Smart Sourcing Summit: Energy is a sellers' market
Supply continues to expand
Tom Stundza -- Purchasing, 10/15/2009 10:18:29 AM
Energy is a sellers' market due to the global rationalization of the supply base but new capacity expansions now and in the future will shift crude oil and natural gas into well-supplied markets, says Brian Habacivch, senior vice president of research and publications at the Fellon-McCord energy management and procurement firm.
While not predicting a buyers' market anytime soon, he tells Purchasing's Smart Sourcing Summit in Chicago that "there's plenty of oil in the world (and) natural gas is migrating into an over-supplied market."
He says "the U.S. is an energy giant, it just doesn't act like one," and tells the audience that "we're not running out of oil." He also says the U.S. has so much natural gas in storage and more coming from shale processing that the country is on the verge of becoming a major world supplier.
Habacivch notes that natural gas buyers and sellers alike were burned in the past by price volatility. "The price spikes made buyers more sensitive to prices paid and the fact that these costs needed to be managed," he says. That's why the market today is much more transparent than in the past with buyers becoming more sophisticated and beginning to question why they allowed suppliers to shift all energy-cost risk to them through restrictive supply contracts.
He sees more hedging ahead and more use of third-party energy suppliers. "Natural gas market volatility and a lack of data transparency have forced buyers to get more sophisticated about the ins and outs of the energy marketplace," Habacivch says. He adds that there is more corporate-level involvement in both energy procurement and risk management. "Because of that, in natural gas procurement, especially, you can expect more reliance on long-term physical supply deals and less trust in financially driven contracts."
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