive technology—one that upends markets in ways few 

anticipate—presents obvious challenges to industry incumbents. Yet it’s also a huge growth 
opportunity. One supplier of parts to high-tech manufacturers has created a team of “speculative 
market analysts” to better identify the emergence of disruptive technologies and to predict their 
business implications. The team helps the company to position itself as a supplier that’s ahead of 
the curve and to enjoy superior sales growth while competitors scramble to catch up.

The full-time team cuts across all business units and draws on a variety of internal and external 

sources: the sales force provides insights into the technology initiatives of the company’s customers 

while continually pressing them for feedback about its shortcomings and the efforts of competitors.

In addition, the team closely scrutinizes all reports from competitors and customers—easier said 

than done, given the sheer volume of market information emanating from countries such as China. It 

even fosters close ties with venture capital firms and provides up-and-coming companies with

funding and “sweat equity” to convert innovative concepts into realities. Together, these efforts have 
helped the company’s sales force to get ahead of recent major disruptive trends, including the boom 

in tablet devices and e-readers, as well as the growing fields of LED lighting and solar technology.

What’s more, the team’s efforts are generating an estimated annual return on investment that

exceeds 12 percent.

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