Falling oil prices signal problems for distributors

The price of oil has slipped, signalling problems in the channel.

The price of oil fell yesterday, touching the lowest level since December last year.

It dropped by $1.17 to finish at a low of $92.81 per barrel in New York and was also down nearly 13 percent since the beginning of May.

Brent crude, which helps set the price of oil imported into the US also fell by 53 cents to finish at $111.71 per barrel in London.

It has been suggested that the lower prices have been driven by an oversupply of oil, with crude supplies in the US rising to 2.1 million barrels.

According to an analyst familiar with the situation, the prices will also have a great effect on the already teetering European market that’s heading once again into a recession. He said this would in turn have a knock on effect on the way businesses and consumers spend their cash.

“If we’re talking about the channel of course there will be a problem here.

“Oil prices rule the world and of course this means the drop will have a significant effect on big investors and banks who have been sitting and living off their oil shares for a while now.

“With these now going down they may lose out a great deal. Banks will tighten margins meaning less borrowing for consumers. Less money consumer wise means less spending which will hit retail and in turn the channel, especially distribution which could be left with an oversupply of goods.

“If big businesses decide to cut down on their channel offerings then partners could be hit. There’s already companies such as Oracle threatening to do this with their marketing budgets, but it could get worse.”