Understanding The Current Increase In Gas Prices

Last Updated on March 24, 2024 by Saira Farman

Since the start of mass vaccination drives around the world, economic activities started to resume. This has led to a supply and demand crunch around the globe. Every commodity has seen a rise in its price and rising inflation has made it difficult for ordinary citizens to make ends meet.

Oil and gas prices are no different, they have also seen a dramatic rise. There are several reasons behind the sudden rise in gas prices. In this article, we will try to understand them.

Why Are Gas Prices Increasing Globally?

The current prices of gas are a reflection of the high value being placed on gas due to the global supply and demand. It is important to remember that these prices are not representative of pre-existing contracts and therefore do not apply to all of the gas being consumed.

Here are certain reasons why gas prices have increased:

Reopening Of Economies:

As COVID-19 lockdowns and regulations are being eased around the globe, countries are restarting their economies.

Previously, the demand for gas had gone down because industries and power plants were running on limited capacity. This has reduced the prices of gas dramatically. 

But since the reopening, there has been an uptick in global gas demand. Industries around the world are increasing their production capacities, which in turn is increasing the demand for gas.

Extreme Cold:

The reopening of economies combined with the cold winter has increased the demand for gas from the household sector. This has left suppliers with little spare capacity driving the prices higher.

Demand Of LNG In Asia:

As Asian economies are restarting there has been an increased demand for Liquified Natural Gas. LNG is transported through ships, which has led to a shortage of gas supply for Europe.

Maintenance Projects:

The maintenance project scheduled for 2020 had been postponed to 2021 which led to a bottleneck. This has caused worry among speculators and driven the gas price higher.

Impact Of Higher Gas Prices On Businesses:

Most businesses are seeing a considerable rise in their bills. This can lead to a reduction in production capacity or a complete pause. Some businesses might not be able to survive this increase and they can cease trading.  

Or it can cause the businesses to pass the prices on to the customers through price hikes. The most severely affected are energy-intensive industries. However, these high rates are affecting every business including those who just need to heat their shop or office.

How Can Businesses Survive?

If you are a business owner who is worried about the gas bills, you should keep in mind that these prices will only last until the start of spring. Therefore, your current goal should be to survive this period until winter ends. 

How To Plan For The Future?

While most businesses will get through this period, they should plan and make strategies to become energy efficient and self-reliant for the future. 

Making Infrastructure And Equipment Energy Efficient

The first thing a business should do is to invest in its infrastructure and equipment to make them energy efficient. Most businesses are operating in old buildings and using outdated machinery. This causes them to lose large amounts of money in paying energy bills.

Most business establishments are long overdue for a structural overhaul because they no longer serve the purpose of their organizations goals. This investment in infrastructure can be the first step towards becoming energy efficient.

New technology and innovations have made it possible for buildings to become extremely energy efficient. Businesses can now install spray foam insulations and insulating concrete foams to reduce their energy losses in winter. These materials can be used when overhauling older buildings. 

Moreover, organizations that are pursuing new infrastructure can incorporate elements that reduce reliance on fossil fuels and make their buildings self-sufficient. They can incorporate insulation to prevent the loss of warm air. They maximize the use of daylight by having windows and ducts but these are double glazed to prevent heat transfer from the building. They can also have plants and vegetation to help lower temperatures inside. 

Energy Procurement

Getting the best possible energy contract is the goal of every business, energy procurement is the name of this process. Most large scale organizations have an energy procurement department but this is not the case with smaller businesses. This is where energy procurement firms come in.

These firms have the desired expertise and knowledge to help you acquire the right energy contract. They also conduct an energy analysis of your business to highlight its shortcomings and give you a detailed strategy to maximize your savings.

Energy procurement firms work with suppliers that provide block/fixed contracts, indexed contracts, and a mixture of both of these. The energy procurement firm you will hire will help you to forecast the prices of utilities so you can budget accordingly.

Why These Steps Are Important

These steps are important because they reduce the operational budget of a business and to survive in a world where fuel prices are only going to increase. Half a century ago, the fuel prices were not high and the government provided subsidies to businesses but the situation is a lot different now. The government wants businesses to transition towards alternatives and it will not be providing any economic concessions to businesses struggling due to high gas prices.

Also, these steps can help firms improve their net profits and also lower the production cost. These steps will also make your business future proof and make it more robust in the face changing economy.

Where Can I Find Professional Help?

You can contact the Utility Bidder. They have an award-winning energy procurement service that offers consultancy on getting the best possible energy rates. They provide consultancy to organizations looking for business gas contracts. 

Their experts will negotiate on your behalf and compare the bids from different suppliers, maximizing your savings and minimizing the time wasted on searching for the best business gas prices.

 Click here to learn more: https://www.utilitybidder.co.uk/

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