07 October 2004
Purchasers can expect suppliers to demand more price hikes as energy costs continue to soar, according to the chairman of CIPS energy committee.
Ian Dobson said moves such as that by US-based plastics and adhesives supplier Dow Automotive, which recently asked its clients for a price hike of 25-40 per cent, will become more common this winter, putting supplier relations and even entire businesses at risk.
"We'll probably see more of this and I can even see a lot of companies folding, more so in the UK and Europe than in the US," he said.
Dow has warned it could be forced to stop research and development to accommodate rising oil prices.
Oil now costs more than $50/barrel and is still rising.
Automotive firms have also been hit by 100 per cent price rises for steel in the past year.
Shell recently said it will cut oil production in Nigeria fearing a civil war and threats by rebels that the company's Niger Delta facilities may not be safe.
In addition, the continuing instability in the Iraqi oil industry is making the market jittery.
"Energy supply chains are at increasing risk of disruption because terrorists now know that creating trouble such as blowing up a pipeline will give them immediate media coverage," Dobson said.
"Terrorist trouble and threats almost instantly affect market-place energy prices."