Buying decisions are easy when prices are low – aren’t they?
If you are wondering what buying decisions have to do with low gas prices – read on.
It’s incredible to me that gasoline (petrol for those over the pond) cost’s almost as little a gallon in parts of the US as it is for a liter in Europe!
The economic benefit from a fall in gas prices is substantial. According to motoring organization AAA, consumers saved over $115 billion in gas last year. This week saw production freezes by some of the big oil-producing nations to address the oversupply affecting world oil prices. However, given these production levels are already high – the impact is muted.
One thing we know is that with a finite resource and world population growing by tens of millions every year, the party won’t last. The markets will correct over time. Oversupply will be addressed further by a reduction in exploration investment, constrained supply, and increased demand from a growing economy. Many energy consumers will look back and wonder why they didn’t act to secure the benefit of this lull in prices.
Sure, we can enjoy the current low prices at the pump, but we are limited to a tank of gas at a time, but what if we could lock in today’s rates for several years knowing if prices drop further, we could participate in the fall.
Making Effective Buying Decisions
Energy procurement professionals recognize two things determine success – the quality of their decisions and luck.
Sadly not enough companies encourage energy procurement teams to think outside the box in the way they make or analyze decisions. Companies make the mistake of evaluating decisions post-mortem, based on results and hindsight bias rather than the decision itself. This behavior is essential to correct as without embracing alternate decision-making processes, organizations drift into a herd mentality that measures success based on other people’s objectives rather than its own.
Are Buying Decisions Bets?
Energy is a very volatile commodity. Purchasing decisions in this area will always be bets, i.e., a decision about an uncertain future. Companies don’t like to think about themselves as gamblers or risk-takers, but with energy, that is what happens day in and day out. Perhaps worse, most don’t know all the risks of these decisions (or lack of them).
Vervantis use knowledge, data, proprietary software, and risk management tools to help procurement professionals make smarter decisions with more predictable outcomes. Energy sourcing experts apply advanced tendering, pricing, and contracting options to fine-tune energy procurement behavior and strategies to the objectives and risk profile of the business, which means better decisions – every time!
Using SourceRisk™, a proprietary energy procurement and risk management solution, organizations can navigate volatile energy markets, knowing the decision process they use is robust and unquestionable. The outcome, while uncertain, is much more predictable and always in line with their objectives. Better still, decisions made will withstand any post-mortem, hindsight evaluation no matter market prices do.
Learn more about energy procurement and risk management strategies – you can connect with us here or call one of our experts now on: 1-888-988-5474
