The Oil & Gas Squeeze Continues...


A few months ago, I checked if Oil & Gas supply chain costs were catching-up with WTI price increase, and showed they were increasing faster than WTI.


Well, I just checked again... While labor is not increasing as fast at WTI - typical management behavior in O&G -, main steel raw material costs are fully capturing increased margins from WTI price appreciation over past 12 months, showing price increases from 30% to 73%...! And I am not getting into specialty products and services, which are usually carrying higher margins...


As WTI recently dropped, guess what? O&G margins will be squeezed even harder... and paddling back on labor cost is a slow process...


All this is fascinating to me... And I still wonder when Oil & Gas companies will learn and implement supply chain & procurement disciplines well mastered in other industries and sectors...


Hoping that WTI will endlessly go up is not a strategy... managing labor and supply chain cost is a sustainable strategy and a true competitive advantage.

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