Thursday 27 August 2015
Next target for the newspaper's oil wrath : retailers
In the recent times the Major petrol retailers get a lot of stick, somewhat justified but not entirely, for not reducing their prices when the price of crude oil falls. As I have gone into before, the refining of the product and margins in that industry are of course more important factors. Not that journalists care.
I have been impressed of late with Journo's uncovering the scams at airports and hospitals where customers are over-charged because of the captive market created in the local environment. These are good things and show the power of a free press, albeit in a small way.
To continue this theme, we can consider what crude oil gets made into - the answer is easier if we try to think of things not derived from crude oil. For example, in a supermarket:
- All the medicines are oil based more or less,
- All packaging that is not pure paper - so, er, all of it.
- Most flavourings and dyes
- All baby products, with each nappy being one cup of crude oil originally for example
- Then there is the heating and lighting
- Much apparel, including all trainers, are mainly oil based
- Plus the costs of transporting everything to the market.
- Even all the food is grown with oil based fertilisers.
So basically, supermarkets have had a 50% reduction in the input costs to their products in the past year months. It may take some time to feed through as many of the products are a long-time in production and transport. We should really expect to see big reductions in retail prices across the majority of goods. In fact, this alone could well be enough to push the country into deflation for the rest of this year.
However, I have a sneaking suspicion the desperate big Four supermarkets - all suffering from stiff competition, will use the falls to help them rebuild margins and profitability where possible.