Finding the best business gas rates for your business can be a tedious task. Energy prices fluctuate, and money management becomes unpredictable. When gas prices increase, this means that you have to pay more. But, if there are reductions in gas prices, it will require you to reassess your operational costs.
It’s always a good idea to have more information and knowledge about the causes or the factors that affect the changes in gas prices. There are a lot of factors that influence the cost of wholesale gas. And having the know-how or being able to understand why those factors affect the prices of gas will make it easier to predict how you should run your business.
When it comes to paying your gas bill, having in-depth knowledge and understanding of your pay prices will make it easier to save more money.
What affects business gas prices?
The reality is the energy market is fluctuating. It’s why it is essential to find the best deal because you may pay more than what you need for your business if you aren’t careful. Gas prices will keep on changing due to several factors, and we will go in-depth with each element one by one.
● Supply and demand
Supply and demand is a traditional concept that provides the relationship between the commodity and the price. We all know that gas is a resource bought, sold and transported to several locations in large amounts. However, we need to remember that this is not an unlimited resource. Therefore, how much supply is currently available in the market will affect the gas prices. When there is a demand but there is no supply, the costs will increase. On the other side, when the supply is higher than the demand, the gas prices will decrease.
We have already mentioned that gas is a finite resource. There will come a time that this resource will no longer be available because it has been fully exhausted. So what do you do? You have to import. His means that you will compete with other countries because there is a shortage in the supply. And in this case, the price of gas will naturally increase.
If a country relies heavily on gas, it is essential to have its storage so that if there comes a time that more energy from gas is required, it will be readily available. For example, back in 2017, the UK’s biggest gas storage site was closed down. This storage was supposed to provide 15-days’ worth of gas, but the warehouse could only offer 4 to 5 days since it was closed down. Closing down a gas storage site caused a massive impact on gas prices, especially when the UK experienced a cod winter in 2018. Due to the demand for gas, the gas price went up to its highest in more than ten years.
● Foreign exchange rates
Just like every commodity traded internationally, gas prices are affected by foreign exchange rates.
● Alternative energy
The UK creates more energy from offshore wind generators. Around 40% of the global capacity is from the UK alone. With the government planning to generate a third of its electricity needs using wind power by 2030, this will change gas prices. However, if there is less wind, there is less energy, and as a result, the country needs more gas. Since gas is necessary, there is a higher demand which will increase in price.
● Heatwaves and Cold Snaps
When the weather is hotter than usual, less gas is required. But, it’s the exact opposite when the weather is colder. Unpredictable and unforeseen weather can disrupt the predictability of gas prices.
● Regulatory Pressure
One of the most prominent factors that influence gas prices in the UK is the regulations. The legislation will always affect the price of gas, mainly if they impose restrictions on amounts allowed to be bought and sold in the market due to considerations on the environmental impact.
There are a lot of factors that will affect the prices of gas. Whether at the international or national level, knowing how these factors will affect the fas price will allow business owners to predict and control their finances.