The AA is reporting fuel sales are down 15% in the UK, that's 1.7bn billion litres less compared with three years ago.
The AA blame rising fuel prices. The price of petrol was around £1.05 a litre three years ago and is now £1.37.
Can we infer the Price Elasticity of Demand from this data? Well actually no, ceteris paribus does not apply.
You could calculate the PED but it won't be very accurate. Incomes have changed markedly in the recession, moves to reduce carbon emissions have been ongoing and of course households have had time to adjust to higher prices since the 2008 peak.
Interestingly the same phenomenon has been reported all over the world. All over Europe, in India and North America fuel consumption is down.
The decline in fuel sales has many benefits. Firstly, there will be lower levels of pollution from exhaust fumes which helps with global warming and whatnot. Secondly, people are opting to use other means of transport, like bikes and walking which are good forms of exercise. Thirdly, people drive slower in order to preserve fuel consumption which means greater safety.
ReplyDeleteOn the other hand, the high prices mean many people l cannot afford to buy petrol and will suffer as a consequence.
Additionally, this may correlate with increasing unemployment figures, as people made redundant do not need as much petrol to get to work.
Thank god I do not drive yet because this continous rise in the prices of fuel would make me as a consumer feel manipulated and victimised. It gets to a point where monopolists should respect a country and not be so selfish with their pricings, particularly as fuel and trasnsport is a necessity good to most.
ReplyDeleteIt's great news, maybe not for the economy, that fuel sales have declined. It shows that people are being forced into using public transport and/or other ways of getting from A to B. Whats more, this can lead to reduction in pollution and traffic. Apart from the fact that fuel is scarce, don't the government want four wheel drivers to stop dumping their waste in the atmosphere by increasing fuel prices? This shows that their enforcement is working to an extent. Less people are driving, which is saving the environment. However this doesn't mean everyone who no longer uses their car is getting where they need to go. They may simply not travel because they cannot afford the fuel. This is a downside.
ReplyDeleteas the rule of demand suggests, rising prices have caused a fall in sales as less people are willing to spend that much on fuel. this is all well and good for the environment and may cause people to buy more fuel efficient cars or find other means of transport, but in the long run if prices continue to rise there will come a point where cars will become a luxury for the super rich as no one else will be able to afford the fuel costs. this is a problem for a lot of people who rely on cars.
ReplyDeleteGreat news for the environment, and I totaly agree with Miles, as the price rises and the demand lowers, surely the fuel companies will have to rise their prices yet again to be compensate for their loses? This is going to make it even harder to be able to afford to have a car, which is a dissapointment, but then again, public transport may see the benefits of this as we're pushed to use their services.
ReplyDeleteAlthough I don't have to drive yet, but as an overseas student from Hong Kong, the rise of fuel price makes my parents as a consumer affected because the additional prices are added in the flight tickets. Fuel oil is necessary for transportation, transportation is necessary to all of us. Although monopoly can charge whatever they want, but they should respect the right of human to use fuel with reasonable price.
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