Good news for motorists

The price of road fuel is falling. Petrol and diesel prices in the UK are now at their lowest level since February 2011. The average pump price for a litre of unleaded petrol has fallen to 130.44p in November – down nearly 8p per litre since September.

According to the AA, the reduction in price equates to a fall in the average monthly expenditure on petrol of a two-car family of £14.49 – down from £252.54 to £238.05. This saving can be used for spending on other things and can thus help to boost real aggregate demand. The fall in price has also helped to reduce inflation.

But will lower fuel prices lead to a rise in fuel consumption? In other words, will some of the savings people make when filling up be used for extra journeys? If so, how much extra will people consume? This, of course depends on the price elasticity of demand.

The following articles explain why the price of road fuel has fallen and look at its consequences.

Webcast

Good news for motorists as fuel prices fall in the East ITN (22/11/13)

Articles

November fuel price update Automobile Association (22/11/13)
Finally there is good news for motorists as petrol prices hit lowest level since 2011 The Telegraph, Steve Hawkes (22/11/13)
Petrol prices fall to lowest level for almost three years as strong pound gives motorists relief on the forecourt This is Money, Lee Boyce (22/11/13)
Falling petrol prices boost motorists The Guardian (22/11/13)

Data

Weekly road fuel prices Department of Energy & Climate Change
Europe Brent Spot Price US Energy Information Administration
Spot exchange rate, US $ into Sterling Bank of England

Questions