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How the UK goverment can stabilize oil prices ?

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  1. How prices of oil in UK have fluctuated?
  2. Why oil Prices in the UK fluctuate?
  3. Changes in Supply of oil in UK
  4. Challenges in Demand
  5. How effective are the different interventions likely to be?

Everyone in UK has had an experience of the shock for unexpected dramatic change in prices of fuel for instance fuel prices will unexpectedly sky-rocket overnight. Mostly it is the supply and demand case: there is a very high number of vehicles tapping oil and the supply is declining. Various factors have been causing these changes with the main being the changes in supply and demand of oil (Economics Online Ltd, 2015).

[...] There are various methods that the government can use in order to stabilize oil prices in the United Kingdom. Most of these bring about other problems and more especially encourage more production of oil which is in turn harmful to the environment as well as other effects that have been specified. Low prizes on oil have their own disadvantages too. Oil is an important commodity which is widely used by everyone in the United Kingdom and without it, it is true that there may be major difficulties to deal with. [...]

[...] Buffer stocks- the government may implement oil storage in order to stabilize oil prices especially when there are suppliers in supply. The stock may be supplied when there is a low supply in the market. The government can encourage production and use of substitutes- this will reduce the demand for oil hence fuel prices will be stabilized due to lack of supply. Maximum / minimum prices- the government may implement rice control on oil as a way to stabilize price fuels. [...]

[...] - The income of consumers determines how elastic the demand for oil will be. If oil prices go high and income remains constant then demand will reduce. If there is higher income for lower prices of oil the demand increases. Change in oil supply in UK are caused by loss of production. Without other sources of energy, then the supply of oil would not be enough since these other fill the gap that cannot be fulfilled by oil supply. Events such as war, threats among others lead poor harvest of oil causing undersupply, which in turn leads to lack of surplus hence high prices. [...]

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