What do rising oil prices mean for small businesses?

Oil prices have been rising since mid-March but are still lower than in June last year. What does this mean for small business energy bills?

There was a 6% increase in oil prices in March as traders worried that hostilities in Yemen would disrupt supplies. So far this hasn’t been the case but prices have again increased and the cost of Brent crude oil has gone up by about $9 a barrel in the last six weeks to around $65.

The continuing conflict in Yemen is still playing a part in these price rises. But it’s unlikely they will go back up to the previous levels any time soon.

How are oil prices linked to gas and electricity prices?

Changes in oil prices often dictate changes in gas prices – but why?

Gas is a by-product of oil exploration and production. Over the last few years a number of different sources of gas have emerged including shale gas. But gas prices are still strongly linked to oil prices because of overlap in production and exploration.

Gas prices are linked to electricity prices because gas is used to generate electricity. This means oil prices can have an impact on both business electricity and gas costs.

But business gas and electricity prices haven’t fallen as much as had been hoped as a result of lower oil prices – partly due to government levies on bills.

Now, as economies around the world recover, oil consumption is expected to increase. And when consumption goes up prices can increase. While there’s a glut of oil at the moment, prices aren’t likely to increase rapidly in the short term. But they will start to go up.

What does this mean for small businesses?

If your business energy contract is due for renewal now or over the next few months it’s important to make the most of these lower energy prices.

Use a compare and switch site to find a better deal. Fix your contract and benefit from these lower prices for the next two, three or even four years. Knowing exactly how much your energy will cost will allow you to make better long term decisions.

SwitchMyBusiness.com offers a straightforward solution, cutting bills by up to 70%, with exclusive supplier rates. Thousands of businesses have already saved an average of £747 per switched meter with a call that takes less than five minutes. For an impartial expert option, fill in the form at the top right of this page or call 0800 411 8830

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