IMA Asia Managing Director Richard Martin told CNBC that rising energy prices will create a surge in business costs and narrow profit margins for companies around the globe.
In the past few weeks, prices of natural gas, oil and coal have all be on the rise while supply for those commodities have been tight as demand is still rebounding from the COVID-caused slowdown, CNBC reported this month. CNBC reports that Europe and Asia have been seeing fuel and power shortages due to the rise in demand without the product to meet it, while also having to deal with a shortage of shipping containers and supply chain disruptions.
“It’s a big problem for companies," Martin said on CNBC’s “Squawk Box Asia. "It will narrow their profit margins because as their input costs go up, the question is how quickly can they raise their selling price."
Martin said that companies will most likely see the impact on their revenue come the fourth quarter of 2021 and the first quarter of 2022, but the U.S. will have a better chance of protecting its margins due to a customer market that is more buoyant than other countries like that of China, CNBC said.
“In many countries around the world, we don’t have such a buoyant consumer market," Martin told CNBC. "China is one, in fact a lot of East Asia is in that area. And as the costs go up, the profit margins go down."