A greasy road

The Business Times
View From The Top
Published: 3rd Nov 2014

How has the fall in oil prices in recent months affected your business or industry?
What would be the wider impact if prices stay lower for longer?

AS we are in the professional services industry, fluctuations in oil prices do not directly affect our business. Lower oil prices are generally good for the overall economy, as all businesses require the use of energy, some industries more than others. Those in import/export trade may experience cost savings and this could help to keep consumer prices from rising further.

In the long run, however, prolonged low oil prices will have a negative impact on oil producers and oil exporters. Companies in the energy sector are likely to scale back on capital expenditure and may implement budget freezes or cuts to ensure healthy balance sheets. Oil companies will also need to take measures to ensure that supply does not outstrip demand by too much, as this will drive prices further south. Historically, there is a tendency for oil producers to cut back on production to maintain prices at a certain level. If the cutback is substantial and prolonged, it would be a slippery slope that may eventually lead to a shortfall in supply and that would drive prices up again.

Ronald Lee
Managing Director
PrimeStaff Management Services Pte Ltd

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