Energy, utilities and resources companies are grappling with new challenges due to US tariff policies. Tariff changes often require rapid shifts in strategy, making long-term planning increasingly difficult. These changes impact investment decisions by increasing risk, lowering performance targets and limiting available capital.
Although these industries are distinct, their shared experiences highlight common struggles such as disrupted supply chains, increased costs and slowed growth. Global companies in these sectors are generally the most impacted, while more US-centric businesses may benefit in the short term. But by responding strategically and ensuring adaptable technology, companies in all three industries can thrive even during these volatile times.
Strategies to weather unpredictable markets:
- Engage in advocacy and lobbying efforts through industry trade groups and associations.
- Consider delaying or canceling significant projects that require large capital investments.
- Alter strategies to explore market opportunities in those regions benefiting from tariff advantages.
Industry-specific strategies to reduce tariff impacts
Energy Industry
The energy sector is especially affected by tariffs on steel and aluminum, materials critical to the construction of drilling rigs, pipelines and plant equipment. These assets play a vital role in the location and extraction of oil and gas, making the cost of these resources a key priority. Reduced power consumption in recessionary conditions compounds these challenges.
To offset these cost increases, energy companies can diversify supply chains and focus on localized sources when possible. Leveraging predictive analytics to optimize procurement practices will also be helpful.
Utilities Industry
Electric, gas and water utilities are most sensitive to availability and costs of equipment used in maintenance, distribution networks and renewable energy projects. Reliability issues from delayed maintenance and slower grid modernization efforts pose significant concerns, and reduced consumer spending power prevents many of these costs from being passed on via increased prices. Fortunately, utilities companies can help offset these costs by leveraging predictive maintenance to prevent potential failures before they occur, as well as optimizing the workforce through automation and remote monitoring to reduce manual intervention expense.
Resources Industry
Resources companies are highly vulnerable to tariff wars due to the global nature of their operations. Mining activities often span multiple countries, exposing companies to higher costs. However, many resources companies can benefit from tax credits for clean energy minerals and mining rare earth minerals in-country. Investing in AI-driven mineral processing and automation can also help maximize output while controlling costs.
Leveraging technology to strengthen resilience
During times of market volatility, technology becomes increasingly important in navigating disruptions and optimizing operations. Companies locked into software vendor support may struggle to quickly access new technologies and innovative solutions as market conditions change. At the same time, delaying innovation can be a costly mistake, as emerging technologies can help build resilience, improve efficiencies and maintain a competitive edge.
For companies in the energy, utilities and resources industries, ERP systems may need to evolve to better support industry-specific needs. This could include adapting systems to manage fluctuating energy prices, optimizing asset maintenance schedules and facilitating efficient tracking of raw material procurement. Companies may also need to integrate advanced capabilities to better monitor grid reliability, model renewable energy projects or analyze global resource logistics.
Don’t underestimate the power of technology to help your organization succeed during challenging times. But don’t jump blindly to a new, flashy tech approach either. Maximizing the value of existing, stable ERP systems could mean the difference between just “keeping the lights on” and thriving.
Best practices across Energy industries
In addition to industry-specific solutions, there are a number of broader strategies that energy companies can lean on in times of disruption. One of the greatest ongoing concerns for most energy, utilities and resources companies involves rising costs and limited availability of raw or essential materials needed to generate revenue or advance modernization projects. The COVID-19 pandemic exposed many vulnerabilities in our supply chains, which tariffs now threaten to exacerbate.
Always-on strategies to mitigate disruptions:
- Diversify sourcing strategies for raw materials.
- Establish diversified manufacturing plans.
- Invest in efficiency improvements.
- Maintain larger inventory levels.
- Develop pricing strategies that share the tariff costs equally among supply chain partners.
Preparing for the future
While the current uncertainty surrounding tariffs may only last a few months or quarters, prolonged trade conflicts are also possible. But the energy, utilities and resources industries are no strangers to navigating market volatility and global geopolitical uncertainty. Their ability to successfully adapt to external pressures has long been tested by fluctuating commodity prices, shifting trade policies and unpredictable economic climates.
Key takeaways
To succeed amid these challenges, companies in these industries must follow a smart path, embracing flexible, responsive strategies that can quickly adapt to changes in markets, competition and geopolitical shifts. Rimini Street offers this smart path forward, with expert third-party support to help energy, utilities and resources companies extend the life and value of their existing systems, freeing up resources to invest in innovation. Connect with us today to learn how we can help your organization.
