Inflation and the Effect on Your Business
Update August 2022 | Cetane Associates’ Steve Abbate and Tamera Kovacs recently spoke at the Northeast Propane Show in Worcester, Mass.
This presentation explored the effects of inflation on propane and heating oil businesses.
Types of Inflation:
Headline Inflation – The raw inflation figure reported through the Consumer Price Index (CPI). Up 9.1% through June 2022. Largest increase since November 1981.
- The CPI determines inflation by calculating the prices on a fixed basket of goods.
- Core inflation removes the CPI components that can exhibit large amounts of volatility from month to month.
Core inflation – The change in prices of goods and services, except for those from the food and energy sectors. Up 5.9% through June 2022.
Annual Inflation Rates:
Effects of Inflation on the Economy:
- Inflation, the sustained and broad rise in the prices of goods and services over time, erodes purchasing power.
- A small but positive inflation rate is economically useful, while high inflation tends to feed on itself and to impair the economy’s longterm performance.
- Real estate, energy commodities and value stocks have historically outperformed during periods of high or rising inflation.
- Conversely, bonds and expensive growth stocks tend to lag as inflation lowers the present value of their future cash flows to investors.
Methods to Offset Inflation:
- Margin Increases
- Invest in technology
- Tank Monitors
- Delivery Routing Software
- Lower fuel costs
- Terminal Exchanges
- Shop Operating Expenses
- Diversify Revenue Streams
- Consider Delivery and Other Fees:
- Fuel Surcharge
- Statement Fee
- Delivery Charge
- HAZMAT Fee
- Tank Rental/Monitor Ree
These are brief highlights from a 21-slide Powerpoint presentation. We invite you to attend future seminars at regional conferences around the country. Please contact us for a confidential consultation at https://www.cetane.net/contact-us/
Next up: We’ll see you at the HEAT Show in Providence, R.I.