MBA Research

Trend #36: Shifting Factors in Energy

The potential impact of shale on natural resource availability in the U.S. and abroad is unknown but potentially a game-changer. Heightened focus on the preservation of global resources for future generations plays a role in the energy debate. As energy resources are explored, and utilized in different ways, companies have to deal with the resulting supply-chain issues. This month’s Action Brief looks at shifting factors in energy supply and demand, and some of the resulting economic effects. 

Business Implications

Greater availability of domestic energy resources has drastically changed the face of gas and oil production in the United States. The “shale revolution” is reshaping the country’s dialogue about energy strengths and weaknesses, especially now with record amounts of propane and other natural gas liquids being exported. Other countries with shale resources are also working to extract gas and tight oil, but access to fresh water reserves used in the process can present a challenge in many parts of the world. Coal plants and other traditional energy operations are closing or laying off massive numbers of workers as they go out of business or restructure to support alternative energy’s processing and delivery.

Companies in the renewable energy sector are also experiencing their own viability issues. Many companies are struggling to stay financially solvent while facing funding issues and other business challenges not unusual for start-ups. Government subsidies are potentially on the chopping block which adds to eroding confidence in many companies. While renewable energy is relatively low-cost, and growing in use, many companies are coming up short with funding to support new and growing infrastructures. 

The boom in natural gas and oil holds many potential benefits, such as less dependence on foreign resources, increased manufacturing, more choices and lower prices for consumers, and maybe even cleaner air. Disadvantages are:

  • Potential contamination of water and other natural resource supplies due to fracking and wastewater disposal
  • Fracking induced earthquakes
  • Loss of jobs and revenue in traditional and new alternative renewable energy source sectors

 

Much to the dismay of environmentalists, the shale boom may have somewhat slowed a shift toward the use of products that utilize renewable energy sources. As an example, many consumers are passing up hybrid vehicles for conventional gasoline-only models. Surprisingly, even some consumers who had switched to hybrids are going back to fuel-only powered vehicles. Lower gasoline prices mean a longer break-even time for consumers purchasing hybrids. Guessing that the price of gasoline will rise again, automakers are ramping up production of traditional vehicles, but not putting hybrids on the shelf just yet.   

While hybrid car sales may have taken a recent hit, studies show that more than 50 percent of consumers from across the globe are willing to pay more for products from companies committed to making an environmental impact. As consumers become more savvy about sustainability issues, many companies are strengthening their green appeal in the following ways:  

  • Incorporating more areas of relevance to customers’ lifestyles
  • Encouraging customers to live sustainably beyond that particular product
  • Understanding what social and environmental issues their customers are concerned about and continuing to address those concerns in product development
  • Demonstrating credible environmental impact (proof) based on product sustainability

 

How are these companies and others walking the walk? Look for next month’s Action Brief when we explore how companies are working to reduce their carbon footprint and the obstacles they are facing in doing so. 

Classroom Implications

Understanding the different types of energy and basic cost implications of use can be crucial for students as they enter into the energy debate and understand the impacts on business: 

  • Help students become energy literate by accessing information and lessons on this website: http://cleanet.org/clean/literacy/energy/index.html 
  • Explore energy related issues with students such as:
    • How are decisions made regarding energy use—what are the main drivers?
    • How do varying energy sources impact the economy and the environment?
    • How do energy policies vary in different states/countries?
    • How do energy prices and the process of importing/exporting affect our economy?
    • How are businesses impacted by fluctuations in energy costs, and what are some of the techniques used in mitigating those variations? 
  • Ask students to identify local business efforts to sustain energy. What resistance has been encountered? What support has been provided? Discuss community benefits that have resulted.