Renewable Energy Manufacturers Among Those That Benefit From Higher Oil Prices

Jul 25, 2017

U.S. oil prices fell last month as OPEC exports began to increase. Brent crude oil fell by $4 a barrel to $46, marking the first month of the year that prices averaged below $50 per barrel. There’s a big meeting of OPEC producers set for next week and it’s unclear right now how that will impact the market.

In general, however, experts believe that U.S. crude oil prices will remain moderately strong for the near future. This isn’t necessarily a bad thing for all manufacturers though, as manufacturers in some industries like renewable energy actually get more business when oil prices go up.

Prediction for 2017-2018

According to the U.S. Energy Information Administration, crude oil prices are expected to average $53 per barrel this year and even higher, at $56 per barrel in 2018. Some commodities traders predict the prices will go even higher, reaching as high as $64 per barrel this fall.

It’s important to note that these prices are still relatively low, compared to the highs reached in 2008 of $145 per barrel and in 2014 of $100 per barrel.

How Will Higher Oil Prices Affect Manufacturers?

While it’s typically assumed that higher oil prices stifle the economy, research has shown that people do eventually learn to adjust their buying habits to accommodate the price increases. This is called “demand destruction.”

For manufacturers, higher oil prices can mean higher overhead costs. But higher prices can also have advantages for some manufacturers as well.

According to the Institute for Supply Management, a not-for-profit educational association, those in the chemical, petroleum and coal products industries benefit from the higher prices as their products become more competitive as energy sources.

Manufacturers that provide products to these industries typically benefit from higher oil prices as well, as they will receive more orders for larger ticket items like new machinery and computers.

Renewable energy producers and manufacturers and other businesses that support this industry also benefit from higher oil prices. When oil prices start to go up, renewable energy sources also become more attractive options for energy, especially if they are more affordable.

Dixie Southern: A Steel Fabricator for Renewable Energy

At Dixie-Southern, we proudly support the production of equipment for the renewable energy market. We are honored to be considered a leader in custom steel fabrication and take pride in manufacturing all of our products in America. To learn more about our products or if you need a custom steel-fabricated product, contact us today or request a quote now!

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