How rising oil prices are affecting B2B trade

The situation between Ukraine and Russia has affected the global economy in more ways than one. Many nations and organizations are placing sanctions and severing ties with Russia to separate themselves from the turmoil. As a result, shortages and financial disruptions have arisen.

Russia is among the top oil producers in the world,¹ so naturally, the severance with the nation has led to a rise in oil prices around the world.² The growing gas prices are affecting everyone from the wholesale to the consumer level.

In this article, we’re going to discuss how the rising oil prices are affecting the B2B trade and how wholesaler suppliers can navigate this situation.

The effects of rising oil prices on shipping

Did you know that fuel accounts for 60% of global oil consumption?³ That’s why removing Russia’s oil supply from the global pool is causing gasoline prices to increase around the world.⁴

The rising price of gas is a concern for many B2B suppliers since it affects shipping prices. Exporters who are trading overseas could be hit particularly hard since shipping is a bit more involved at this level.

Rising oil prices could also affect manufacturing since the cost of materials will likely be affected, as well.

When the costs of production and shipping rise, wholesalers must either absorb the costs or raise their prices to make up for the losses. Absorbing the costs may help to keep customers happy, but it will affect your bottom line. When wholesalers increase their prices, the inflation trickles down to the retail cost of each individual unit.

What can B2B sellers do to prepare?

Over 30 nations are tapping into emergency oil reserves to help mitigate the rapidly rising prices of gas.⁵ While this is a good start for balancing out fuel prices, it is a temporary move that is slated to be carried out for six months.

At this time, it is unclear whether using emergency oil reserves will simply act as a bandaid or if it will truly serve as a solution to the problem. Either way, it is a good idea for B2B sellers to prepare for these abnormalities to the best of their abilities.

Here are a few ways that B2B sellers can brace themselves to best navigate the uncertainties with rising fuel costs.

Optimize shipping practices

If you’ve been considering optimizing your shipping practices, now is the time to do so. See where you can reduce your shipping costs by getting strategic with your shipping practices.

When it comes to shipping items, weight and volume are huge determinants of the cost.⁶ If you can trim down your packaging to save on weight or reconfigure your packaging in a way that allows you to fit more in a smaller space, you could save a lot of money.

Consider local trade

One sure-fire way to keep expenses in check while shipping costs are on the rise is to lean into local trade partners. If you’re doing business with those close to you, shipping costs will be less significant since the items don’t need to travel far.

For example, if you’re a manufacturer it is possible to source raw materials locally for a reasonable price, explore those options. As a wholesaler, you could offer incentives to local customers who want to buy from you to cut down the distance you need to ship.

Leverage preordering

Allowing buyers to place preorders helps to make more calculated moves for your business. When you know exactly what your customers want to buy, wasting funds on stocking up on inventory that will go unpurchased isn’t an issue. This way, you’re not spending money to have unnecessary items delivered.

This also applies to wholesalers who manufacture their own goods. If there is a material that you know you will use, order it as soon as possible to lock in rates before they inflate.

Prepare your customers

One of the biggest concerns for many B2B traders in this tumultuous global situation is the lack of predictability. The only thing that sellers can do about this is to maintain clear communication and transparency with their customers.

It’s a good idea to issue a statement or reach out to buyers individually to let them know that there might be some unforeseeable issues. Remind them that you are doing your best to navigate these issues and that you will keep them updated as things progress.

Also, make sure that your customers know that you’re always available to answer questions they have along the way.

Sell on Alibaba.com

With so much uncertainty in the current global economy, exporters are wise to embrace stability wherever they find it. Fortunately, Alibaba.com is here to provide the support you need to navigate these uncertain times.

Alibaba.com is a B2B marketplace that gives wholesale suppliers the tools they need to grow and scale their businesses. Some of the top tools and features on Alibaba.com include smart product listings, demand forecasting tools, powerful analytics, and Trade Assurance.

Sign up for Alibaba.com today to prepare your business for growth through trying times.