David V. Brandon, Senior Vice President, Site Selection Group, LLC (Apr/May 10)
Representatives surveyed for Area Development's 24th Annual Corporate Survey last year ranked energy availability and costs as the fourth most influential location driver - up from the fifth spot in 2008 - with a combined score of 88.0. In the companion 6th Annual Consultants Survey, site selection consultants ranked the factor as the seventh most important - a drop of three places from 2008 - with a combined score of 89.7.
Corporate managers appeared only slightly more concerned with energy availability and costs in 2009 than they were in 2008. The 2009 score is only 0.1 percent and one position higher than in 2008, a year when energy costs spiked and supplies came into question. Consultants showed similar concerns, with the factor's score shifting only 1 percent, although that contributed to a drop of three positions.
Corporate respondents viewed labor costs, highway accessibility, and tax exemptions as more important than energy considerations. But site selection consultants ranked highway accessibility, labor costs, occupancy or construction costs, availability of skilled labor, state and local incentives, and availability of land above the availability and cost of energy in making location decisions.
In both instances, the combined scores showed little change over the years, while shifts in other factors contributed to the rankings of energy availability and costs in 2009. Notably, occupancy or construction costs dropped from the third to seventh spot, and corporate tax rate rose from the eighth to fifth spot in the Corporate Survey, while labor costs moved from the tenth to second spot with the ascent of real estate factors in the Consultants Survey.
Cost of Consumption
In 1999, the average spot market price of a barrel of crude was $16.56. By 2004, that price had more than doubled to $37.66 in 2004 dollars, and $43.17 adjusted for inflation. The price continued rise to an average of $91.48 in 2008 before a drop to $53.48 in 2009, and currently $69.85 at press time. Geopolitics and China's thirst for crude have magnified this market disruption.