Oil giants cash in while small firms go under

Oil giants cash in while small firms go under

One war, two economies and a growing bill for Britain

The world's biggest oil companies are counting the billions while Britain's smallest businesses are counting every penny. As tensions in Iran send oil prices soaring, the giants of the energy industry are enjoying another bumper payday. Meanwhile, electricians, delivery drivers, builders, cafés and shop owners are watching their costs spiral out of control. It is a tale of two economies: one making fortunes from instability and the other being pushed ever closer to the edge.

The latest conflict in the Middle East has once again exposed a harsh reality. Big businesses can ride out global shocks and, in some cases, profit from them. Small and micro businesses, already burdened by rising taxes, higher wages, soaring insurance premiums and mounting energy bills, are left to carry the cost. For many, this latest crisis may prove to be the final blow.

A TALE OF TWO ECONOMIES

£67Bn in profit, and counting, from the rising oil prices: we’re seeing daily headlines about the oil giants raking it in. Not much is being said about the fact that the same conflict is leaving small firms bleeding dry.

The Iran conflict has sent global oil prices rocketing and while families and small businesses have their backs to the wall, the world’s biggest oil companies are rolling in cash.

Industry analysts say the crisis has triggered a profit surge for the oil majors, with some earning millions more every single day as crude prices leap. There are calls now for those companies to spread that benefit, a debate that will doubtless take a long time to resolve.

At the same time our small and micro businesses around the UK, on which the economy relies, are being forced out of business by fuel costs, energy bills and supply chain chaos. Why is that not making any headlines?

The winners

As the Iran conflict disrupts shipping routes and threatens supplies through the Strait of Hormuz, global oil prices have surged, and the biggest players are reaping the benefits.

• BP has higher margins on every barrel sold

• Shell has boosted trading profits from volatile markets

• Saudi Aramco, the world’s richest oil company, is earning billions from price spikes

• ExxonMobil & Chevron, the US giants, are benefiting from global supply fears

• Commodity traders are making huge gains from market volatility

Every time oil jumps a dollar, these companies make millions. With the Iran conflict showing no sign of easing, analysts say the boom could continue for months.

The losers

While oil giants celebrate, the UK’s small firms are being squeezed to breaking point.

Electricians, plumbers, builders are all seeing fuel costs soar. Some say they’re losing £50–£100 a week just driving to jobs.

Delivery drivers & couriers have had their margins wiped out. Many now earn less than minimum wage after fuel costs.

Cafés, salons, florists, small shops are contenting with rising energy bills at the same time as suppliers are forced to add fuel surcharges and customers cutting back.

Construction businesses are dealing with rising material and transport costs and projects are being delayed or cancelled.

In rural areas where there’s little public transport fuel is a lifeline and it’s becoming unaffordable.

Small firms are being priced out of existence.

The Iran conflict

The Strait of Hormuz, the narrow Gulf passage where a fifth of the world’s oil flows, is at risk from the conflict despite all the attempts at peace talks and resolutions that might get the oil flowing again. The oil companies didn’t start the conflict and can’t be blamed for making more money because of the rising prices. Every threat, every strike, every disruption sends prices soaring. Big oil companies can absorb shocks and profit from volatility. Small businesses can’t and are the ones that get the bill.

The economic damage

Small and micro businesses are the engine of the UK economy and the fuel price surge could push thousands of them to close. There’s the danger of inflation rising again as construction slows consumer prices rise.

Small businesses are already battling all of those higher costs that are well documented: rents, insurance, wages, taxes on top of their energy bills and fuel costs. Many are wondering if it’s worth all the hard work any more.

Unless the conflict eases or the government steps in there will be more small businesses closing, with slower economic growth as a result accompanied by rising unemployment.

Oil Price Bonanza

The Iran conflict has created a massive benefit for the world’s biggest companies and a massive economic nightmare for Britain’s small and micro businesses. Unless something changes, the gap between the winners and losers will only grow.