• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month
Page
  1. 1
    1
  2. 2
    2
  3. 3
    3
  4. 4
    4
  5. 5
    5
  6. 6
    6
  7. 7
    7
  8. 8
    8
  9. 9
    9
  10. 10
    10
  11. 11
    11
  12. 12
    12
  13. 13
    13
  14. 14
    14
  15. 15
    15

Is the Government to Blame for Higher Petrol Prices?

Extracts from this document...

Introduction

CONTENTS PAGE PAGE NO Introduction 2 Economic Theories 3 - 6 Data Collected 7 Presentation of Findings 8 - 13 Evaluation and Conclusion 14 - 15 Bibliography 16 INTRODUCTION In September 2005 the UK experienced unprecedentedly high petrol prices at filling stations throughout the country. In rural Wales the psychologically important �1/litre was breached for the very first time. What I wish to investigate is what is causing prices to be so high at the pumps at this particular time and why petrol prices are rising faster than the rate of inflation. In 2000 there were widespread protests to the level of government taxation placed upon petrol as it was felt to be excessive and unfair, similar smaller protests occurred this year also. Government Taxation is a major determinant on the price of petrol however there are other factors which determine the price of petrol. The price of petrol is made up of 4 components. The Fuel Duty imposed upon it, the Value Added Tax imposed upon it, the amount the product cost and the retailer/deliverer's overheads. As we all know the two taxes are determined by the government, the product's price is determined by the price of oil and the retailer's/deliverer's overheads by the costs of production associated with selling the oil. I will therefore need to investigate the rate of taxation used by the government on petrol and what determines the price of Crude Oil being the main component of Petrol. Crude Oil is a derived Demand as it is useless as it is it is made into useful products like petrol. I will investigate the Retailer/Deliverer overheads differences between different suppliers and different companies will charge different prices for petrol. My investigation to cover both the short and longer term history of petrol prices and I will try to used historical data and economic theories to try and establish why Petrol Prices are rising on a general long term trend. ...read more.

Middle

Oil Prices however rose over this period from $18.97/Barrel to $48.97/Barrel a 61.93% rise over this period. Clearly it can be seen that supply from OPEC has risen much slower than the increase in the oil price over this period making Oil Supply Price Inelastic. Also these graphs show OPEC production being cut when prices were low to stabilise the oil price and stop it from declining. Determinants for Supply of Oil (Short Run) Supply disrupted by Hurricane Katrina Hurricane Katrina was the major short term cause of supply led increases in petrol prices having interrupted oil production, importing, and refining in the Gulf area, thus having a major effect on petrol prices. A tenth of all the crude oil consumed in the United States and almost half of the gasoline produced in the country comes from refineries in the states along the Gulf's shores. At least twenty offshore oil platforms went missing, sank, or went adrift, according to the Coast Guard. One oil rig, in dock for repairs before the storm, broke loose and hit the Cochrane/Africatown USA road bridge over the Mobile River in Mobile, Alabama. Two others went adrift in the Gulf of Mexico, but they were recovered. One platform, originally located 12 miles (20 km) off the Louisiana coast, has washed up onshore at Dauphin Island, Alabama. The Shell Oil Company MARS platform, producing around 147,000 barrels (23,000 m�) a day, was severely damaged. The Louisiana Offshore Oil Port, which imported 11% of US oil consumption, closed on August 27, and Shell reported a reduction in production of 420,000 barrels per day. Due to fears that the production of oil in the United States would be cut by up to one-third of normal capacity, the price of oil fluctuated greatly throughout August 28th reaching highs of $70/Barrel. Long lines developed at some petrol stations throughout the U.S. as customers rushed to buy Petroleum, anticipating price increases in the wake of the storm. ...read more.

Conclusion

Using statistical data I was able to prove that Oil Supply is very Price Inelastic with a PES of 0.19. The data also showed to me that Oil Demand is not only Price Inelastic it actually is positively inelastic so it slopes the way a supply curve does. This shows just how reliant the world really is upon Oil that demand increases even when price is increasing. Soon however I feel that alternatives to Oil will become economically viable and Oil Demand would become increasingly price elastic as Solar Powered/Hydrogen Powered Cars become the main source of transportation. Hydrogen is already being tested on some London Buses. To improve my investigation I would have hoped to have researched local filling stations to gain primary research however the filling stations were unable to supply me with the price information I needed because these details were not kept within the shops themselves. I would also have liked to have done a more in depth analysis upon OPEC and its internal workings to discover just how true a monopoly market structure it actually operates. I have tried to show how it does exert monopoly power upon the market i.e. 1973 Oil Crisis however I am not sure whether the price setting is more to do with political motivation rather than profit maximising. I would have also like to have been able to do more research into the new alternatives to Petrol cars being developed. So is The Government to blame for Rising Petrol Prices? The answer before 2000 with the fuel accelerator in place and 80% of petrol cost being taken up would have been a resounding Yes. However as my investigation has shown more worryingly in fact Petrol Price increases are now out of Government hands as Demand led rises in prices are likely to continue. The era of cheap petrol appears to be coming to and end and with our North Sea Oil stocks dwindling it is likely our petrol prices are about to become much more expensive and much more volatile. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level Markets & Managing the Economy section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level Markets & Managing the Economy essays

  1. Marked by a teacher

    Supermarkets in UK - An oligopily

    5 star(s)

    What constitutes HYBRID pricing is necessarily subjective, depending on an individual's own beliefs regarding how much price variation constitutes a departure from pure EDLP. Because of the price rigidity, supermarkets have resorted to non pricing strategies as a means of capturing market share.

  2. what is economics

    of production * Any change in any input can have an effect on the firm's profits and willingness to supply the market. * The most obvious is a change in the costs of the factors of production o For example, oil prices have been rising over the years, and this

  1. In economics we refer to these two acts as tax evasion and tax avoidance. ...

    dQs = Sp *( dPd - dt )= Sp * dPd -Sp * dt . This is done so that supply is equal to demand after the tax is introduced it must be the case that the change in quantity demanded has to be equal to the change in quantity

  2. What will happen to houses prices in five years time?

    house prices will ease during the rest of the year as the number of sales declines. Source from BBC news. House prices across the UK tumbled last month at the fastest rate for two years, a leading industry survey shows today, while demand from first-time buyers plummeted sharply, adding to widespread evidence that the housing boom could be over.

  1. Micro economics environment - Government intervention

    for the public interest or last regulate them when the government give them laws so they do not act against the public. The overall responsibility for competion policy is in the hands of the secretary of state of trade and industry.

  2. For a duopoly involving homogeneous products, explain and contrast a Cournot, Stackelberg and Bertrand ...

    Yet firm 1 cuts its output, this being a lagged response to the entry of firm 2. Therefore day 3 output combination is on 1'd reaction curve but not on 2's reaction curve. Given the shapes of the reaction curve as the process continues it converges on the Cournot equilibrium which is a stable.

  1. Case #1: Canadian Briefing Note (LCBO)

    This sum of money has a multiplier effect on the provincial economy, larger than the original amount injected into the economy. 3 2.2. Pricing and Marketing The LCBO carries a very wide selection of quality-tested products throughout the province at uniform prices.

  2. What Are The Effects Of Tescos Oligopolistic Market Structure, On Both Consumers And Producers?

    Tesco has the holding share of the market with just over 30%, while Morrisons has the lowest with only 11%. Tesco is definitely a suitable example to model oligopoly, since it is competing with a small number of other large firms, selling similar products with significant barriers to entry mainly due to brand name, and large land acquisitions.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work