Contemporary Business Environment: Impact of Crude Oil Prices and Government Actions

This document explores the changes in crude oil prices in the UK from 2010-2020 and the economic determinants behind them. It also analyzes the impact of government actions on the UK market and predicts the immediate and future effects of COVID-19 on crude oil prices.

Contemporary
Business Environment

ABSTRACT
Crude oil is one of the most important factor that is required for managing business
within business industry and sector. Almost all industry perform their task with the help of crude
oil that also helps for making and analysing organisational aspects. There are different
circumstances also exists in market environment which is impacting on prices of oil. Demand
and supply, tax etc. are some example that impacts on business of gas and oil industry. Due to
Covid-19 pandemic conditions in environment of business are also raised and it is impacting on
price of oil. Further, with the recommendation to government initiative related with business
environment are also included in this industry for ensuring the environment of country in future.

Contents
ABSTRACT ...................................................................................................................................................2
INTRODUCTION...........................................................................................................................................4
MAIN BODY..................................................................................................................................................4
1.How have average Crude Oil prices in the UK changed over the period from 20010 - 2020?..............4
2.What are the economic determinants of the changes outlined in your answer to Question 1?..........5
3.How has government action over the period 2010-2020 affected the UK market?.............................7
4. Analyse and predict the immediate and future effects of COVID-19 on the prices of Crude Oil?........9
Recommendation to the government...................................................................................................10
CONCLUSION.............................................................................................................................................10
REFERENCES..............................................................................................................................................12

INTRODUCTION
Contemporary Business Environment is defined as the market where competition is at
higher level and even changes in the market can be seen at a very fast speed. In this type of
market, there are different types of factors which must be consider because that certainly has a
huge impact on day to day activity. In context of the file, UK Oil and Gas industry will be
considered and that changes which has been seen within this particular sector since last 10 years
will be majorly focused (Shukla and Karki, 2016). On the basis of oil and gas industry, its prices,
economic determinants will be overviewed. Along with it, different actions which will be taken
by government in past few years and even future effect of COVID-19 on crude oil will be
analysed.
MAIN BODY
1.How have average Crude Oil prices in the UK changed over the period from 20010 - 2020?
Crude Oil can be defined as the natural occurring and unrefined petroleum product which
is formed with the help of hydrocarbon deposits along with number of other organic materials.
Further crude oil can be refined for the purpose of using oil as gasoline, diesel as well as number
of other petroleum products. The demand for crude oil is huge in the market and in present it is
almost impossible to depend upon other factor as a alternate of crude oil. Each of the nation is
directly dependent upon crude oil for its economic growth. It is because whenever price in crude
oil increases then inflation rate increases which certainly slowdown the economic growth of the
company (Rui and et. al., 2018).
The history of last ten years shows that there is a rapid speed flow of the price in crude
oil. The price has been never stable in crude oil and the major benefit is obtain by the country
where crude oils are found. Even there are different types of taxes which are included at the of
bringing the crude oil within the nation. It is one of the main reasons that price is changing on a
regular basis. As demand of crude oil is increasing at a rapid speed which means that price is
also increasing. For example: the prices of crude oil have declined significantly because of the
requirement of oil in the global pandemic COVID-19.

In context of United Kingdom, although there is a great requirement of crude oil but at the same
time since year 2008 there was a huge downfall. But in year 2010, it again started to increase the
price which was 75 US$/barrel. There was continuous increase in price of the crude oil and it
was found that in year 2014 it almost reached up to 125 US$/barrel. It has increased the overall
price of price which means that there were some of the situation of inflation but country like UK
also started to focus towards other solar energy to perform their work (Perrons, 2014). It simply
means that price has against started to slowdown which is a positive sign for the nation like UK.
The continuous slowdown of the price since year 2014 has allowed the nation to improve their
overall economic condition. In year 2019, the price of crude oil for per barrel was 59 US$.
In short, it is said that whenever price of the oil and oil product changes, the direct impact
can be seen upon the nation where different activities are performed at a greater speed. The
nation simply gets number of advantages at the time when prices reduces because there is better
opportunity to perform any of the work at a minimum price which is the key line to attain
success in current scenario.
2.What are the economic determinants of the changes outlined in your answer to Question 1?
The current market says that there are different factors included which has a direct impact
on day to day activity. In the similar manner, it is said that price of crude oil is increasing and

