The recession may already be tough on UK businesses but if they don’t draft up fuel and energy strategies for the future then they may find that they weather the current storm only to be floored by increasing energy costs.
That’s the opinion from Sandra Patterson of courier matching service Boxby.
Sandra believes the rising oil price of recent weeks suggests a much harder economic climate could be just around the corner, with many firms left worrying exposed.
She said: “Companies need to start asking themselves the basic – and harsh – question of whether their business will still be viable if the price of fuel doubles?
“For many the answer will be ‘no’ so, if they want to stay in business, they really need to start looking at what they can do minimise costs and draft up fuel and energy strategies.
“It’s amazing how many companies still think there will be a return to easy and cheap oil – but there isn’t going to be.
Businesses must be fuel efficient
“What’s left is either hard to get to or located in non OPEC countries, ruled by governments that are happy to use the supply of oil as a heavyweight political weapon.
“Also, demand is going to rise again when you consider that countries like China and India are will continue to grow.
“The new sources of oil being targeted are more expensive to locate, extract and process. The state owned firms do not have the budgets that they used to have, having spent billions of pounds on expenditure programs to help their countries survive the worldwide downturn.
“All in all, it adds up to a high probability that the record high oil prices seen in 2008 were just a flashing glimpse of the long term future.”
Sandra thinks it is unlikely that the UK government will be willing to cut the taxes on oil in order to encourage investment and stability in the oil industry because of current debt commitments, leaving UK firms fully exposed to the raw volatility of market prices.
Vital investment in fuel for Scottish PR Success
More worryingly, she sees it hitting the road haulage, freight and courier firms first.
She added: “Oil prices don’t simply mean an increase in the price of a litre of diesel, oil prices impact deeply all the way through our economy, from the price of a kilo of potatoes, through to demand for new cars and vehicles.
“Every price of every product or service sold in the UK incorporates the price of oil to some extent.
“The Road Haulage Industry, Couriers, and Freight/Parcel/Pallet services are all industries that see the impact of the oil price rise first. Large conglomerates have the ability to forward buy and hedge their oil prices, Virgin Airlines successfully turned a profit for 2008 whilst the other airlines all declared losses.
“But the companies that provide most of the UK’s logistical movements are not large enough to hedge their fuel purchases and are exposed to fuel price changes.”
Businesses must act now if they want to avoid going out of business, according to Sandra.
Important business planning for PR in Scotland
She added: “The best advice for UK companies is not to ignore this future risk, to identify it on their radar now, and make it integral to their business planning and strategy for the next few years.
“Will products still be marketable if the cost of delivery doubles? Or will that increase in the cost of delivery mean that customers look at alternative solutions not simply alternative suppliers.
“Companies need to prepare an energy use strategy, looking at how their company incorporates energy across the board, from suppliers and components, choice of raw materials, sourcing of raw materials, production, through the supply chain, and also management and movement of people.
“UK businesses need not to stick their head in the sand about the extent that future oil prices could impact on their business. Blockades, lobbying and other protests are likely to have very little impact on an oil price determined by worldwide demand and supply. The UK government will undoubtedly take a lot of the flak, but its powers to influence the worldwide price of crude are minimal.
“Forward thinking, planning and incorporating a fuel and energy strategy into their business corporate planning will be essential for all, from the smallest same day courier business, all the way through to the national Newspaper groups. The price of oil impacts heavily on all.”