ESCALATING OIL PRICE MEANS INCREASED
January 9, 2008
EDWARD HARRIS AT LARGE!
ESCALATING OIL PRICE MEANS INCREASED
OPERATING COSTS!
The escalating Oil price will mean spending more on all aspects of existence in today’s world. Let us take a look at the effects:
a) Transportation Costs, not only operating costs but also maintenance costs, spare parts, fuel and other consumables. b) General operations of small businesses, costs of inputs, goods and services, equipment and repairs will rise. c) Inputs, especially those that have to be imported will increase and those manufacturers who manufacture for exports will be seriously affected. d) Cost of doing business will go up and will further exacerbate, access to credit, making it more difficult depending on the nature of the business being transacted.
Government intervention necessary:
a) To see how it can access a source of oil with concessionary terms, (Petro-Caraibe). Take note of USA / Venezuela Oil Deal. b) To facilitate MSMEs in reduction of Duties and Taxes. Fiscal Interventions may be necessary such as reduction of import duties as well as reduction of income tax and other assistance. c) Private sector entities through their umbrella organizations will have to rally together to identify more cost effective means of doing business, i.e.: bulk purchasing and cheaper financing (the advent of the Development Bank is a step in the right direction) d) Cost of doing business such as distribution costs will rise and impact negatively on the established profit margins.
In this regard there is an urgent need to revisit marketing and promotional strategies for the various enterprises in the MSME sector.
The Economy:
a) There will be a global impact at the micro and macro levels. b) Government costs for doing business will rise. Consumables for Health, Education and Security will rise. c) Pressure on Industrial Relations front will intensify with Workers and Trade Unions seeking higher wages and better working conditions in the face of economic pressures. These are challenging issues and there will be need for compromise on all sides. Austerity measures may be necessary. d) The situation will also impact upon the socio economic conditions of the society.
Agriculture:
(a) Agriculture will be affected as more and more farmers will find it difficult to remain in the industry. Export of Bananas can decline. Agriculture exports will have to be supported. b) As a result of increasing costs with reducing returns, many farmers are likely to exit the agriculture sector especially those farmers in the Banana sub sector. This has implication for the national economy and rural households and communities in particular. c) At the national level, food security and rural poverty may be further aggravated with implications for increasing out migration into the city and outside St. Lucia.
Tourism:
a) Cost of Travel will go up, thus making St. Lucia a more costly destination which means that visitor numbers will be affected. This has implications for the entire Hospitality sector and other sectors which are inextricably linked to it – manufacturing, agriculture, services and trading. Small hoteliers, vendors, taxi drivers will be directly affected should there be a slowing down in the sector due to increased costs. b) Some re-strategising may be necessary as it relates to marketing and the type, quality and suitability of products that we invest in, i.e. Cruise Tourism may become a product for greater focus. Maintaining a presence in the Cruise Tourism market throughout the year will be necessary. c) It may be prudent to redirect our focus, putting greater emphasis in the EU market for the next 12 – 18 months. As a direct result of the implications of the oil prices and the credit crunch with near recession conditions that impact on the USA economy we should seek to benefit from a higher exchange rate from the EURO zone. Canada also falls in this category. There should be a serious shift in the marketing strategy adopted by the tourism sector.
US Economy:
The state of the US economy is nearing a state of recession. The credit crunch in the housing sector exacerbated the situation in spite of the interventions of major international banks. The fact that the EC Dollar is pegged to the US currency, it simply means that as the US dollar devalues, our dollar is also devaluing. Once the US economy goes into recession, it has direct implications for remittances particularly for families in the more marginalized communities. It is important to note that the oil crisis will necessitate a global response. Our main trading partner will be under serious pressure in the coming months and with a weak dollar, challenging times are ahead. We can conclude that there is very little that can be done to relieve the negative impact.
In times of economic uncertainties and anxieties, the only weapon at the disposal of the people is discipline. Much thought will have to given to every step as we navigate through these difficult times. Lifestyles will be affected unless additional source/s could be found.
Here is my selected motivational message of the week:
YOU ALWAYS HAVE ENOUGH TIME IF YOU USE IT WISELY
Your dilemma goes deeper than having a shortage of time,
it’s basically a problem of priorities.
Most people leave undone those things that should be done,
while they do things that they shouldn’t be doing.
Set priorities for your goals.
A major part of successful living lies in your ability to put first things first.
Most major goals are not achieved because people put second things first.
Is what your doing getting you closer to your objectives?
Anything that is wasted effort represents wasted time.
Don’t serve time, make time serve you.
Copyright 2007 www.yourdailymotivation.com
As we seek to grapple with the times, how we deal with TIME will make the difference in the quality of life we enjoy. Our challenge will be to find additional sources of income. It is all about MONEY!!!
This article was written after a serious discussion with a fellow Consultant on the impact of the escalating oil price on the economy and MSMEs in particular. I thank him for his contribution. I sincerely wish that many of my readers will share some ideas with me from time to time.
Keep the Faith, God is in Charge, Dream Big and Expect Miracles all the time!!!
Edward Harris
Biblicist, Freelance Journalist, Author, Business & PR Consultant, Realtor, Sales & Marketing Specialist, Networker, Private Sector Advocate, Motivational Speaker
Email: eaharrisdestiny@gmail.com
Websites: http://www.Edwardharris.ws http://www.stluciasimplybeautiful.com http://www.stluciarealtors.com