Changes in Crude Oil Prices in the UK: Economic Determinants and Government Actions

Global business
environment

Table of Contents
INTRODUCTION...........................................................................................................................4
Crude Oil prices in the UK changed over the period from 20010 – 2020.......................................4
Economic determinants of the changes outlined.............................................................................5
Government action over the period 2010-2020 affected the UK market ........................................8
Present and Future effects of COVID-19 on the prices of Crude Oil..............................................9
CONCLUSION..............................................................................................................................11
REFERNCES.................................................................................................................................12
INTRODUCTION

External environment consist of many factors that are affecting the way organisations &
different industries are functioning. Oil & gas industry is one of most crucial industries that lead
towards development of economy of a country. Changes in Oil prices is a significant factor that
is major aspects of every country's economy (Apergisand Vouzavalis, 2018). Present report is
based on the discussion about the changes that have taken place since last 10 years. There are
some economic determinants of such changes that have been outlined in the crude oil prices in
UK. There have been some government actions related to oil industry across period 2010-2020
that has affected the markets of UK. Further there is discussion on the future of oil industry UK
will be affected because of the recent crisis of the virus COVID-19.
Crude Oil prices in the UK changed over the period from 20010 – 2020
UK is a country that is producing highest oil and is second among production of natural
gases in EU. Production in UK oil and natural gas has declined since there has been discovery of
some new services and this has resulted towards failing of the existing sites. UK became the
importer of crude oil since the year 2015.
UK has approximately 380 oil & gas producing files. More than 90 percent of the
production in UK is at offshore fields. In year 2015, oil production is meeting 50 percent of
demand in UK and oil supply is more than 70 percent of the total energy needs. According to the
department energy & climate change (DECC) it will remain consist till year 2030. oil production
has reached to a 2.7 million barrels in year 1999 but then it started falling since then. Production
in UK is about 1.1 million barrels per day and 400 million annually, revenue from the production
of oil was 4.7 pounds million in the year 2014 that fall from 12.4 pound million in year 2009
because of lower output and prices (Asche, Oglend and Osmundsen, 2017). The recent declines
in oil prices has lead to falling in employment of people from 500,000 top 375,0000 people that
is data according to the oil & gas trade association of UK. This is approx of .6 percent of whole
country population that is about 64 million people. According to government of UK, UK has
probable resources of 5.4 billion barrels that is because of possible additional reserves of 2.5
billion barrels.
There has been a impact on the oil prices that has taken place in UK in the year 2014
where there has been enhancement of UK economic activities as the production cost is
decreasing. Oil prices have been traded above UK $100 per barrel in four years till mid 2014.
after that by mid January in year 2015 oil prices started to fall and it reached at the peak level in

the year 2014 in June (Degiannakis, Filis and Arora, 2018). The world was facing a global
financial crisis in years 2008-09. there is a need to understand the price collapse that started in
the year 1980 and it was later reversed to explore the scenario of future movements of price. The
size of UK economy is increasing by 1 percent as a average relative around 2015 & 2020. this
has lead to increase in employment by a approx of 90,000 by the year 2020. the impact is smaller
where the fall of oil prices is temporary such as the average impact on GDP level is 0.2-0.5
percent and employee index in year 2020 is between 3000 & 37000 that depends on the speed of
oil prices getting rebound. In the year 2019 the Brent crude oil prices are a average of 64.36 UK
dollars per barrel that is low since year 2014 average price of 99 UK dollars per barrel. Brent
cried is a classification of sweet light crude oil and it is the benchmark price of oil.
Economic determinants of the changes outlined
Since the year 2005 UK has been a importer of oil and the current account deficit is
widening in these recent years. In year 2014, the GDP Of UK reached to 5.9 percent that was
high from 3.5 percent in year 2012 (Kartaev and Medvedev, 2019). in the period of last 10 years
UKL has been able to get a recovery from their current account deficit by having more
investment. After the financial criss of 2008 the deficit in inveterate is outpaced the overall
deficit in goods & services. There are some economic determinants of the changes that are
taking place in the oil industry of UK as mentioned below:
Balance of payments: The declining prices of oil since year 2014 can lead to a negative
impact on the economy of UK even if country is the largest producer of oil. Oil is contributing
towards the balance of payment and lowering down of prices. There is lagging of oil production
that can lead towards weakening of pound.
Local economy: The recent studies have clearly shown that local, economy of UK can
be befitted from the declining of oil prices in year 2020 as there has been higher investment in
sectors like transportation, manufacturing and services (Kisswani, and Elian, 2017). Low
interest rates in Europe and the present situation of high debt accompanies with the budgets crisis
in Europe in years 2019-2020 has lead to stimulation of investors towards GBP. Many local
analysts have expressed the optimums of oil contribution to economy of UK . Oil prices can be a
rebound in coming years.
Brexit: brexit is a recent phenomenon that has affected all industries of UK in which
Britain is leaving the European union. This treaty is going to impact the overall agreements