Oil Prices Drop: How it affects you; the Importer, Exporter & Shipper

  

 Email Article  

Tweet  

  

  

 delicious  

  

  

Monday May 23, 2011, the price of crude dropped on the Mercantile Exchange $2.40 per barrel for the July contracts/delivery. (Link to Desert News – for today’s oil price and their view of why)

This can cause many questions to arise like:

• But what does it mean?
• Does it mean my customers will have more money to spend on my goods that I’m spending my life at work to bring to them?
• Will it be easier to drive during summer driving season – and therefore turn more money over in the economy as families poor money into the pleasures of vacationing away from home?
• Does it free up money in the economy – so the oil companies get less and everyone else gets more?

Perhaps all of the above for a little while.  But the underlying reason cited for the drop in oil is “decreased demand”  in the USA and in China.

Why?  Well with the retail price of gasoline at $4 per gallon – people buy less, travel  less, and do less.  China’s economy is heading into a slow down – and their projected oil consumption is – in my view – a leading indicator. 

This slowdown is seen in production order drop off, leaving excess capacity for some of the manufacturers in china. 

If you are sourcing out of China – do the research -  watch the orders of your sector and see if you can use the expected slower economic growth as leverage to secure pricing discounts from otherwise unmovable suppliers.  They may be willing to give you something they were unwilling to over the just 12 months ago.

Then – if you are able to pass that saving onto your customer you are the one more likely to get and secure the further loyalty of those you supply.

Every customer with a view to the long term, will value your efforts and contribution to their bottom line.

Dave Stover

Dave@universalcargo.com