- Dharshini David
- BBC
August 24, 2022
Many families and companies suffer from high prices, but the situation is not suffering for everyone.
If the fastest rise in the cost of living in four decades means people usually have to spend £110 to get about £100 what they bought last year, the situation is different for companies in certain sectors.
Some businesses benefit from high inflation and make huge profits. If you’re into oil exploration, wheat trading, shipping, or selling fine wine, there are huge profits to be made.
The question is: Who benefits from the increased spending?
energy giants
Companies operating in the fossil fuel extraction and refining sector have made headlines in recent months thanks to their record profits, after wholesale gas prices rose in international markets and oil prices reached about $100 a barrel due to increased demand, and fears of a decline in supply due to the Russian invasion of Ukraine. .
Saudi Aramco achieved record profits during the period between April and June, while BP achieved a profit of 6.9 billion pounds in this period, and Shell topped the list with profits of 9 billion pounds worldwide. the scientist.
Centrica, the parent company of British Gas, reported a fivefold increase in profits due to its assets in the oil, gas and nuclear sectors.
photo released, Getty Images
Many less well-known companies operating in the UK have also benefited, including Harbor Energy, one of the largest producers in the North Sea, which has seen growth through its oil and gas acquisitions and is profitable again this year.
Meanwhile, shares of Neptune Energy, which produces about 12 per cent of gas in the UK, saw double profits last year, giving it the opportunity to redistribute a billion dollars in dividends to shareholders, as Ithaca achieved Owned by Israel, the Norwegian company Equinor made a profit.
All of these companies will be subject to a government wind-up tax of 25 per cent and gains from oil and gas extraction in the UK, despite this, for most energy giants, local extraction is a small share of their operations.
For example, for BP, the United Kingdom represents a tenth of total oil and gas production.
However, there are some companies that have not yet benefited from higher oil and gas prices because of the way they buy energy in bulk, since these companies set prices in advance to secure their position against large fluctuations in market prices, a process known as hedging.
mining companies
At a time when countries are looking for alternatives to Russian gas, the use of coal has unexpectedly returned.
This pays off for mining companies that have specialized in the worst fossil fuels.
photo released, Getty Images
Glencore has also benefited from record prices for its thermal coal business, helping to double its profits to over £15 billion in the first half of 2022.
Despite the retreat of many of its competitors from coal, “Glencore” said that it will be an important fuel during the transition to more environmentally friendly forms of energy production in some countries, and that it will resort to reducing production in the coming decades.
Amid fears of a suspension of gas supplies this winter from Russia to Europe, the government has asked energy companies to delay the shutdown of coal-fired power plants in the UK.
Germany’s Uniper said on Monday it would start producing electricity for the market via its Hayden 4 coal-fired backup power plant due to Russia’s suspension of pipeline supplies.
food commodity companies
Companies such as Archer Daniels Midland, Pong, Cargill and Louis-Dreyfus are unfamiliar names, but their products make a big splash on dinner tables around the world.
Supply chain intermediaries, in times of global turmoil, play a key role in helping maintain a steady supply of food, and helping countries find alternative sources of wheat to counteract supply disruptions from, for example, Ukraine and Russia.
photo released, Getty Images
However, this turmoil means that wheat prices are now 25 percent higher than they were a year ago, and many other basic commodities are also becoming more expensive.
Archer Daniels Midland reported a 60 percent increase in its latest quarterly profit, and Bungie’s performance was less than expected, but it is optimistic for the remainder of the year.
The profits of “Cargill” increased by 23 percent to reach record levels of 165 billion dollars in the last fiscal year, and the company says that it recorded 163 million dollars in humanitarian and other relief work, which is equivalent to 0.1 percent of sales.
shipping companies
Although the closures to protect against the outbreak of the epidemic disrupted economies and supply chains, they also boosted the profits of shipping companies.
Freight rates have risen and have remained high since the increased demand for consumer goods during the closure measures due to Covid, and the restrictions have meant congestion in ports and the halt of new shipbuilding projects.
photo released, Getty Images
The container shipping sector has achieved half a trillion dollars in profits over the past two years by the end of 2022, according to data from the consulting company, Drury.
AP Moller Maersk, the world’s second-largest container shipping group, also raised its annual profit forecast for the third time this year due to the long-running disruption at ports, and said a “return to normal” prices might not happen now until the end of the year.
fine wine companies
The combination of high inflation, relatively low interest rates, and weak economic growth for the wealthy makes it difficult to make good profits from traditional investments.
So they focus on other sectors, and Knight Frank brokers say the value of investments in fine wines and luxury watches rose 16 percent last year.
Investors bet on the holdings, and that their value will exceed inflation, and this will continue until this year, and the Bordeaux Index, the largest wine exchange in the world, reported a 37 percent increase in sales during the year to June.
However, inflation for us makes life more complicated compared to business sectors that benefit from the situation.