One of the holiday season stressors for most everyone is the thought of those post-holiday credit card statements arriving in the mail. That’s why I was pleasantly surprised to see gas prices drop to under $2 per gallon in our area (Northeast Ohio). Why was I surprised? Between the ever-increasing global demand for fuel, and news that terrorist group ISIS had taken control of some refineries in Syria and Iraq, I just couldn’t comprehend oil prices dropping anytime soon. As I learned from researching this topic a bit, that macro-perspective is flawed.
For one, it turns out the ISIS supply disruption has thus far been minimal. Analysts say that ISIS has not yet been able to take control of many oil properties in the southern part of Iraq, and that unless ISIS does so, there is probably little reason to worry about global supply being cut. Dan Pickering, co-president of Tudor, Pickering, Holt & Co., an investment bank that focuses on the energy industry, told CNN Money, “There has been no visible production decrease yet. ISIS has made a push for the south of Iraq and has not succeeded. And that’s where a significant portion of the country’s oil production and infrastructure is.”*
Also, while the global economy continues to grow, the pace (and thus demand for oil) has slowed in economies in Europe and Asia.
And, most importantly of all, there has been a surge in oil production from the United States and Canada. As Philip Verleger, president of an energy consulting firm and former director of the Office of Energy Policy in the Treasury Department, told The New York Times, “This time, the innovation is fracking. The sudden surge in U.S. oil production has profoundly changed the dynamics of the markets. The oil exporters have lost a third of the market they thought they’d have in 2014.”1
My personal joy for the gas price drop aside, I was excited about what this development means for the pest control industry. As owners of route-based businesses, PCOs have been adversely affected by rising fuel costs the past decade. They’ve examined fleet management from every angle possible and taken measures such as downsizing service vehicles, refining routing and retraining technicians on driving habits. For this month’s feature story “Primed at the Pump,” PCT contributing writer Kristen Hampshire analyzed this trend and interviewed PCOs about what the falling gas prices mean to them. So, how did PCOs that we interviewed react to this “found money”? They were excited for sure, but not necessarily for the reasons we expected. Donnie Blake, president of OPC Pest Control, Louisville, Ky., for example, was appreciative of this reduced business expense, but he was more excited about what it means for consumers. “More disposable income for customers is just as important to me as what I’m saving on gas,” he said. “What impacts our customers’ budgets is going to impact our sales and our receivables.” Blake added that while winter brings higher utility prices, if people are spending less at the gas station they might feel just rich enough to say yes to that extra service or at least not cancel.
If recent history provides PCOs with any clues, the price of oil will continue to ebb and flow in the immediate future. Who knows, by the time you are reading this column prices may have spiked up .30 per gallon. Regardless, the short-term impact for PCOs has been positive and a great way to kick off 2015. It means that PCOs can redirect some of their time, resources and energy away from reducing operational expenses and into finding innovative solutions for their businesses and their customers.
PCT magazine is in the process of identifying the largest 100 pest management firms in the U.S., based on 2014 revenues. Please take a moment to fill out the form on page 3 (or online at www.pctonline.com/top100.aspx) to make sure your company is included as part of PCT’s Annual Top 100 list in May!
The author is Internet editor and managing editor of PCT.
*Stewart James, B. (2014, December 5). Steep slide in oil prices is blessing for most. The New York Times. Retrieved from http://www.nytimes.com
1La Monica, Paul, R. (2014, September 25). Oil prices plunging despite ISIS. Retrieved from http://money.cnn.com