ENERGY CRISIS: HOW IT WILL IMPACT THE US SMALL BUSINESSES?

Russia’s decision to keep the Nord Stream pipeline closed indefinitely is unleashing price swings in European energy markets. It’s hitting the continent hard because, unlike oil, natural gas is hard to ship long distance—you have to chill gas to -260 degrees Fahrenheit to liquefy it and put it in a tanker. That’s expensive, and it means that gas markets are more regional than global.

Thankfully, Americans are not going to experience anything like the massive price increases that have already hit Europe, where astounding wholesale gas price increases of 400% and more have already taken hold in certain areas.

The United States is the world’s largest natural gas producer, and our domestic supplies, while running on the lower side of the five year average, are more than adequate. More importantly, the supplies are ours, we are not beholding to Russia (the world’s second largest natural gas producer) for our supplies, and we control our own destiny by virtue of our energy independence.

What does it all mean for gas prices in the U.S.?

Current prices are about double last year’s levels, and the deepening European natural gas crisis will continue to affect US consumers on this side of the Atlantic.

Europe needs natural gas and it will import as much compressed natural gas, called Liquified Natural Gas, or LNG, as it can. And while the U.S. is a major source of LNG because of its abundant natural gas supplies, LNG export facilities take years to build. Existing U.S. LNG export levels are literally maxed out in terms of capacity.

This means no matter how high demand for LNG becomes, U.S. gas prices will not directly follow European gas prices into the stratosphere, but US gas prices will likely remain elevated, and perhaps rise, as winter’s cold takes hold.

How do Fuel Prices Affect Small Businesses?

Small businesses have struggled over the past two years of the pandemic, facing shutdowns and closures, dealing with supply chain issues and a shortage in labor.

However, the higher prices at the pump could affect the overall economy, including small businesses. When a larger portion of their income is spent filling the tank, people will reduce their spending in other areas. Consumers may find they have less expendable income for some of the goods and services they would normally purchase, or they will avoid driving as much as possible.

Small businesses that use vehicles as part of their daily operations, such as construction, transportation, maintenance, and deliveries, will be obviously hit the hardest. 

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