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Distributors Capitalize On Low Oil Prices

Swelling supply and relatively sluggish demand have pushed oil prices down even further in recent weeks. This week, Brent crude plummeted to $36.05 – an 11-year low – before recovering some to more than $37 yesterday. Meanwhile, the per-barrel price of U.S. crude sank 40 cents to $34.17 – the lowest level since 2009. While the numbers rebounded some before the market closed yesterday, the prices are dramatically low compared to just 18 months ago when oil traded at $115 per barrel.

Unseasonably warm temperatures in North America and Europe, and slower demand sparked by economic weakness in China, have played significant roles in driving down the price of oil. So has global oversupply – a glut that analysts expect to continue as more U.S., Russian, OPEC and, come 2016, Iranian oil hits the markets.

The low oil prices are having mostly positive impacts on promotional product distributors. “Lower oil prices have definitely decreased shipping costs,” says Tej Shah, vice president of marketing and e-commerce at Overture Premiums & Promotions (asi/288473). “We’re seeing the biggest savings when dealing with large freight orders or overseas importing.”

While other industry firms say they haven’t experienced similar lower shipping costs, the lagging oil prices have certainly helped some distributors generate business this year. HALO Branded Solutions (asi/356000) is among them. “We have had markets that have grown because they have reduced fuel and raw material costs,” says Terry McGuire, HALO’s senior vice president of marketing. “Lower oil costs, in general, are good for consumers and many of our clients are buying more because they are marketing directly to consumers.”

Nonetheless, it hasn’t all been roses for HALO in regards to the oil market, as the distributorship has a substantial presence in the petroleum and energy sectors. A downturn created by lower energy prices has decreased HALO’s overall sales with such clients. “Yet,” McGuire notes, “we have been able to expand our share of our clients' total promotional spend because of our aggressive costing.”

Looking forward to 2016, HALO expects spending from petroleum/energy clients to remain on par with the current year as oil prices stay low. “We're confident the market is as low as it will go, and that it will begin to rebound late next year,” McGuire says.

At Overture, continued low oil prices in 2016 could influence business, too. “If the prices remain where they are, I can imagine overseas importing will continue to be a larger part of our overall business,” says Shah.