Retailers benefit from declining oil prices

Global Business

The free-fall of the price of crude continued on Wednesday as U.S. oil prices dropped below $61 per barrel, a five-year low. Brent crude — the international benchmark — also dropped to five-year lows at below $65 per barrel. Over the last six months prices plunged more than 40 percent. 

Put simply, the drop is because of classic supply and demand.  Global supplies have been surging, due largely to a sharp increase in U.S. production. On Wednesday the U.S. posted a surprise jump in inventories.  Demand, meanwhile, has been on the decline — especially in the slowing economies of China and Europe.

That slump has also lead to plummeting gas prices. That’s not good news for oil producers but it is for consumers, retailers, and delivery services — like Lehrer’s Flowers in Denver. While business is always up in the weeks before the Christmas holiday, 2014 is proving to be particularly rosy.

Dee Vasey is in charge of one of Lehrer’s 16 delivery vans. Getting her load of flowers to their destinations can require up to 200 miles of driving a day — a pretty expensive proposition until recently.

“The gas prices have been excellent the last couple months,” she said.

And don’t think her boss hasn’t noticed.

“Our gasoline bill is over $8,000 per month,” Rob Spikol, Lehrer’s Chief Operating Officer, said. Gas feels practically like a bargain these days because, experts said, while the supply of oil from countries like the U.S. and Canada is up, the demand for oil from places like Asia and Europe has fallen off. Lower prices give a boost to drivers of gas guzzlers, and they act like a tax cut for companies with vans and trucks out on the road.

“To some degree they’re going to pocket the difference,” Jim Marchiori of the University of Colorado Business School said. “Partly, it depends on the nature of the competition in any given market. If your competitors are passing the price reduction on to the consumer, you’ve got to pass it on too.”

Spikol said this makes up for the years when he absorbed a lot of higher fuel costs rather than pass them on to his customers. Now, he said he’s putting more products into his flower arrangements and adding more jobs.

“It also makes us work a little bit harder, wanting to go out and hire salespeople for out in the street, wanting to get more business in,” he said. “I sure hope the gas prices are going to continue to fall, that’s for sure.”

“The supply is such that we shouldn’t expect any big prices or any big volatility anytime soon,” Marchiori said.

CCTV America’s Hendrik Sybrandy reported this story from the U.S. state of Colorado.

Retailers benefit from declining oil prices

The free-fall of the price of crude continued on Wednesday as U.S. oil prices dropped below $61 per barrel, a five-year low. Brent crude — the international benchmark — also dropped to five-year lows at below $65 per barrel. That slump has also lead to plummeting gas prices. That’s not good news for oil producers but it is for consumers, retailers, and delivery services — like Lehrer’s Flowers in Denver. CCTV America’s Hendrik Sybrandy reported this story from the U.S. state of Colorado.


Carl Larry on the decline in global oil prices

CCTV America was joined by Carl Larry, director of business development in oil and gas at global consulting firm Frost & Sullivan, to talk about decline in global oil prices.

Carl Larry on the decline in global oil prices

CCTV America was joined by Carl Larry, director of business development for global consulting firm- Oil & Gas - Frost & Sullivan to talk about decline in global oil prices.