- Dharshini David
- BBC Global Business Correspondent
August 26, 2022
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From East Asia to the Middle East, and from Western Europe to North America, tens of millions of households and companies are struggling with a deluge of inflation.
In the UK alone, inflation has recently exceeded 10%, and prices for daily necessities have risen at the fastest pace in 40 years; that is to say, anything you could buy for £100 not long ago will cost at least £100 this year. Just £110. Especially for low-income people, this can be overwhelming.
However, not everyone is so troubled. As the saying goes, some companies are happy and some are sad, but some industries and companies have made a lot of profits in this era of soaring prices. For example, if you are in the oil extraction industry, wheat trading, toy shipping or wine sales, you might be lucky.
So who will benefit the most during inflation?
energy giant
Energy companies that extract and refine fossil fuels have made headlines in recent months as they rake in record profits. Natural gas traded soaring on international markets, with oil hitting $100 a barrel, amid concerns about supply problems following Russia’s invasion of Ukraine.
Saudi Aramco posted record profits in the April-June period, while BP earned £6.9bn over the same period and Shell earned £9bn worldwide.
Centrica, the parent company of British Gas, has seen profits rise fivefold thanks to its oil, gas and nuclear assets.
But there are many companies in the UK that have not received the same attention. Among the bigger ones is North Sea company Harbour Energy, which has expanded further by acquiring oil and gas companies and has returned to profitability this year.
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Meanwhile, private equity firm Neptune Energy issued a $1 billion dividend to shareholders. The company, which supplies 12% of the UK market for gas, doubled its profits last year. Other big gas suppliers are Israel-owned Ithaca Energy and Equinor.
All of these companies extract oil and gas in the UK, and their profits face the UK government’s 25% windfall profits tax – which is designed to help British households cope with rising energy bills in the future. But for most energy companies, extracting energy domestically is only a small part of their business.
The UK, for example, accounts for only 1/10 of BP’s total oil and gas production.
But some companies have yet to profit from high oil and gas prices because they are buying wholesale energy.
These companies use insurance to control costs in advance to prevent large fluctuations in market prices, a process known as risk hedging.
coal mining company
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Coal has unexpectedly regained popularity as many countries look for alternatives to avoid Russian gas.
For the mining companies that specialize in extracting one of the nastiest of fossil fuels, they are compensated.
Mining giant Glencore’s thermal coal company has profited from record prices, doubling their profits to £15bn in the first quarter of 2022.
Many of the company’s competitors have pulled out of coal, but Glencore believes coal will remain an important source of energy in many countries’ transition to green energy, and they expect to taper output over the next few decades.
Energy companies are delaying the closure of coal-burning thermal power plants in the UK at the request of the government amid fears that gas supplies from Russia to Europe will be disrupted this winter.
Germany’s public infrastructure company Uniper said on Monday it would start generating electricity from its reserved coal plant, Heyden 4, in response to Russia’s disruption of pipeline gas supplies.
Archer Daniels Midland (ADM), Bunge, Cargill and Louis Dreyfus are not household names, but their products are in A place at the dinner table of families around the world. These companies, known as “ABCDs”, are major trading companies in grain commodities, especially grains.
At a time when global supply chains are affected, these supply chain middlemen can play a key role, helping to get goods where they are needed and helping some countries find alternative sources of grain as supplies from Ukraine and Russia have been disrupted.
But the disruption has pushed wheat prices up 25 percent from a year ago. Prices of other staple food commodities also rose.
Archer Daniels Midland’s most recent quarterly profit jumped 60%. Bunge’s profits are not that high, but they are bullish on profit prospects for the next few months of the year. Privately-owned Cargill’s revenue rose 23 percent in its most recent fiscal year to a record $165 billion. The company says they have set aside $163 million for humanitarian relief and other philanthropy, which accounts for 0.1% of their revenue.
shipping company
Lockdowns during the Covid-19 pandemic may have disrupted economies and supply chains, but they have boosted business for shipping companies.
Freight rates have risen sharply and remain high as demand for consumer goods remains high during the COVID-19 pandemic. Restrictions during the pandemic mean ports are congested and new shipbuilder projects come to a standstill.
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Profits from the container shipping business have risen by $5,000 trillion over the past two years until the end of 2022, according to consulting firm Drewry.
AP Møller-Maersk, the world’s second-largest container shipping group, raised its earnings forecast for the third time this year, as ports suffered chronic disruptions and said the speed of “return to normal” before the end of the year may not be Reality.
Seller of luxury watches and fine wines
For those with cash on hand, rising inflation with low interest rates, as well as slow economic growth, means that conventional investments are less likely to deliver decent returns.
So they turned their attention elsewhere. The value of investments in fine wines and luxury watches rose 16 percent last year, investments in fine art rose 13 percent and investments in whisky and coin collecting rose 19 percent, said traders at consultancy Knight Frank.
Investors are betting on collectibles to boost their value during inflation, a trend that has continued into this year. The Bordeaux Index, the world’s largest distributor of fine wines and spirits, saw a 37% increase in sales through June this year.
Of course, at a time when these companies are lucrative, it cannot be forgotten that inflation remains a painful experience for the vast majority of businesses and consumers.