Oil prices are swinging. Is your rate list keeping up?

Last week, Brent crude fell more than 16% in five days, closing at about $98 a barrel on 6 November. It was one of the biggest stories in world markets, and it came after months of high fuel costs caused by the conflict in West Asia. If you run a distribution or wholesale business, the question is not where oil goes next. It is whether your business can keep up when costs move this fast.

This guide is for distributors and wholesalers in FMCG, rice, grain and staples. It explains what is happening, where swings like this quietly take money out of your business, and what you can do about it this month.

What is happening, in plain words

• Oil is moving sharply. The fall came on hopes of a diplomatic breakthrough, but in the same report one energy analyst put the chance of fighting resuming at 80%. Nobody can tell you next month's price with confidence.
• India feels it directly. State-run retailers raised diesel prices in four rounds from mid-May, about 8.6% in total.
• Freight follows diesel. Diesel is nearly 50 to 55% of a heavy truck's operating cost in India, and road transport carries more than 65% of the country's freight.
• Food and money are getting dearer. Retail inflation rose to 5.54% in September, with food inflation at 7.74%. In October the RBI raised its repo rate to 5.50%, its first increase since February 2023.
• Grain shipping is under strain too. Attacks on commercial ships, including grain carriers, are adding to the risk on world food prices.

Why a distributor feels this more than most

Distributor margins in India are about 3 to 5%. On margins that thin, small slips decide whether a month was good or bad. Swings like these open four leaks. The rupee figures below are simple examples to show the scale; put in your own numbers.

1. Selling at yesterday's rate

This is the biggest one. Say your cost on a ₹1,500 bag goes up by ₹30, a 2% rise. You earn about 4%, so 100 bags should bring ₹6,000. If the salesman is still quoting the old rate from last week's WhatsApp list, those 100 bags lose ₹3,000. Half your margin has gone, and nobody noticed.

Manufacturers add to the confusion. Large FMCG companies have been making small, selective price rises and shrinking pack sizes, and many input costs follow crude with a lag of three to four weeks. So rates keep changing in small steps, long after the headlines have moved on.

2. Half-empty van trips

The pump price itself is manageable. A van running 100 km a day at 12 km per litre uses about 8 litres, so a ₹7.50 rise adds about ₹60 a day, or roughly ₹1,600 a month. For five vans, that is about ₹8,000 a month. It hurts, but the bigger cost is a van going out half full, or going to the same area twice in a day because orders came in late by phone.

3. Credit that stretches by a week

When prices rise, retailers feel the squeeze and pay later. At the same time, your own borrowing gets costlier. If you have ₹1 crore out on credit and your money costs 12% a year, one extra week of delay costs about ₹23,000. It never shows up as a bill, so it rarely gets attention.

4. Buying on a guess

A sharp fall tempts you to load up, and a sharp rise tempts you to hoard. With prices this uncertain, either move can tie up cash in the godown just when you need it for credit and collections.

What to do this month

1. Have one rate list, and date it. Salesmen, the counter and retailers should all see the same rate, with the date and time it was set. Remove old lists from circulation.
2. Lock the rate on each order. Record the rate the order was taken at, so there are no arguments at delivery and you can see what you actually sold at.
3. Check your margin by product every week, not at month-end. Start with the 20 items that bring the most sales.
4. Plan trips from orders. Set a cut-off time for next-day orders, group them by route, and send a van only when it is properly loaded.
5. Work out the cost of each trip: fuel, driver, and the value delivered. Trips that deliver little should be merged.
6. Review credit every week. List the ten oldest dues and call them first. Hold new credit for retailers who are well past their limit.
7. Buy to your plan. Do not change your stock levels because of one week's headlines. If you do take a position, keep it to fast-moving items and a limit you decided in advance.

Where a system helps, and where it doesn't

To be plain about it: software will not lower the price of diesel, and it will not tell you where oil is going. What it does is close the leaks around the price.

• Rates: change a rate once, and every salesman and retailer sees it at once. Each order keeps the rate it was placed at.
• Vans: orders come in before the cut-off and are grouped into trips, with proof of delivery and cash recorded for each trip.
• Collections: everyone can see who owes what and for how long, and the salesman collects with the right figure in hand.
• The owner's view: sales, margin and dues the same day, with GST bills going to Tally.

Many businesses still run all this on phone calls, WhatsApp and Excel. It works when prices are calm, but it tends to break when they aren't. We wrote about the warning signs of that here. If you are looking at options, start with what a distributor management system should do and how an ordering app works alongside Tally.

Cloudshops Order to Cash is the system we built for FMCG distributors and B2B wholesale. If you first want to talk through your own situation, our weekly consultation costs nothing and has no strings attached.

The bottom line

Nobody controls the price of oil. You do control how quickly your rates change, how full your vans are, and how fast your money comes back. In a year like this one, those three decide who keeps their margin.

Market figures are as reported on the dates shown and can change quickly. Rupee examples are illustrations, not data from any business.