The Impacts of High Energy Prices on the Offshore Industry
It's impossible to bury our heads in the sand. There’s a problem on the horizon that needs puzzling over. One that won’t simply “pass by”.
While the surge in energy prices has, in part, increased profitability in the offshore oil and gas sector... we have to face the facts. The overall influence of the cost of living crisis has not been positive.
The worldwide economy is taking a hit right now, and many experts are predicting an upcoming recession (Source: EY). This means that it's becoming urgent for business owners, leaders, and decision-makers in our space to start preparing for the future.
“In the new normal, where energy prices are likely to stay high for at least the next two years, there will be significant effects. Energy-intensive companies pass on costs to their clients in varying degrees. The production of energy-intensive products could also become unprofitable due to high energy prices.” - Hellenic Shipping News
The rise of energy prices
Over the last year, many countries - including the UK - have seen electricity prices rise so high that the government has had to step in and help. It’s a little intimidating.
As of early 2022, relief schemes were put into place to support homeowners and businesses, but these won’t be around forever. The BBC predicts that the grants are likely to drift off soon and even offshore firms will be affected.
With such astronomical costs on the horizon, we need to make decisions accordingly.
The negative impacts of increased energy prices
It’s important to reflect on the positives and negatives increased energy prices can offer our industry.
1. Employee wages
Employees all over the world are struggling to keep up with the increasing cost of living. They are sending money to their families overseas while also trying to support themselves… and failing. To retain our talent, wages need to accommodate this change in conditions.
2. Supply chain issues
Even if you have a reliable cash flow and the ability to absorb a general increase in prices, other industries that the offshore industry relies on (e.g. manufacturing) are going to struggle. They’ll need to keep their factories running as they consume more and more electricity, making compromises on quality and speed.
3. Talent concern
The energy crisis is starting to cause drastic risk aversion - especially for consumers, investors, and employees. Already, employees in our sector are questioning whether they want to risk being overseas when so much is going on.
“Rising commodity prices have increased the cost of producing solar PV modules, wind turbines and biofuels worldwide. This situation has short-term implications for equipment manufacturers, project developers and policymakers.” - IEA
The positive impacts of increased energy prices
That doesn’t mean the offshore industry should be completely apprehensive, though. There’s a light at the end of every tunnel.
1. Project approval
Across the world, more and more offshore energy projects are gaining approval from local governments to commence operations. This reduces the average wait time as countries become eager to find sustainable/reliable alternatives to electricity production.
2. Subsidies and grants
Additionally, organisations in offshore renewables can expect upcoming funding from the government. Rather than risking businesses being forced out of the market because of unaffordability, our sector will see a range of opportunities for start-ups and established firms alike.
3. Industry investment
Increased prices mean more profit for the sellers. For offshore firms already mining coal, oil, and gas across the world, this is an interesting scenario that could open the door to a host of opportunities. While consumer spending is certainly experiencing a downfall, there hasn’t been a drop in offshore investment (Source: Business Wire).
How to prepare for the impacts of high energy prices
Regardless of whether your organisation is likely to see the positive side of things or the negative, it’s in your best interest to prepare for what's ahead.
Going forward, you should look to:
Protect your bottom line by decreasing wastage.
Onboard technology into your day-to-day process for more efficiency.
Increase general employee productivity.
This will grant your business the flexibility it needs to adapt to an ever-evolving market.
However, there is something even more pressing than this.
Mitigate risk through talent attraction and retention
In 2023, your absolute priority should be to retain the talent resources you already have, ensuring your people stay with you.
The worst situation for a business facing uncertainty is suddenly not having the staff required to continue normal operations, let alone commit to above-and-beyond thinking.
Therefore, to avoid the consequences of the high energy prices on our market, you need to start investing in employee wellbeing. Their needs must come first.
Where teams are anticipating an increased workload, be sure to recruit proactively or - at the very least - onboard contractors who can help you fill urgent gaps and drive business growth.
Find offshore employees through Select Offshore
Select Offshore delivers maritime professionals who are reliable, communicative, and enthusiastic. We adhere to tricky deadlines to secure project success through:
Our team strongly believes in celebrating each of the individuals we work with, dedicating time to find them desirable offshore placements.
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