What actions might be taken by the government of your Uk to reduce or limit price fluctuations of oil - Essay Example

The U.K. together with other many other countries have suffered from the fluctuation of oil prices in the international market as OPEC manipulates the prices (Keohane 1984). The fluctuation of petroleum prices in the U.K. is mainly affected by the fluctuation of crude oil prices in the international market which in turn is affected by the levels of supply relative to the expected and actual demand for the commodity. In this respect, the U.K. can control price fluctuations by mainly playing around with the demand and supply of the commodity and reducing overall dependence on oil (U.S. Department of Energy 2015; Yan 2012) as will be discussed in the following sections.

There are a number of measures that the U.K. government can take to limit or reduce the fluctuation of oil prices which grossly affects the nation’s economy. One way through which the a country can reduce the fluctuation of oil prices is by taking measures to reduce the consumption of petroleum (Ji and Song 2009). By ensuring the production of machines and equipment that are more fuel efficient, for example, the U.K. would end up with a lower demand for oil. Furthermore, the demand for oil can be reduced by asking nationals or making legislations to ensure that the consumption of oil by households, businesses, and industry reduce.

Yet another means through which the U.K. government can control oil price fluctuations is by increasing the supply of oil. When the supply of oil in the country is increased and the demand for the commodity is held relatively constant, the price of the commodity will tend to reduce and stabilize at some point, holding other factors constant. This being the case, the U.K. can opt to drill more oil wells, somehow increase the output of its fields, or reduce its oil exports to other countries. Closely related to altering the demand for a commodity is using substitutes.

There are several substitutes that can be