Blog
AS Economics Revision - Oil and Petrol Prices
22nd May 2010
This week we have heard news that the price of petrol and diesel at the pumps has reached a record high.
The data chart above provides another opportunity for students to familiarise themselves with changes in price information over time and perhaps try this question
“Using the extract, identify two points of comparison between UK diesel and petrol prices and the world price of crude oil over the period shown by the data” (8 marks)
Naturally there is a reasonably close connection - over a period of time - between the prices of crude oil in the international markets and the cost of filling our vehicles when we head to the petrol forecourts! There is normally a short time lags between changes in world oil prices and the retail price for motorists.
But in 2010 petrol and diesel prices are significantly higher than they were when crude oil was at similar levels.
One key reason is the movement in the sterling exchange rate against the US dollar. We import oil in dollars and the pound’s recent depreciation means that imported fuel now becomes more expensive. Indeed it is probably the exchange rate that explains much of the gradual rise in petrol prices over the last year or so.
These figures are averages - hiding very large differences in average petrol and diesel prices across different regions and localities in the UK.
Geoff Riley
Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.