August 13, 2020
George Schutte leads the energy industry vertical at Crane Worldwide Logistics as Vice President, Energy Services.
With over twenty years of experience and a wealth of knowledge in the energy industry, George recently took part in our 'Coffee with Crane' podcast series to share his industry insight and experience as to the economic impact on the oil and gas industry given the COVID-19 pandemic.
Below is an exert from the podcast interview.
The energy industry has certainly been impacted by COVID-19 but was already struggling prior to the pandemic and was in a downward slump. The gap between supply and demand has been huge. Certainly, we see a lot of contracts being cancelled and a significant economic impact on our clients and the industry in general. There has been a reduction in capital expenditure throughout the industry and now we begin to focus on operational efficiencies more than ever.
Firstly, we have to consider what the new 'normal' looks like, today we are still in the middle of the crisis and we see the spread of the virus continue in various parts of the world, so to date we don't actually know what 'normal' means and is. What we do know, is that we are looking at the long term over multiple years.
If you look at this in the context of the oil industry, the operator's decisions on capital flows and expenditure will drive the direction of the industry. By nature, they are companies who think in the long term and plan their business fifteen to twenty five years in the future.
I remain confident that the energy industry will bounce back as there is still a very high demand for hydro-carbons, but unfortunately what we are seeing is the reduction in expenditure in research and development which may impact the future development of alternative energy resources.
Clearly it depends on what sector of the business you are in, for the downstream energy business it will obviously be driven by consumer demand but the number one driver will be the oil price. Oil prices have suffered distinctively during the COVID-19 crisis, we have actually seen negative oil prices over the past few months which drove immense panic in the sector. To instigate further consumption, we need to burn off the current inventories that have been built up and we are starting to see that happen slowly and we are looking for the point when demand will outstrip supply.
In line with our core service offering of freight forwarding, logistics, warehouse solutions and supply chain management, we are seeing some key trends. Firstly, viewpoints on outsourcing, it's important for the industry to focus on their core competencies and outsourcing functions with key supply chain partners can enable our clients to focus on their business operations as well as introduce more operational efficiency. Secondly, there is a strong focus on cost controls, eliminating waste and inefficiencies in the supply chain in partnership with logistics service providers. Finally, industry consolidation is a focus area, eliminating multiple suppliers to ensure key partnerships play a role in the future.
If you are interested in learning more about the energy sector supply chain support available from the energy experts at Crane Worldwide, please reach out with your inquiry below.
You can also listen in to the full podcast or watch the video below: