Here we go again. Gas prices are on the way up once more as crude oil prices are rising toward $100 a barrel (currently around $95). Average price for a gallon of gas in the U.S. has eclipsed the $3.00 mark again. A combination of high demand worldwide and tightening supplies is cited as the cause for the surge in crude oil prices.
While the effects of higher gas prices will range from an irritation to great hardship for consumers, how does this affect businesses? An obvious effect is higher transportation costs to move products to the point of sale. Often, consumers will foot the bill for this indirectly through higher prices for products or directly in the form of fuel surcharges.
A more important question to ask is how will higher gas prices affect customer buying behavior? Will they pass on buying certain items because they’re now spending more of their budget on gasoline? If your business requires consumers come to you (e.g., retail, some services, entertainment), will they still come? For several years, I have made the 4-hour trek to Talladega, AL, to take in a NASCAR race. As much as I enjoy the experience, I can easily see myself sitting on the sofa next year watching the race! Unfortunately, it would not be just the money on gas I would not be spending, but the race track would not sell a ticket, a hotel would not rent a room, and restaurants would not sell meals.
While the possible change in consumer behavior is a major threat for some businesses, a business can seize this trend as an opportunity. Can you save customers money by delivering the product to them? One reason why a company like Netflix has thrived is because it is easy for customers to acquire DVDs. Online businesses and even catalog retailers seem poised to meet customers’ needs in a world of $4 a gallon gasoline, which is a price many experts predict we will see in the not too distant future. Link