decreasing and for that there are number of factors included in it. Looking at the above question,
it can be determined that price do changes as it never remain same where factor like requirement
has a great role in it. Below some of the main factors are discussed in detail that how this factor
are main reason behind the frequent changes in the price of crude oil in United Kingdom.
Demand and Supply: According to the study of economics, demand and supply always
plays the crucial role in bringing changes in the price of oil products. It is necessary to
understand that whenever there will be higher demand of crude oil, it simply means that charges
will be also higher. In any of the circumstances, the supply will be not be as per the requirement
the there will be automatic reduction in the price of crude oil. In context of United Kingdom, it
has been found that demand and supply has been one of the major factors due to which prices in
crude oil has changed. It is essential for the nation to understand that demand for the crude will
increase only in the circumstance where there will be effective growing economic activities in
the nation (Moradlou, Backhouse and Ranganathan, 2017). But if there will not be any of the
economic growth activity then there will not be any kind of requirement of crude oil and it will
certainly not allow to increase the price of crude oil in even future time period as well. Further,
there both demand and the supply are inter-related with each other and it leads the country and
their origin business to alternate and control the prices of products. In context of UK demand and
supply of oil and gas is more because majority of individual travel with personal vehicle which
refers large consumption of petroleum energy. On the other side, large manufacturing and
production units also developed product in UK because of its flexible policy and better resource
availability. So it refers that more demand of oil and gas enhance price of raw-material that is
required for developing energy.
Taxes: Law and regulation which are formed by the ruling government or from
Parliament house has a great importance. They bring continuous changes to the plan and policies
which means that sometimes price of any product or policy get increased and in some of the
circumstances it even decreased. In context of United Kingdom, there are different types of taxes
which is being paid by the country and even by customers. It certainly increases the price of
crude oil (Śliwa and Johansson, 2015). Some of the main charges or taxes which are being
charged by the UK government on crude oil is supplementary charges, petroleum revenue
charges. Even VAT is also charged by the nation. All of this taxes and prices which are being

charged by the country certainly increases or decreases the price of petroleum or crude oil
product. In simple words, it needs to be understood that changes in plans and policies which
certainly bring changes to prices.
There are other taxes as well which is to be paid by government which forces them to
increases the price of crude oil (Lu and et. al., 2019). In current scenario, UK do not generate any
of the crude oil in their own nation which means that they are forced to purchase it from other
nation like Iran, Qatar and many more gulf countries which are leading giant in the field of crude
oil. Here, at the time of purchasing the oil they are also fulfil the international taxation rule due
to which other charges are also required to be paid by them. Whenever this types of taxes are
paid the changes in the price of crude oil can be seen.
Economic growth- With the study of recent years all the data and information that is
related with economic price of country specifically for oil price undertakes different factors
which make weak economic growth. The major reason that oil prices is impacting on the
economic growth of country is that refiners continue purchase oil because whenever, the price
changes organisation sale them in more profits. The demand of oil and energy product is inelastic
so refiners not reduce demand of products due to which it becomes more expensive. Moreover, it
makes more sense by understanding that the demand of petroleum products modifies the price
than the refiners also respond by changing price of crude oil (Gornicka, 2018). Along with this
there is more bulk in the revenue of government and refiners due to the constant demand of
products. The earlier study also demonstrate price in the year 2019 was too low and it is because
individuals realise differences which make a direct measure of gasoline prices and this is more
relevant to measure crude oil price. With the study of short term price elasticity the demand for
crude petroleum defines and confirms results which make results for gasoline products. This also
refers short term products make better process that helps in income elasticity of oil demand
which make better possibilities to grow by enhancing improvement within the country to
complete work by fuel switching.
3.How has government action over the period 2010-2020 affected the UK market?
British government is clear about implementing the changes that ensure safety of
environment in the future. Along with this British business are also focused on the real, practical
and clear ideas that support approach for longer term. As it already discussed that the year 2008

was a recession period for all over the world. This also refers management of oil and gas need to
build different perspective which enhances possibility in making aspects that leads individuals
for investing in the sector of petroleum products. One of the major aspects which are more
beneficial for organisation relates with investment aspect of business. This also defines that by
identifying different strength and capabilities market team create and generate decisions that
make long lasting structure for the country.
Government ban petrol and diesel cars
A ban on the sale of new petrol and diesel cars is announced by the government of UK.
This refers that there is ban on the automotive sector but the major purpose to take such strict
action is to accomplish the UK target of emitting zero carbon within the year 2050. This action
was announced by Boris Johnson in the event that happed in United Nations. With the action of
ban hybrid vehicles it is identified that UK oil and gas industry is more impacted. The reason for
such a large impact is to control pollution that is generated from vehicles and it set a great
benchmark for tackling or handling climate change (Curtis and Samy, 2014).
Reduction of Petroleum revenue tax to 0 percent in 2016.
The information about tax impact on the oil & gas company that are operated in UK or
within the continental shelf and the measure of new package defines there is a permanent zero
for the revenue that is earned from petroleum products. PRT (Petroleum revenue tax) is reduced
with 35% and also this make changes which are payable in respect of profits. Thus, to adjust
fence profits tax rate is minimized from 20% to 10%. Further, it provide HM revenue and
customs a power about the definition of relevant income for cluster area that enable country to
manage tariff income. Tax reduction of UK government support refiners to extent profits which
is used by them to invest in future for establishment of new business or it is also used to trade in
overseas market.
Government promotion of electric cars
The Office for Low Emission Vehicles (OLEV) is a group working throughout government to
assist the early marketplace for extremely-low emission motors (ULEV). It is offering over £900
million to put the UK at the worldwide vanguard of ULEV development, manufacture and use.
This will contribute to economic boom and will assist lessen greenhouse gas emissions and air

