How SMEs can tackle high fuel and energy prices

If you drive, this won’t be news to you: the cost of petrol is currently a huge cause for concern. Prices at the pump have shot over the €2/litre threshold in France and a tank that cost €65 to fill up two months ago may now be costing you €100.

The outbreak of hostilities in Ukraine has fuelled volatility, which has been playing havoc with the energy market. SMEs with fleets of vehicles are being hit hard and prices are set to fluctuate significantly even beyond any eventual peace agreement between Ukraine and Russia.

While petrol prices are an immediate sign of an unsettled oil market, there are more dark clouds looming: next, it’s likely we’ll notice similar hikes with energy bills as gas supplies threaten to become disrupted.

While the price of powering our offices and vehicles is at the mercy of myriad factors well beyond the control of any single entrepreneur, there are ways in which businesses can soften the blow to their finances.

Read on to find out more.

First, some context.

France gets nearly 20% of its gas and oil from Russia. This means that along with petrol pump prices and energy bills, the cost of anything that requires oil or gas to produce (i.e. the vast majority of the products we use) will be vulnerable to a volatile energy market.

According to Eurostat, inflation in the Euro zone rose to 5.8% year on year in February. Energy leads this increase, and was itself expected to hit an annual inflation rate of +31.7%. In terms of what we see at the pumps, the price for a liter of unleaded was fluctuating within a bracket of between €1.80 and €2.20. That's up around 30% over the last 12 months.

This volatility had been brewing for a while but has also been exacerbated by the conflict in Ukraine. And what happens next could see things get worse before they start to get better.

To sanction Russia for its military invasion of Ukraine, the European Union is planning to cut imports of Russian oil and gas by two thirds before the end of this year. Replacing that will be neither easy nor cheap.

There is, too, the possibility that Russia will respond to the EU’s move by simply cutting off all supplies of gas and oil to Europe. This wouldn’t be an easy decision - oil and gas accounts for around 20% of Moscow’s total budget - but few people would rule it out entirely. Should this happen, the price of a barrel of Brent crude could reach $200 (say the traders), or even $300 (say the Russians). As of 10:00 on March 22, the price was around $110 per barrel.

Whatever the geopolitical fallout, European households and businesses need to brace themselves and buckle up for some turbulent economic times.

But where there is adversity, there is opportunity. The ‘transition to clean energy’ has long been somewhat over-promised and under-delivered in the eyes of many. The situation in Ukraine and its consequences may be the catalyst to accelerate that transition. Europe’s SMEs can be the agents of this change. Similarly, now is a moment to take a long hard look at our energy consumption and figure out ways of saving money in the short term. The precious insights we gain now may also be useful further into the future.

There’s no magic bullet for high energy prices. But there are plenty of little changes that can make us more energy-efficient, improve our margins and soften the blow. Below, we list some of those little changes.

• Put aside enough cash flow to ensure your fuel and energy costs are covered. This may mean deploying more budget towards this expense item to mitigate the risk (and associated costs) of being cut off.
• Ask your energy provider for a payment schedule at the earliest opportunity. This will give you greater control of your budget and visibility over your cash flow.
• If you do fall behind on your energy bill payments, ask your provider if they can reduce your monthly payments or even suspend them until you have managed to steady the ship.
• Buying new office appliances or relocating? Check the energy consumption score and seek out the most energy-efficient models or premises. It’s a criteria that ought to be factored into purchasing decisions if that wasn’t already the case.

There are many small habits we can adopt to shave money off petrol costs. These include obvious measures like taking other forms of transport where possible and seeking out cheaper petrol pumps (supermarkets are generally less expensive and no less efficient than big-oil brands). Other good practice includes driving slower to be more energy-efficient, not transporting unnecessary loads to make vehicles lighter, and even keeping tyres full inflated (it’s estimated you use 3% more fuel for every 10% your tyre pressure is under the recommended level.)

Getting absolute visibility over what you spend allows you to identify areas where you can make extra savings. Categorizing your different business expense items will give you this improved visibility. And this is where Qonto can help.

• With Qonto, you can create multiple accounts, one for each business expense. Each expense account remains separate from your main account. This means you can create an account solely for your company’s petrol costs, allowing you to monitor your fleet’s petrol consumption - vehicle by vehicle if you wish - and adapt accordingly. You’ll be able to transfer funds from one account to another instantly, giving you the flexibility you need to suit your particular situation. This multi-account feature is free with all Qonto plans, with the exception of the Solo Basic.
• You can give your company drivers fuel payment cards to be used uniquely for buying petrol. These payment cards are directly associated to the dedicated fuel accounts mentioned above. This lets you set payment limits on a daily or monthly basis, so you can pay for the exact amount of fuel you’ll need instead of just filing the tank up every time. With such control, you can be sure that you’ll never go over budget. You can adjust these limits in real time directly from the Qonto app, or even freeze or block them should the need arise.

It’s impossible to say what will happen next in Ukraine or in the energy market generally; volatility is, by definition, unpredictable. What EU politicians have made clear is that Europe needs to free itself from dependence on Russian oil and gas to avoid energy being ‘weaponized’ in the same way in future.

While the above tips are short-term hacks to keep fuel and energy bills as low as reasonably possible, a safe longer-term bet would be to back renewable energies and seek out opportunities to factor them into your energy mix. Whether it’s examining the use of solar panels or calculating the value of investing in hybrid or electric cars for your fleet, the ‘transition to clean’ may be happening faster than we thought at the start of this year.