How Motoring Industries Respond to Fluctuating Fuel Prices

Over the years, the global economy has been operating in an environment of constant oil price fluctuation. There are a wide range of factors which can be attributed to oil price fluctuation, such as: variability in industrial performance; resources scarcity; international trade; currency fluctuations; global politics and regulations. Apart from these important factors, which have usually affected oil prices, the 2007 credit crunch burst in the United States is another important variable that has subsequently resulted in international financial and economic crisis.

Global Effects of Oil Price Fluctuations
The fluctuation of oil prices and the international economic instability can be identified as one of the primary factors that led to the automotive industry crisis. Since 2008, the automotive industry and motoring sectors have been severely affected globally. Manufacturers experienced significant pressure by rising commodity prices and specifically oil prices fluctuation. The substantial increase in automotive fuel prices was also affected by the 2003-2008 energy sector turmoil. Global manufacturers experienced great difficulties in producing fuel-efficient vehicles due to the increased raw material prices.

Moreover, increased oil prices affected motoring manufacturers' capabilities to devote efforts on new product development. A new product development cycle would require significant focus on research, experimentation and tests which might in the long run endanger companies' cash liquidity due to growing expenses. This is the reason why, international consumers have been provided with lack of fuel-efficient transportation alternatives. This was particularly problematic in Europe and America, where local fuel-efficient alternatives were scarce and has resulted in manufacturers developing high discount promotions which did not help with double-digit percentage decline and consumers focusing on Asian automobiles to benefit from their claimed fuel efficiency. As it can be seen from these primary outcomes of the financial crisis and the subsequent economic downturn which affected oil price fluctuations severely, motoring manufacturers' experienced substantial pressure on their production capabilities. Also, consumers faced the pressure of high fuel prices and lack of fuel-efficient automobiles.

Oil Prices and the UK Economy
In the United Kingdom the effects of the economic downturn and oil price fluctuations have been particularly extensive. For example, Jaguar, which is a leading UK manufacturer, sought a 1.5 billion USD loan to sustain its performance. In 2008, the ex-prime minister Gordon Brown also declared the UK Government's intention to support the UK motoring industry and automobile customers. Jaguar was not the only company that was affected by the fluctuating oil prices and economic downturn. Nissan UK announced that it shed 1200 of its labour force in Northern England in 2008. This has, not only affected its current employment capacity, but reduced the availability of job opportunities in the United Kingdom. Subsequently, customers' ability to seek employment and obtain sufficient income to pay for increased oil prices were severely affected. In the end, low labour force capacity of leading brands as Nissan has decreased the capabilities of these companies to invest in the production and distribution of new fuel efficient motoring alternative.

The tremors in the automobile industry may have affected some popular UK brands as Jaguar and Vauxhall negatively but many other sub-sectors may be recognised to have partially benefited from the economic turmoil. For example, the public transportation has grown in popularity due to the increased expenses which automobile customers face.

In addition, other brands as the UK van and commercial vehicle manufacturer LDV recognised this as an opportunity to focus on the production of electric vehicles only. Although the financial crisis and subsequent economic downturn resulted in a diverse range of negative effects on the motoring sector, it has brought about a positive change among manufacturers, such as LDV - adoption of 'green' technology and fuel efficiency innovation.

At present, the United Kingdom has been facing similar price pressures. The oil price has been constantly fluctuating at an increasing rate which has made many experts to predict gloomy days for UK drivers. Petrol price fluctuation has, not only had negative impacts on UK customers, but been seriously influencing a number of motoring and motoring-related industries. As fuel is essential raw material, it can be proposed that many companies would face significant supply-chain pressure due to price fluctuations. This is likely to have an effect on the prices of other raw materials. For example, steel prices can be heavily affected by increased price of oil which as a result would make transportation and machinery use more expensive within a business supply-chain cycle.

In comparison to last year's quarter prices, a tanker of oil is suggested to be 17 GBP more expensive. These lack of sustainability and increasing price trends have even worse implications in the present summer period of greater driving and transportation intensity. The Freight Transport Associations (FTA) outlines that the current increase in oil prices has a significantly damaging effect on many industries that depend on fuel for their operations and could further increase unemployment.

At present, fuel prices have fallen with less than a penny, little above 118p per litre. However, this would not be sustained in the long-term as a wide range of external and domestic factors are expected to negatively influence the unsustainable oil prices, and a further 1p rise in duty has been predicted for October while an increase of 0.76p is set for January 2001. In July 2010, London recorded the highest price for unleaded - 118.7ppl. The country has had the ninth highest unleaded fuel price and the second highest diesel price in Europe. The country has been one of the European economies greatly affected by oil price fluctuation and the preceded financial crisis.

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