MUMBAI: From packaged goods makers to retailers and paint companies, firms are keeping a close tab on crude oil prices , which have been volatile since the start of the escalating conflict between Israel and Iran.
Higher crude oil prices tend to inflate input costs for companies-crude-linked derivatives, for instance, are used in the packaging of FMCG products across categories such as food and beverages and personal care, while certain segments like detergents and dishwashing liquids are heavily dependent on Linear Alkyl Benzene (a crude derivative) as a key raw material. Beauty products like lotions, creams, and lip balms also use crude derivatives like petroleum jelly, said Anuj Sethi, senior director at Crisil Ratings.
The development comes at a time when broader consumption had started seeing some green shoots after several sluggish quarters, helped by tax sops, easing food inflation, and rate cuts. Further escalation of the conflict in West Asia could impact demand recovery in the near term. For companies, the challenge will be on two fronts- protecting margins if input costs spike and getting consumers to spend more; high oil prices typically impact overall household spending, nudging consumers to cut budgets on their discretionary purchases.