Gas prices have a large impact on the economy on both the commercial and consumer level. Small business is particularly affected by fluctuations in gas prices because when prices rise, profits margins narrow. On the other hand, when prices dip, there are typically higher levels of consumer spending and small businesses pay less for goods.
Nearly three-quarters of small businesses are directly affected by rising energy costs, and more so than larger companies. Small firms must be able to navigate through potentially tough economic periods with lower revenues. In just a three-year time span from 2012 to 2015, gas prices were both above $5 and below $2 per gallon.
As such, small businesses have to adjust their operations accordingly, with 41 percent altering their hiring plans due to energy costs. Another 22 percent of small businesses reduce employee hours when prices dramatically change.
Businesses are impacted by gas prices in different ways. For instance, companies in the industries of transportation, landscaping and shipping all see monetary benefits from low gas prices because the cost to produce and transport goods is cheaper.
On the other end of the spectrum, green-focused and alternative-energy companies benefit more when gas prices are high because consumers are driven to these more resource-efficient businesses.
It’s important to note that the success of the economy is largely tied to the success of small businesses. And changes in gas prices directly impact how the economy expands.
Roughly 99.7 percent of workers in the U.S. are employed by small businesses. Additionally, small businesses account for 64 percent of new private sector jobs created and 46 percent of total private sector output.
By understanding the dynamic between fuel costs and small business productivity, owners can better plan out their budgets. In leaner times, businesses that need additional funding to continue operations can benefit from a working capital loan from National Funding.
View our Infographic on How Gas Prices Affect Small Business and the Economy.