Logistics Management - October 2011

Andreoli onbubble had grown well beyond the “froth” stage. Hopefully, On the natural gas front, while the shale gas revolutionthis time around we can build a recovery on a more solid is still going strong, there’s reason to question the sustainabilityfoundation; however, without a dramatic improvementof low prices. Along these lines, the U.S. Geologi-in consumer confidence it is hard to imagine where the cal Survey (USGS) recently revised their estimate of thedemand for goods and services is going to come from. total shale gas resource, cutting the initial estimate by 80In the past, the government could goose the economy by percent—a fact that won’t come as a surprise to those shippers“spending against the wind” and building reserves throughwho read my shale gas column.taxation during periods of expansion. Unfortunately, the Of course, this downward revision is not the first of itsgovernment is now hamstrung by concerns over federal debt. kind. In October 2010, the USGS reduced its estimate ofGoing back to the Ceridian quote, I appreciate the undiscovered crude in the National Petroleum Reserveinsightcontained in what must be an accidental choice Alaska (the NPR-A, not to be confused with ANWR) by aof words. If there really is something to the predator-prey whopping 9.7 billion barrels, a 90 percent downgrade. Tomodel, and there clearly is, we are quite literally “waiting put this downgrade into perspective, 9.7 billion barrels isto get the energy” for a full recovery. Unfortunately, on the the equivalent of 70 years of production from the Bakkensupply side of the energy equation, tensions in the Middle at current rates.East/North Africa (MENA) region remain extremely high, Resource downgrades and credit downgrades certainlyand the resumption of the flow of light sweet crude from don’t instill confidence in those of us who understand that aLibya and the U.S. Gulf of Mexico remains a long way off. healthy economy requires the efficient movement of goods,From the demand side, China’s growth rate remains near people, and capital.double digits (though it is showing signs of weakness), and Looking forward, the U.S. economy is clearly not outIndia’s growth rate hovers around 8 percent. Ergo, any marginalof the weeds, a fact that makes it difficult for supply chaindeclines in consumption here won’t have much of an managers to keep their eyes on the road. We know there’s aimpact on prices given growing demand in emerging markets. turn up ahead, but it’s still difficult to see whether the roadIn short, it’s difficult to imagine where the energy for a is going to take us to recovery and even higher fuel prices, orfull recovery is going to come from. Light sweet crude from stagnation with high fuel prices. The wise logistics and supplythe Bakken formation in North Dakota is certainly growingchain manager will have thought these options throughasi_perfship_halfpgLM_1011_final robustly, but U.S. exports of gasoline and 10/5/11 distillate 12:41 have surged. PM Page and 1developed strategies for both. M“The Business of America is Business”Calvin CoolidgeThe Business of Alliance Shippers, Inc. is . . .“To Manage Our Customers’ Business.” ®For more information about all of our services, visit us at: www.alliance.comPerfect Shipment ® Performance:On-Time Pick-Up = 98.7% On-Time Delivery = 96.8% YTD On-Time Delivery = 97.5%2010 Damage-Free Performance:Refrigerated Services = 99.98% Dry Van Intermodal and Highway Services = 99.79%Data as of 8/31/11® denotes a registered trademark of Alliance Shippers, Inc.