Essex, The price of oil has changed a lot in the last few weeks. There have been dips as well as peaks, but generally, since the start of the US-Israeli attacks on Iran at the end of February, the black stuff has been getting more expensive.
As a direct result, petrol and diesel prices in the UK have also rocketed. Motorists have felt the steep rise on petrol station forecourts, while some fuel sellers have been accused of profiteering and ripping off customers.
There have also been calls for the government to intervene to prevent costs from spiralling out of control. But what can it actually do to bring petrol prices down?
One option might be to impose price caps, setting a legal limit on what motorists can be charged for a litre of fuel. But a major problem with this idea comes down to a lack of supply.
Taking the Strait of Hormuz as a perfect example, if fewer tankers from Kuwait and Qatar are getting through, that means there is less oil available. As stocks run low, it is impossible for everyone to get the same amount of fuel at the same price as before.
High fuel prices may persuade households to cut down on consumption, which is helpful when there is less oil available. After all, people don't switch from travelling by car to public transport unless there is a good reason to do so. High fuel prices are a good reason.
Research suggests that in the UK, a 10 per cent increase in petrol prices can lead to a reduction in demand of up to 5 per cent. So, high prices are a way of adjusting consumption to cope with the lower supply.
A more promising policy intervention could be temporary fuel duty discounts – reducing the proportion of fuel costs which ends up in the Treasury.
Another option, favoured by some economists, is based on one-off transfers of money from the state directly to some motorists.
Indeed, households that leave the car at home will profit, as they keep the transfer. This is as it should be: households that use less fuel get rewarded, while those that need it still have some support.