pollutants on UK roads. Op-up motorcycle lanes with included space for cycling, wider
pavements, safer junctions, and cycle and bus-best corridors might be created in England inside
weeks as part of a £250 million emergency lively tour fund - the primary degree of a £2 billion
investment, as a part of the £five billion in new investment announced for cycling and buses in
February that work as a positive factor for establishing safe and positive business environment
(Cooper, Stamford and Azapagic, 2018).
4. Analyse and predict the immediate and future effects of COVID-19 on the prices of Crude
Oil?
Immediate Impact of Covid19 on Crude Oil Prices in the UK- With the recent announcement of
refiners relates with raise in the production of the crude oil that helps in controlling the price of oil and
profits. This also refers that oil prices are reduced with 50% from the beginning of the year due to
uncertain pandemic conditions. Along with this government is also taking actions against the petroleum
products. Therefore, both of conditions generate challenges for oil and gas industry of UK. One of the
major revenue is earned from the petroleum industry and specifically from oil and gas. When China
announced Covid-19 and its expansion at that time the prices for crude oil are reduced from the US
$61.06 to the US $ 23.36 that defines more than 50% of revenue is decreased. It directly impacts on oil
sector at international level because all productions units are closed due to ban of government. This also
defines that gas clients are switching in order to purchase material at low cost. Moreover, covid-19
impacts on the sector and industry. More than 175 countries from the last month of March, 2020 are
impacted due to cumulative infection that is an evidence of destroyed or weak global economy.
Future Impact of Covid19 on Crude Oil Prices in the UK- United Kingdom is one of the
major buyers of oil and gas products. On the other side, supplier of petroleum related products
are Saudi Arabia and Russia which are one of the major suppliers (Ahiaga-Dagbui and et. al.,
2017). This also refers that EIA forecasted the Brent and WTI crude oil price that is average
between 28$ and 43$ per barrel for the remaining of 2020 year. Moreover, there is a price war
between both countries so to overcome from them it is essential for the UK government to
forecast their requirements in order to select those which perspective that leads to consume
aspects which are beneficial for UK government and individuals. Example- the impact is
monitored on supply of petroleum products as most of the production units store oil for
minimizing such complex situation in future.

A deal announced last week among OPEC and impartial producers to reduce output by
approximately 10 million barrels consistent with day beginning in May appears now not to were
sufficient to buy charges of oil, even as the carefully-monitored garage capability is monitored
for reduce black marketing and to reduce illegal storage of oil (Thomas and et. al., 2017). The
unethical Desires shipping of oil are more probable in UK future because Covid-19 issue and
also UK government authorities are not in favour for use of more petroleum products. Further,
for long marketplace understanding that the OPEC deal is not only sufficient to stability oil
markets. Therefore, it is mentioned negative charge most effective impacts oil deliveries due
Tuesday. UK oil futures for transport in June additionally fell sharply, dropping 18% however
finished at $20.43 for each barrel.
Recommendation to the government
The recent spike within the oil prices generates different administration that are
considered towards the dip which impacts on all oil reserve. The council of the UK government
defines that for addressing the oil price volatility organisation of UK gas and oil industry address
different prices and most of them is managing business aspect that the oil market prices feature
unfavourable prices to corporate and coordinate work of organisation. In the present scenario,
Covid-19 impact on all business aspects. So the first recommendation to the government of UK
is to formulate and develop new and modern fuel related economy policy. Already the initiatives
for business which is recognised relates with identifying of aspects that are modified according
to business policy. One of the major aspect which is related with business is to make
responsibility that helps in managing the ideas and fuel prices of economy. With in the industry
of crude oil and gas it is analysed by business that by making strategic reserve for crude oil in
some specific areas leads in managing crude oil aspect. In the last, it is also recommend to
organisation that by managing energy industry with technology factor it is easy for organisation
to manage all price of oil and also to start initiative that relates with environmental safety of
business.
CONCLUSION
With the analysis of all above report it is identified that UK oil and gas industry is one of
the major sector that provide energy to different sectors or business by providing oil and other
raw-materials for producing products. Crude oil is an essential resource which is required by all

organisations so the changes related with oil within past ten years are included in the report.
Economic determinants for the price oil such as demand and supply, Taxes and the economic
growth along with their impact on Crude oil in context of UK is covered. The effect of
government action on the prices of oil and the action that are taken by government is included
that settles on ban petrol and diesel cars and also reduction of tax on petroleum revenue is
focused in the report. In the last, impact of Covid-19 on the crude oil prices in UK and its future
impact are covered in the report.

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