Trend of Crude Oil Prices in UK: 2010-2020

INTERNAL AND
EXTERNAL BUSINESS
ENVIRONMENT

Table of Contents
INTRODUCTION ..........................................................................................................................3
MAIN BODY ..................................................................................................................................3
1. Trend of crude oil prices in UK over past decade – 2010 to 2020..........................................3
2. Economic determinants of the changes in crude oil prices. ....................................................5
3. Impact of government action on the UK market over the period 2010-2020..........................8
4. Immediate and future effects of COVID-19 on the crude oil prices........................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Crude oil is the integral and base component of many industries like transportation,
chemicals and petroleum etc. there are around 160 different types of crude oil traded globally. It
is also called black gold and is a type of liquid petroleum that is found accumulated in various
porous rock formation in Earth's crust and extracted through burning. UK Oil and Gas industry
is very important industry as crude oil accounts for 97% of the fuel for transportation sectors.
Pharmaceuticals, plastics, cosmetics and domestic appliances uses major feedstock of oil and
gas. In the further report the movement of crude oil price over the period from 2010 to 2020 is to
be analysed. The economic determinant of the above change in prices of crude oil. Light will
also be thrown on the affect of government action on the UK market over the period 2010 to
2020 and lastly the immediate and future effects of COVID-19 on the prices of crude oil.
MAIN BODY
1. Trend of crude oil prices in UK over past decade – 2010 to 2020.
Crude oil is an important and inevitable source of energy all over the world. Various
sectors heavily depend on crude oil like industrial, domestic, transportation etc. The prices of
crude oil in past 10 years have shown a diversified trend in UK. Crude oil prices impacts
economy at a greater scale has it increases inflation and leads to reduction in economic growth.
UK is the largest producer of oil and ranks the second largest for natural gas in European union.
Fall in the prices of crude oil may benefit the businesses but negatively impacts oil and gas
industry.
As UK economy has shown various trends in the last decades, in 2010 the prices of crude
oil was £62.21 per barrel and in 2011 it showed a drastic increase in the prices from £62.21 to
£87.10 US$ and also remained same in 2012. This increase in crude oil prices decrease the
overall economic activity of UK as production costs increases for businesses. But the oil and gas
industry like refined petroleum manufacturing, oil-intensive manufacturing, are positively
impacted by increase in prices as the price of the key inputs rises.
After 2012 the prices showed a downfall trend till 2016. The prices were £84.99 ,£77.48 ,
£40.96, £34.19 per barrel in 2013, 2014, 2015 and 2016 respectively. From June 2014 till
January 2016 the crude oil prices showed a very steep and drastic fall. This price fall was one of
the biggest in history. The downfall in crude oil price increased UK overall economic activity

level and also boosted investment and employment in that phase. In this phase the GDP of UK
increased by 1.2% in 2015 on average, 1.4% in 2016 and around 120,000 people were given
employment in the same year. As the economic activity of UK was growing, revenues of the
government in terms of tax also increased. In this phase there was a rise in real household
incomes which increased the spending by the customers.
From February 2016 the prices again took a rise in 2017 and 2018 the prices were £42.47 and
£55.85 per barrel respective. The inflation rate in this phase increases due to rise in crude oil
prices as decrease in GDP and aggregate demand will exert downward pressure on prices, this is
the offset by the cost incurred that translates into higher consumer prices. Again in 2019 the
prices fall to £50.38 and in 2020 gone to £31.60 per barrel. The oil prices have fallen so far in
2020 that the price of oil is selling for a lower price than the cost for the producers. This has
damaged many oil firms who have borrowed to invest in new oil fields. This fall in price has also
reduced profitability for alternative energy sources (Brent crude oil price annually 1976-2020).