“When survival takes precedence over growth, businesses often forego best practices. Some opt for cheaper alternatives or defer maintenance schedules in an attempt to reduce costs, even at the risk of costly downtime.”
There is an inescapable reality that reliability and maintenance managers have to face: the impact of the record increase in oil prices on the cost of keeping their machinery running, and then coping accordingly.
For the record, Brent crude prices rose sharply in the last week of March, reaching over $110 per barrel at times. And with no end in sight to the War in the Middle East, we should be braced for more.
The Department of Mineral and Petroleum Resources in South Africa has announced significant fuel price increases effective from the 1st of April. It has also reported that rationing concerns are rising amid the volatility.
Why should reliability and maintenance managers be concerned about high oil prices?
They should. It is not alarmist. Directly or indirectly, oil affects their operations. Let’s look at four key factors.
The first is energy.
Some machines run on diesel, and the price increase means heavy industries like mining will spend more. In addition, global supply chain disruptions necessitate stocking more fuel in inventory to ensure it doesn’t run out.
Some utilities – notably South Africa’s Eskom – have diesel-powered generation plants. It will definitely cost more for the entity to run those plants. One can’t rule out the organisation offsetting this cost by increasing tariffs, adding further to OPEX (which usually constitutes the highest cost in heavy industries).
The second factor is the cost of spare (or replacement) parts.
High energy costs will increase the cost of production, prompting an increase in spare parts prices. Then factor in the cost of transporting those parts.
The cost of consumables like lubricants, which are made from petroleum, for Lubrication Centred Reliability (LCR) will also skyrocket.
The fourth aspect is the cost of engaging service providers for remote control centres, diagnostic tools for equipment condition monitoring, software as a service, and others.
Clearly, heavy industries must strive to keep mission-critical machinery in optimal condition by managing how these factors,among others, impact their daily operations.
However, this can be the most tempting time to cut corners. When survival takes precedence over growth, businesses often forego best practices. Some opt for cheaper alternatives or defer maintenance schedules in an attempt to reduce costs, even at the risk of costly downtime.
It is therefore critical for companies to carefully weigh the long-term implications of compromising maintenance standards on operational reliability and overall business resilience.
Read what lubrication experts advise about implementing Lubrication-Centred Reliability in an environment of high oil prices in the forthcoming feature article.
