What’s the price of oil got to do with design?

Quite a lot as it happens. First, the good news. A significant shift in the oil price obviously drives down fuel and energy prices. Taking this a stage further, for many consumers fuel and energy are key household budget items so families are likely to be better off as a direct result. That potentially triggers changes in buying behaviour, and, given the hard times we’ve experienced in recent years, this release of newly disposable income is very welcome.

David Godber

The economic downturn means the population at large is now used to operating with a lower disposable income. As that behaviour has evolved around these lower spend levels this ‘windfall’ is perhaps now available for that extra purchase, that little treat, that long awaited holiday. So what are customers going to buy and who are they going to buy it from?

For many businesses there’s an upside too. Any business that has a dependence on fuel as a key operating cost has just seen their cost bases reduce significantly – for example, logistics firms such as Royal Mail, UPS and FedEx, taxi companies, airlines, holiday companies and manufacturing operations that consume significant quantities of energy or retailers where logistics forms a major cost component of their activity. This in turn allows them either to open up their profit margins or to offer lower prices to customers with that newly discovered real-cost reduction.

In some cases, this even extends to the public sector. If we think about the cost of heating and running public estates and the fuel used in refuse collection and processing, in the emergency services and even the military’s respective fleets, well their cost bases have potentially reduced significantly too.

But there is bad news for some. Simply put, the Treasury gets its income from a number of sources, but the taxation on the production, marketing, refining and distribution of fuel and energy is a significant source of income for government. Given the costs of primary energy production are largely constant these tax receipts just went down. A lot. And with a Government in deficit the last thing they want is a reduction in taxation receipts.

The upshot is that for a public sector already under huge pressure in respect of its budgets, these budgets are potentially set to get even smaller because there is going to be less real money in the form of tax revenues in the system.

So what does this mean for those in design? Well, for a sector that changes things, there’s no greater opportunity than change itself.

So if we look into the consequences of the oil and energy price reductions and think through the consequences, there are a host of opportunity on our doorsteps. New offers, tariffs and bundles will be developed by energy companies at a point where customers are reconsidering their energy suppliers. There will be products and services that customers want to buy with their disposable income windfalls. It could extend from that treat in the shopping basket through to that long awaited holiday perhaps even an overdue, but costly trip to the dentist for a cosmetic makeover?

So if you’re in design, think on. There are a host of opportunities for those working with clients, products or services on the way up or down. And you need to be doing something about it now before this proverbial ship has sailed and before we’ve all absorbed our windfalls into the normal budgetary cycle of everyday life.

David Godber is group chief executive officer at Elmwood

Join us, it's free.

Become a member to get access to:

  • Exclusive Content
  • Daily and specialised newsletters
  • Research and analysis

Join us, it’s free.

Want to read this article and others just like it? All you need to do is become a member of The Drum. Basic membership is quick, free and you will be able to receive daily news updates.