Oil is a globally traded commodity and the rise in oil prices over recent years has affected all countries, not just the UK. Moreover, while the Government recognise that in recent years higher and more volatile oil prices have created problems for UK businesses, by increasing production costs and adding pressure to profit margins, several factors have helped limit the impact. Firstly, in real terms (current prices), oil prices have remained below the peak levels reached in the late-1970s and early 1980s. Secondly, the rise in oil prices has in part been driven by strong global economic growth. Thirdly, UK businesses typically now have a lower intensity to use oil, given improvements in energy efficiency and the shift in the structure of the economy towards services. Finally, developments in financial markets have allowed businesses to hedge against the risks associated with fluctuations in oil prices more effectively.
The 2007 Energy White Paper (http://www.berr.gov.uk/energy/whitepaper/) sets out the measures the Government are putting in place to help improve the functioning of the global oil market, and to ensure that the UK's domestic market framework and supply infrastructure continue to deliver reliable supplies of oil-based energy at competitive prices, as they have done over the last 15 years.
Nominal prices $/bbl Nominal prices £/bbl Real 2006 prices £/bbl 1992 19.5 10.9 15.4 1993 17.1 11.4 15.6 1994 15.8 10.3 14.1 1995 17.3 11.0 14.5 1996 21.0 13.4 17.2 1997 19.3 11.8 14.7 1998 12.8 7.7 9.3 1999 17.9 11.0 13.1 2000 28.6 18.9 22.1 2001 24.5 17.0 19.4 2002 24.7 16.4 18.2 2003 29.1 17.8 19.1 2004 37.8 20.6 21.6 2005 53.8 29.7 30.4 2006 64.7 35.2 35.2 YTD 2007 65.5 33.0 — Notes: 1. Prices for supplies received by refineries in the UK from both indigenous and imported sources. 2. Real 2006 prices calculated using the GDP deflator. Source: BERR