How Falling Gas Prices Can Help Business
Posted by aonenetworks On October 3, 2014
As gas prices fall and begin to approach the lowest levels since 2010, business owners can look forward to a number of benefits. Analysts predict the price of a gallon of gas could drop to even less than $3.00 in some markets by the end of 2014. Crude oil prices have fallen almost 16 percent internationally since the end of June and the United States has seen an 11 percent drop during that time frame. Since the price of crude oil oil represents 66 percent of the cost each time a gallon is pumped into a vehicle this decrease in cost is significant and will be reflected at the pump and in the consumer’s and a company’s pocket.
Lower Costs
A reduction in the cost of gas has positive impacts across many different aspects of a business. Shipping costs for supplies, raw materials or finished products will likely see a decease, freeing capital for other expenses or permitting an increase in a company’s reserve fund. If travel for employees and executives is an important line item, that part of the budget will shrink to allow for allocation of those excess funds elsewhere.
In addition to a reduction in the cost of shipping or travel within a company’s budget, the fall in gas prices may also mean the cost of doing business with other companies will also be reduced. Essential products sourced from outside the company may see a price reduction, again adding more profit for business expansion, eliminating debt or setting aside savings.
Businesses may also look to increase their market share by choosing to pass some of their fuel savings along to customers by lowering prices for their services or products. Using a cost savings pass through as a way to build loyalty and increase a business’s profile in an industry will reap lasting benefits for the future. Increasing business success through more affordable customer pricing also can help insulate the company from the pressures of future fluctuations in fuel prices by broadening its base.
Easing Internal Stress
When energy costs go down a business has the flexibility to allocate more of the remainder of its budget to other facets of its internal workings, most notably human resources and human capital. If the financial stress of high prices for essentials like gas has caused any cut backs in or freezes in wages or hiring management and employees both have been affected adversely. Finding some room in the budget for pay or benefit normalization helps everyone by eliminating long term stress at every level. Increases in hours for some employees and the realization of promotions or bonuses for others will lift morale and increase productivity company wide.
Along with rewarding current management and employees, fuel cost savings can permit a business to expand to better meet the needs of its customers. This can be achieved by hiring more staff, opening new locations, investing in research and development or a combination of several of these actions. Rejuvenation will inspire both employee commitment and consumer interest in the business’s products and services, engendering a more sustainable configuration as the company looks forward.
Consumer Confidence
Very few benefit from ever spiraling energy costs, but a steady reduction in the costs of gasoline and other fuels has a positive correlation with a welcome boost in overall consumer confidence. Higher fuel costs can tie the hands of consumers, affecting their optimism about the economy in general and causing them to curb and even reduce their spending. This scenario may well change with lower fuel costs. Simply put, they have more money to spend on what you sell.
Current efforts to meet more of the nation’s fuel needs with domestic sources from oil shale in North Dakota and Texas have helped move the price of gasoline down. The self assurance that come from consumers’ knowledge that the US is providing more of its own fuel combined with the decrease in the pump price bodes well for business.
More disposable income and less stress for consumers and companies results in appreciable benefits all around. This is the first time these prices have been seen in four years and the business owner who takes advantage of this downward trend in gas prices will see an upward tend in business success.
