WEST LAFAYETTE, Ind. — Oil prices spiraling to a record $119 a barrel will spur businesses to compensate for higher operating costs, says a Purdue University economist.
Businesses will consider ways to cut fuel and energy consumption, along with lowering delivery costs, says Gerald J. Lynch, a professor in Purdue’s Krannert School of Management.
Some may lock in fuel prices with long-term contracts or share delivery shipment costs with suppliers. Lynch says businesses also could cut back on travel in favor of videoconferencing. Rather than increase mileage reimbursements, companies also might purchase more fuel-efficient vehicles for their employees to use.
“In general, people are going to invest the time and effort it takes to save energy because now they’ve got an economic incentive to do it,” Lynch says. “People didn’t install insulation in the 1970s because they suddenly decided they had a patriotic duty to insulate their homes. They did it because the value of the energy saved was greater than the cost of insulating.”
The same incentives will prompt businesses to examine cost-saving measures as the cost of gasoline hovers at what the Lundberg Survey reports is a record $3.47 a gallon average nationally Lynch says.
