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Business energy prices: energy markets are at an all-time low

20/03/2020

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Business energy prices are lower than you think. It’s a great time for businesses to secure new energy contracts and lock in savings.

When it comes to business energy prices, you’ve heard all of this before (probably from an unscrupulous energy broker):

The energy market is at an all-time low! It’s a great time to lock in these low prices! Before prices go up tomorrow! Don’t miss out!

The thing is, this time the energy market really is at an all-time low. And it really is a great time to secure a new energy contract and save money.

We’re not an energy broker, so we’re not going to sit here and tell you that you need to make a decision right now. Business energy prices aren’t going to shoot up tomorrow. Summer is on the way and energy prices are always lower when there’s less demand.

But like Ned Stark always said: Winter is coming. Prices will (probably) go back up as autumn and winter 2020 get closer and demand for energy increases. So give your business a break and take advantage of the low market while you can.

Why business energy prices are so low right now

What’s driving this decline in business energy prices? There are a couple of key macro-economic events in play – and they’re both focused on oil.

Covid-19 is crushing demand for oil

With the airline industry effectively grounded for the next few weeks and workers from almost all sectors quarantined at home, business and consumer demand for oil and oil products has all but collapsed. Flights have been cancelled. Roads are empty of traffic. Shops are closed.

As of 19 March 2020, oil prices were as low as $20.37 per barrel – the lowest prices seen since February 2002.

And they could be set to drop even further, because:

Saudia Arabia is taking aim at Russia and the United States

Earlier in March, Saudi Arabia approached OPEC (Organization of the Petroleum Exporting Countries) with the goal of extending coordinated cuts in oil production in response to the collapse in demand caused by Covid-19. Cutting oil production supports higher prices, and OPEC has pursued this policy for at least the past three years.

Unfortunately, the talks broke up without agreement when Russia walked out in a bid to crush the US’s high-cost shale producers by providing cheaper crude oil.

Saudi Arabia’s response? To increase production to a record 12.3m barrels a day by 1 April 2020, with the goal of increasing production to 13m barrels a day by the end of the year.

By creating such a massive surplus at a time when demand is falling, Saudi Arabia can cut prices and gain market share over other producers. By the end of 2020, it will in all likelihood be the world’s second biggest oil producer after the United States, knocking Russia down to third. Russia has limited ability to expand its operations and its response will likewise be limited.

Most of all, Saudi Arabia’s move puts pressure on energy companies in the United States, particularly shale producers. Shale is expensive to extract and produce, and many shale companies are debt-heavy and extremely vulnerable to the fluctuations in the stock market caused by Covid-19. In contrast, Saudi Arabia’s state-owned company can extract oil cheaply and easily enough to outlast its American counterparts, which are already cutting budgets and dividends to shareholders.

There’s no end in sight to these low prices: neither Russia nor OPEC as a whole is prepared to come back to the negotiating table and pursue production limits.

How businesses can benefit

Wholesale energy prices are heavily influenced by oil prices, so expect to see low prices continue for a while. In the UK, where the government adds significant taxes and environmental charges to every energy bill, any savings come from drops in the commodity costs – and those commodity price drops need to be significant to have a major impact on business energy prices.

Oil, one of the fundamental elements underpinning energy prices, is collapsing in value. That has a major impact on energy markets as a whole, and that’s what makes this such a great time for businesses to switch and save on their energy contracts.

Switching energy supplier during the Covid-19 outbreak

Switching your energy supplier or renewing your energy contract is probably the last thing on your mind right now, but it shouldn’t be. Missing your renewal date could leave you paying extremely expensive out-of-contract rates and see you taking a hit to your finances just when you’re looking for all the cash breaks you can get.

Switch to a lower contract now. Take advantage of the savings that are out there in this falling market. Save money for your business now and in the future when the economy is in recovery.

All of the energy suppliers troo works with are accepting new contracts (despite what you may have heard from some of the more unscrupulous energy brokers out there).

Our team are standing by (in their home offices) to help you save. We usually help businesses save 30% on their bills in rising markets. Imagine how much we could help you save now.

And when you sign up with troo, you get access to troo Assure – our friendly like-energy-insurance-but-not-energy-insurance service for businesses. It’s there to watch your back in tough times like these and make sure you’re claiming back any overpayments and discounts you’re entitled to.

Get in touch with our team on 0808 164 2222 or email fairer@troocost.com and start saving today.

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