ENERGY The Petrol Market

1
ENERGYThe Petrol Market

• Sophia, Yi, Katy, Aaron, Louis

2
The Product

• Crude oil
• Refinery, by-products
• Petroleum
• Used as fuel for vehicles

3
The Costs

• Fixed
• Refinery machinery
• Variable
• Labour
• Duties VAT
• Mostly capital-intensive production
• Price of oil has biggest effect on petrol prices
• 3/4 petrol price is excise duty and VAT

4
The Market

• Very competitive in price - margin 5p
• Availability is essential
• Not much variation in quality

5
The Players

• Oligopoly dominated by few firms
• All privately owned
• 6 main oil companies

6
Policy intervention

• Reasons include
• the objectives of the government
• consequences of inflation etc.
• costs

7
Government intervention

• Why should the government intervene?
• Stops companies from exploiting consumers to gain
  maximum revenue
• To ensure prices arent too high
• Prevents collusion
• Why shouldnt the government intervene?
• Doesnt receive as much tax for public services

8
Suggested types of intervention

• Regulating competition
• Regulating maximum amount purchased by consumers
  per vehicle
• Drawbacks would be
• Competition between firms minimises profits
• Unfair on long distance travellers requiring the
  petrol

9
The Technological Side
10
The Technological Side

• Firms unable and unwilling to commit to change
• Not much change possible technologically without
  much more research
• People also unwilling to commit to new innovation
  meaning not worthwhile anyway for firms

11
Transport

• Open to change
• Currently done inefficiently which costs the
  consumer because it
• - Causes high prices of petrol, as seen in
  the price boom experienced recently
• -Drives down share prices because of expected
  loss of profits spent on transport that costs
  investors

12
The Technological Side

• If the government is to intervene in the
  technological side, it should
• Consider consequences of forcing firms to change
  to more economically efficient methods of
  production as this could totally wreck the market
  which is currently working reasonably well
  considering the variable costs of the workforce
  and taxes that are imposed.

13
The Technological Side

• Instead, concentrate on the the weakest link -
  TRANSPORT
• Give additional assistance to firms while fuel is
  in transport
• Respond more quickly to pleas/emergencies such as
  oil spills, as this cost filters through to the
  consumer as well as the government.