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Three reasons why your business should care about oil prices

Here at Love Energy Savings, we like to keep our fingers on the pulse when it comes to the energy market, and more importantly your business’s gas and electricity bills.

In many European and Asian countries, oil prices continue to significantly impact energy prices, especially for gas. According to Ofgem, oil prices in the UK account for 30% of gas price changes!

This is all very well and good, but you may be wondering how else it could affect you as a business, especially if you do not have a significant reliance on gas. Well, as it turns out, it can have a huge impact way beyond your energy bills.

Here are three reasons why your business should care about oil prices:

UK Economic Activity

You don’t need to be an energy expert to know that oil prices influence almost every sector in the economy. Admittedly, the impact it has varies by industry but with oil affecting not only energy prices but manufacturing, transportation and agricultural costs too, you can see how a drop (or rise) in prices could determine the economic prosperity of this country. Even if you don’t think it will impact your business directly, the implications felt by your supply chain may have a knock on effect for your bottom line.

Our aim is to ensure that businesses save as much money as possible on their business energy costs. Most of the suppliers we work with offer fixed rate tariffs, defending against market fluctuations so that, if something unexpected does happen in the market, you can rest assured we have your business energy worries covered. 

Stocks & Shares

Oil prices and the stock market have tended to move in tandem in the last few years, bucking a trend seen in the early 2000’s which seemed to suggest otherwise. Linking into the economic activity point above, this is generally attributed to more cautious markets over recent years, which view oil markets as indicative of wider global changes in demand and growth.

As the stock market fluctuates, so does confidence and this, in turn, affects investment and consumer spending. This state of affairs will most likely affect your business in some shape or form, and while it may be minimal, it is useful to be aware of market movements so you can plan ahead. 

Climate Change

A longer term issue is that of climate change. Low oil prices may mean that countries are less likely to choose low carbon alternatives. This will result in worldwide climate change targets failing to be met, potentially increasing the pressure on businesses to step up and reduce their carbon footprint.

This may not only be costly, especially if fines are imposed, but it could result in heavy industry suffering. Due to the part these companies play in the supply chain, this could impact you too – increasing production costs or even resulting in you having to look elsewhere.  

As you can see, oil prices are not just a percentage on a graph, they have real economy changing impacts.

At Love Energy Savings we want to support you in every way we can, offering the lowest energy tariffs, matched to your individual requirements and providing you with relevant insights and information that you can use to protect your business moving forward.

To help you and your business stay in the loop, we have created an oil glossary to help you on your way to becoming energy experts just like us.

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Your Oil Price Glossary

Bearish/Bullish: Refers to markets that are moving in a particular direction. Bearish refers to a market retreating in price, while bullish reflects gains in price

Brent: Brent crude oil is sourced from four oil fields in the North Sea: Brent, Oseberg, Forties and Ekofisk. Brent crude is the benchmark pricing for most European, West African and Mediterranean oil, and increasingly in some South East Asian markets

Curve Price: Forward prices across a specific period, reflecting a range of tradeable prices at today’s values for specified dates in the future. While a key indicator of market sentiment, it does not constitute a price forecast in itself, instead representing a set of today’s prices for future purchases at a specific date

Forward Price: The price for a commodity to be delivered to a specific location at a specific date in the future

Futures: Commodities to be delivered at a fixed date or series of dates in the future, with a price agreed at the time the deal is made

LNG: Liquefied Natural Gas – natural gas that has been converted to liquid form via condensation, allowing for easier transport and storage. LNG allows for gas to be trading across a global marketplace, rather than relying on pipelines, as well as allowing far larger volumes to be shipped, taking up around 1/600th of the volume of natural gas 

OPEC: Oil price is generally most heavily influenced by OPEC (Organisation of Petroleum Exporting Countries), which is a group of 14 major oil producers, collectively accounting for 43% of global oil production, as well as controlling over 70% of known oil reserves. Saudi Arabia operates as the ‘de-facto’ leader of this group and they, alongside five other Middle Eastern nations, account for two thirds of OPEC production. These nations are able to produce oil at much lower cost than competitors, particularly the American boom in shale oil which, while plentiful, is expensive to extract  

Spot Price: Oil and other commodities traded for immediate delivery

WTI: West Texas Intermediate refers to oil drawn primarily from wells in the Midwest and Gulf Coast of the United States and sent via pipeline to the Cushing storage hub in Oklahoma. WTI is the benchmark for the majority of oil in the United States

If you would like to talk to one of our Energy Experts about how we could save you money on your business gas or electricity just get in touch on 0800 9888 375.

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