MARKETING INFORMATION
OIL IS SLIPPERY:
Marketing In New
Realities
By Isaac Ngatia
O
ver the holidays, I had
a discussion with an
acquaintance from Angola.
Key was the fascination with Luanda
and the emerging skyscrapers,
new emerging economy but also
the visible divide between the rich
(some super rich) and the rest of the
populace.
He pointed out there is a ‘thin
middle class’, but quickly added thin
not the nutritional definition but the
proportion compared to the entire
population. “We still have about half
of the population in poverty”.
That was not impressive for a
country, which IMF ranks as the
firth largest economy in Africa. He
highlighted the continued decline
in oil prices will have negative effect
as sluggishness in the economy will
affect consumer demand. That was a
few week ago.
The oil prices have slipped from a
high of US$120 per Barrel in June
2014 to about US$30 by February
2016. That is a massive 300% drop
in about 19 months. Any market or
economy experiencing such a drop
would definitely feel the pinch.
Like with other commodities, a fall
and rise in prices brings with it losses
‘‘Sectors enjoying direct positive effect of
low fuel prices could pass the benefit to
customers, with some immediate benefits
such as low fares coming in place. In
addition, with the cost of transport also
coming down, there is a possibility of
reducing prices at the counter for other
consumer goods.’’
24 MAL 11/16 ISSUE
to some and gains to others. The oil
exporting countries have suffered
most from the decline as the steep
decline has affected their revenues
from such exports.
A simplified example here is a
country that was exporting 10,000
barrels would earn US$1,2Million in
2014, but by February 2016, would
earn US$300,000 from the same
amount. By all means, a deficit of
US$900,000 is not a small amount.
Hence, countries like Nigeria, Angola
and Algeria have felt the most
impact. Loss of earning have also
greatly affected their forex markets,
and the wider economy.
The rising dollar has further
exacerbated the issue. The Gulf
Countries have also felt the impact,
with most slashing subsidies on
various sectors that enjoyed such
support.
A country like Kuwait earns 95%
of its export revenues from the oil
sector.