Managing oil price fluctuations through cost management

In the rapidly changing world economy, it is a challenge to adapt a company’s business to the supply and demand of the moment. We are only just emerging from a recession, but the ever fluctuating oil price still has a profound impact on players in the field throughout the production chain. 

Companies have reacted to the downturn by cancelling projects and cutting costs dramatically. However, making significant and sustainable cost reductions without threatening performance and competitiveness is more difficult. Implementing a strong cost management and cost control capability could be the answer.

Understanding cost influences

Companies often reduce expenditures by cutting costs across the line on a very rough level, letting go of personnel and limiting new investments that might prove to backfire on the long term. To stay healthy and competitive, its inner workings should be studied in more detail. This leads to understanding what exactly drives the cost of capital investments and operational expenditures, and how to minimize these costs.

It is easy to speak of these principles, but how do you setup and manage this extra layer of intelligence that needs to be incorporated? Every project, be it a multi-million or a simple maintenance task, has an unlimited number of factors that impact the cost: ranging from simply a delay of an activity in the field to unforeseen market influences.

Cost cutting vs. cost management

It is not impossible to actually manage and control company’s expenditures at these varying levels of detail. We live in an age where software systems can manage huge amounts of data and process it to find key performance indicators and even make forecasts. With advanced project controls software like Cleopatra Enterprise it is possible to keep track of the earned value of activities and manage changing project circumstances. It helps a struggling company to get a grasp on their spending, without having to cut in their resources. When implemented right, cost management techniques can dramatically increase the return on investment.