Drop in oil prices, but don't be happy just yet.

Prices of crude oil dropped from a peak of $147 a barrel in July to below $60 a barrel today. This drop in oil prices has sparked off a price war between, you guessed it, UK’s top four supermarkets-Tesco, Asda, Sainsbury’s and Morrisons. After trying to fill up cash strapped consumer’s shopping carts, they are now trying to fill up their cars. Prices of unleaded petrol fell to just under £1 per litre. The recent fall in the prices is due to the fear that the sharp increase in prices is likely to lead to a fall in demand and hence a fall in revenue.

However, this drop in prices is likely to be short lived. This is because OPEC (Organisation of Petroleum Exporting Countries), a cartel of oil producing nations, announced in the wake of the recent drop in prices that they would cut the production of oil by 1.5 million barrels a day by next month since they fear that their revenue will decrease because of the drop in oil prices. This, they hope, will lead to a decrease in supply and since the demand of petrol is likely to go up due to the decrease in prices, it will ultimately lead to an increase in the price of oil, which some experts estimate to be around $80 to $100 per barrel.

Although it is immoral and unethical, the oil producing nations, in a way, have made a smart move by coming together and working for a common interest, i.e., to make as much money as possible, rather than against each other. Working together ensures that they can control the amount of supply of oil and hence also the price we pay. Oil is by all means almost a necessity which means that the demand is price inelastic; this means that the change in price does not have a huge impact on the level of demand. People still have to fill up their cars to go from A to B, transportation firms still have to fill up their trucks to transport goods and so do buses, trains and airplanes. Also, petrol and diesel have no real alternatives.

However, in a recession, demand is likely to be price elastic, which means that demand is sensitive to the price. So, the move to cut production may lead to a fall in supply, but the increase in prices might also lead to a fall in demand, which would give counterproductive results to what OPEC hope.

Cartels formed by companies are against the law, otherwise we would not have competitive prices and certainly no price wars between supermarkets since they would be busy colluding with each other and fixing prices.

The value of Pound (£) has been falling against the Dollar ($). The benefit of this is that it makes UK businesses very competitive in foreign markets and allows them to import their goods at a competitive price. The flip side of this is that it increases the cost of importing raw materials of which oil is a part. It is likely that even this will increase the price of petrol and diesel we pay at the fuel station.

So, there is no reason to be happy about the drop in fuel prices since it is only temporary and more of a Christmas offer than a real deal.

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Customer Service - do the businesses really practice it?

"Your call is important to us but all our advisers are busy at the moment. Please call later on.."
How many times have you experienced this? Many times, I am sure. Does this mean that there should always be a person ready (24x7) waiting for your call?

No, what I mean is that the businesses do not take customer services seriously. There are businesses that are notorious for exceptionally long delays in answering your phones. There are businesses that are known for very poor customer services. We are not here to name and shame businesses and the people behind it. It is a fact, however, that many businesses don't like the very customers they are dependent on for their survival.

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Then why does every business you name it professes lofty mission statements about serving the customers? In my personal opinion, it is just to create an air about the whole thing. Just to make the poor customer feel good. It is just to attract more customers and also an effort to retain the existing customers.

Why is that if you want to open a new account or buy a new product or service, the lines are never busy and the company is happy to offer a toll free number (0800). Whereas if you are an existing customer, the lines are busy, your letter never reach them, your 'previous call' is not traceable in their records and so on. And by the way you have to dial through a chargeable line (0871).

Does this work? Well, it does - many a times. Otherwise, how on earth you see those business thriving and flourishing?

Why does this work, then? There is no simple answer. May be it works because of general ignorance, apathy and last but not the least - monopolistic situations. In many businesses, there is what is called an 'entry barrier'. It simply means it is not easy for any one just to start that business. It may be due to technology, huge setting up costs, requirement for big infrastructure etc. It is not a coincidence that the businesses in these areas have poor respect for customer service. This applies to small business as well. Look at trades people. I do not mean to suggest that all of them are dishonest or don't care for their customers. It's just a question of shortage of good trades people.

There is another side to this issue. Businesses are primarily to make profit and create wealth for their owners (shareholders) and managers (through performance linked pay). 'Satisfying the needs of the customers' is just an excuse for making more money.

The real problem is that some short sighted business managers do not understand that, in the long run, creating value for their customers (by exceeding the expectations) creates more value for the shareholders and other stakeholders.

Unfortunately, in the long run, we are all dead (with apologies to J M Keynes).