The Award Winning Carbon Reduction Programme for SME's


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Fuel & Energy

Recent years have seen prices for electricity, gas and oil jump to unprecedented heights. The increased burden placed on businesses as a result has pushed profit margins to the limit for many, though it may be a long wait for prices to significantly drop.

It is uncertain just how long global reserves of oil and gas will last, but as existing resources are further depleted, competition for fuels will inevitably grow. We are already seeing the adoption of more advanced methods of resource extraction to combat this, with controversial and inherently more expensive processes such as ‘fracking’ currently on the agenda.

The time of cheap energy is largely over, with the emphasis quickly moving towards society having to reduce its energy demands.

 

Energy costs

Homes in particular have suffered under record energy prices, with around 18% of UK homes falling into fuel poverty in 2009. However, although gas and electricity may not be the biggest outlays for some Small and Medium Enterprises (SMEs), bills almost doubling in just 7 years is certainly something to be concerned about.

For many years, the UK was generally self-sufficient in terms of gas production due to reserves located in the North Sea. Yet with the near depletion of these stocks, the UK went from being a net exporter of gas to a net importer in 2004. This meant that the UK purchased more gas from abroad than it sold.

UK energy_spend_copy

Since then, our growing reliance on foreign fuels has contributed to a noticeable rise in the UKs energy costs, as shown above. This is mainly the result of rising wholesale costs of oil and gas from international markets such as the Middle East.

There are no indications that prices are going to fall any time soon either. In fact, it has been predicted that energy costs may rise by as much as 30% by 2020, placing further strain on businesses and homes. 

 

Fuel costs

 Fuelprice1 copy

The most apparent rises in costs have been through skyrocketing fuel prices. Petrol and diesel costs have risen by almost half since 2007, placing huge pressure on a businesses' fleet and travel requirements. As with electricity and gas, it seems unlikely that prices will sufficiently fall in the near future.

Transport often represents a substantial part of an SMEs expenditure, meaning rising fuel prices are likely to have a considerable impact on operating costs. Generally, forecasts largely predict oil prices to increase further. It has been suggested by many that oil may be trading at $200 per barrel in the near future, up from approximately $100 per barrel currently. This is based on the prediction that global oil supplies will become very strained as early as 2012, as demand from developing nations such as China continues to soar.

 

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