Rewriting the forecasts
The sudden and apparently unexpected dive in the price of oil seems to have caught many forecasters off guard. We are seeing revised forecasts from various sources today. So what does all this mean for the Plumbing & HVAC/R industry?
The corresponding drop in the value of the Canadian dollar, down to 0.80 U.S. as this is being written, makes price increases in many products used in this industry almost inevitable. Most of those products come from the U.S.
A low dollar is supposed to give a boost to our manufacturing, but unfortunately there is much less manufacturing in Canada today than there was 20 years ago. And raw materials are typically traded in U.S. dollars too.
Of course, while prices for parts and equipment may go up, contractors are benefitting considerably from a lower price for fuel. The savings are substantial for contractors with large service fleets.
And it should finally give the oil heating industry a break, making heating oil much more affordable than it has been in recent years. This will provide some relief to the urge by home and business owners to move off oil to another fuel.
The price of crude oil has dipped and spiked numerous times over the years. However, this latest drop in oil pricing looks like it may last for some time. Part of the reason we’ve come to this is that high oil prices encouraged more exploration and development of unconventional oil supplies. At the same time, vehicles, HVAC equipment and virtually every fossil fuel burning device has become more efficient. Economies in various countries, particularly China, have slowed, also reducing the demand for oil.
While it’s good news for consumers, it’s going to cause problems. Government’s have done their budgeting based on high oil prices and the resulting high oil/gas tax revenues. So we’re likely to see those taxes go up and stay up whenever the price of oil does increase.
And yet, barring a major conflict in one of the world’s oil producing regions, the price of oil is likely to stay low for some time. The wholesalers and manufacturers that are holding the line on pricing for plumbing and HVAC/R equipment and supplies can only do so for so long. We will all have to re-do our forecasts sooner rather than later.