Over the past nine months there has been an astonishing decrease in the cost of crude oil. Many nations who import oil have been benefiting, including the UK. How have small British businesses benefitted from this?
From 2010 – May 2014, Brent crude oil was at a very stable price, continuously staying at $110 a barrel. Since then however, there has been a monumental dip in prices. In January this year, crude oil dropped to $49.92, something that hasn’t happened since May 2009.
This is all well and good, but how have small business owners benefitted?
There are 3 ways in which small businesses have been boosted by the drop in oil prices:
1. The price of petrol has gone down
Many SMEs heavily depend on transportation for their businesses to succeed, with over 72 per cent of small businesses stating that their car/van is crucial to their businesses.
The lowering in the price of petrol has not only significantly helped small businesses, but their customers have also felt the benefits. In January the rate of inflation fell to a record-equalling low 0.3 per cent, meaning that customers spend more on goods and services, which will promote growth in British business.
2. Decrease in energy bills
The decrease in the price of oil has not only reduced the price of petrol at the pumps, but energy bills have also decreased, which will lower the cost of running a business for SMEs. Energy bills for oil, electricity and gas are starting to fall, which can significantly reduce the overhead costs for a small business.
In February, gas prices were 27 per cent lower than the equivalent price a year ago, while wholesale electricity prices fell to a two year low of £45.69 / MWh.
3. Interest rates have fallen
One of the best effects of the oil price decrease on British small businesses is that the Bank of England has pushed back the expected timing of their first interest rate rise this year.
The consumer price index measure of inflation was flat in February. This means that SMEs have been able to save money that they were originally supposed to pay on any potential loans.