The 4 Industries Most Affected By The Rising Energy Prices

Across much of the world, oil and gas prices are at record highs. Driven by the COVID-19 pandemic, supply chain disruptions, staff shortages, the increase in demand as pandemic restrictions ease, and Russia’s invasion of Ukraine, the cost of energy has reached levels rarely seen before.

This increase has already begun to affect most businesses and individuals, as the significantly higher prices have led to spiralling utility bills.

Plus, as operational costs for companies rise, and as the companies inevitably pass some of the increased costs on to consumers, the prices of everyday goods on the store shelves will increase too.

In many parts of the world, this combination of high utility bills, more expensive basic supplies, and stagnant wages has led to what has been termed a 'cost of living crisis.'

Unfortunately, the challenges this will present to businesses, families, and private consumers will likely be substantial.

But which industries will be most affected by the rampant inflation? Let’s take a look

1. Transport & Logistics

For companies that transport either people or items from one place to another (e.g. bus services, couriers, train operators, shipping services, air travel companies etc.), the increased fuel prices are a nightmare.

Fuel prices are a significant cost for all these industries, and when the costs rise, they are often passed on to consumers in the form of higher prices. However, it is often difficult to pass on the full cost increase, meaning rising fuel prices will usually reduce profit margins.

This will be especially true at this point in time, as the sheer scale of the squeeze being felt by businesses and consumers makes it difficult for transporters and logistics services to request more money from a populace that is already being bled dry.

For transnational courier companies in particular, the sharply rising energy costs are an unwelcome additional challenge to deal with on top of the substantial disruptions to EU trade caused by Brexit.

Thankfully, there are some measures these businesses can take to mitigate the effects of the increased fuel prices. For example, they can train their staff in more efficient driving practices to maximise the distance travelled on every drop of fuel, make use of every available government incentive and tax deduction, and perhaps even switch their fleet to one mainly comprised of electric vehicles.

2. Petrol & Diesel Vehicle Retailers

As fuel prices increase, seemingly with no end in sight, for many businesses electric vehicles are becoming an increasingly attractive option – particularly when the generous government incentives for buying electric or hybrid vehicles are factored in.

Other traditional concerns about electric vehicles - such as their limited range - are becoming less of an issue too, as recent models can travel up to 620 miles between charges.

By shopping smart, you can reduce the upfront cost of buying an EV, and then benefit from the lower cost of recharging versus refuelling your vehicle.

Therefore, vehicle retailers who focus primarily or exclusively on selling fossil fuel powered vehicles should aim to diversify their stock as a matter of urgency.

3. Leisure & Hospitality

With more and more people having to choose whether to heat or eat, for many, treats and luxuries have become a thing of the past.

As impoverishment spreads, and more and more of a worker’s monthly wage is spent on necessities such as housing, food, heating, and taxes, disposable incomes will plummet.

This will have a painful knock-on effect for leisure and hospitality businesses, and any other company that offers non-essential goods and services.

In short, the spending power of those looking to treat themselves to recreational activities will be reduced. As this market shrinks, businesses will have to work harder for every customer – competing fiercely on price and quality of service to earn the business of hard-pressed consumers.

4. Manufacturing

Energy-intensive processes are necessary to produce many common goods such as tin cans and component parts for machinery of all sizes.

Metals, chemicals, plastics, and glass require a lot of gas in order to be correctly processed, meaning that the spiralling prices have created a very difficult environment for every energy-intensive industry across Europe.

This will be felt most by those who produce aluminium.

The lightweight metal, which is used in everything from beer cans to electric vehicles, is known as ‘solid electricity’ because of the large amounts of power required to transform its key ingredient, alumina, into refined metal.

In the last year alone, the price of alumina has increased by more than 100 per cent, making it far more expensive to produce the aluminium used in many everyday items; this is yet another recent rise in costs that will almost certainly be passed on to consumers, at least in part.

Easy To See, Tough To Escape

It will be hard for any business or consumer to avoid the impact of the energy price rises. Although some industries will be more affected than others, they are all crucial sectors that supply many vital facets of our day to day lives.

Therefore, as certain costs are inevitably passed down to the end user, we will see the impact of the rampant price inflation reflected in nearly all our purchases.

To counter this, it is important that both businesses and individuals research ways to optimise their routines for greater efficiency, reduce any unnecessary expenditures, and cut down on their energy usage wherever possible.