The “new normal” that we find ourselves living at present has led to much political, scientific and economic squabbling over the best course of action in various industries. The global Coronavirus pandemic’s impact on the world of business is showing no sign of slowing. But, Easter weekend saw an unusual moment of clarity and agreement in the competitive oil market.
The Organisation of Petroleum Exporting Countries (OPEC) features 10 of the most oil-rich countries across the Middle-East, South America and Africa and controls more than half of the world’s oil production. It is in competition with other oil producers such as Russia and the USA.
Reduced demand for oil in fuel production and energy generation due to energy-intensive industries grinding to a halt has led to a slump in its price to the lowest level in 18 years.
Fig A. Three month oil price in 2020 in Sterling https://www.exchangerates.org.uk/commodities/live-oil-prices/OIL-GBP.html
This particularly threatened the USA’s LNG industry and led to President Trump applying pressure to the country’s oil competitors to come to an agreement to cut production, which would reduce the amount of oil in circulation.
After failed initial negotiations in March, OPEC yesterday agreed emphatically to the largest cut in production in history: up to 20 per cent for May and June.
This will eventually drive the price higher once demand returns to somewhere near normal levels post-coronavirus.
What this means for your businesses
This depends on how much of an impact oil has on your business. We have written a blog on how oil prices impact UK businesses before, which you can read in detail.
Oil price has a direct impact on fuel costs. If your business has a fleet of vehicles, for example, you will currently be enjoying low prices at the pump. But this will will not last forever. Many transport businesses are still operating at capacity despite the pandemic, so they will be taking advantage of some much-needed savings at present. But., make no mistake, the OPEC+ oil production cut will take effect when demand starts to rise again and prices will jump higher.
The impact of oil on electricity and gas prices is less distinct. A very small percentage of the UK’s electricity comes from oil-fuelled generation. However, commodities markets in the likes of oil and coal are linked to the country’s generation of all types of energy in varying degrees.
Gas is a different story
The gas wholesale market has been on a downward trend for almost a year in the UK, which is not a direct result of the COVID-19 oil slump. But the pandemic’s impact on business and demand for gas means that a further sharp fall during March has taken the wholesale cost to an almost 10-year low.
This doesn’t mean that suppliers will pass on the full drop to customers. Transmission and distribution charges, IE the cost of getting that gas to your business, have not seen a reduction. Nor have environmental levies or taxes. This puts pressure on suppliers to maintain their margins.
But it does mean that there are deals to be had. At Great Annual Savings Group, we have secured some exceptional prices during March for both new and existing customers, which have caused a few double-takes in our quality processes.
With the changes in oil and the forthcoming market shifts, there is no guarantee this price will stay the same. We are recommending our customers take advantage of this current low price and renew gas contracts now. This can be done for contracts which are running up to 3 years in the future.
How we can help you take advantage
Let’s get the most important thing straight. We are more than aware of the current pressure businesses are under and their current priorities are around securing jobs and their future. Many businesses are not in an operational position to be addressing their contracts.
However, Great Annual Savings Group has still helped a good number of businesses prepare themselves over this period with advice and guidance, as well as securing some excellent business energy contracts to give them a financial boost when industry returns to normal.
Equally, many organisations, such as schools, are in an ideal position to address their running costs at the present time with no teaching taking place and a focus on cost efficiency.
We can offer businesses guidance on their utilities, payment machines, waste management, office equipment, security, telecoms and broadband, insurance and more.
Get in contact with us to see if we can deliver your business a boost before this gas price opportunity disappears. Working with Great Annual Savings Group is no-obligation and we do not charge you a fee.
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