US$89 Oil and not a peep !

Oil is hitting 26 month highs, touching US$89 per barrel. This affects the price of many things.

Most noticeable to everyday life are products collectively known as “fast-moving consumer goods” or FMCG’s.

The price of oil is felt in its chemical derivatives (benzene, ethylene), packaging and transportation to mention a few.

Normally, rising input prices will be passed on by manufacturers, but this time around, I don’t think consumers will accept this so easily.

So, if manufacturers swallow the rising costs associated with a rising oil price, look for a squeeze in their margins.

For the European giants, a strong Euro translates into cheaper USD denominated oil while a weak USD means the American brands are beneficiaries of a globally competitive product, but as ice hockey great, Wayne Gretsky once said “skate to where the puck is going to be, not where it has been”.

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