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January 16, 2011

Comments

Arhur Dent

Maybe it's because a rise in petrol/diesel price has a knock on effect on pretty much everything else since transport costs will rise.

potatoffel

Since there already exists a working oil futures market, why aren't financial institutions offering 'Shilleresque' insurance against oil price spikes if there is demand for it? Right now I can't think of any kind of market failure (financial illiteracy?) that requires government intervention in order to insure people against oil price fluctuations. This isn't a rethorical question, I'm genuinely wondering.

Matthew

Govt intervention already stabilises petrol prices - the variability of the petrol price is far less than the oil price.

The stabiliser some Tories want seems to me to make the elasticity of demand 0, and presumably therefore will see the oil producers increase their prices.

Matthew

Potatoffel's question is a good one. Clearly it is hard to hedge against duty and VAT, but not so hard against oil prices - you could do it with an oil ETF (there's an issue about the cost of doing so via contango, but it'd still work - also a problem with dealing costs but I think it'd still make sense with only a small purchase)

Funfoid

Food: more digging of ground locally limits need of gov. to even think on it. In Italy, where I now live, most produce, espec. fresh is Italian. Food price hikes have been limited.

Fuel. Much bigger issue. 'Cause supply of oil is not much under control, ultimately, of UK gov.

Price hikes: sign of the times. Key q. whether devolve to UK control to massage it straight or indirect marker of bigger problems coming.

Edward Spalton

British agricultural policy has been totally under EEC/EU control since January 1 1973. I know 'cos I was there and served on a Min of Ag & Fish Trade Committee, charged with bringing it into effect in the grain/animal feedingstuff trades. It was a real eye opener.

Our firm's 25 year happy trading relationship with New Zealand, buying unsubsidised milk powder, was cut off at a stroke. We had to buy EEC milk powder at around 2.5 times the price, then we could get about half the difference back in subsidy at the cost of officials crawling all over our plant. The New Zealand product could only come in at a huge price increase from the Common External Tariff and was not eligible for the subsidy.

The government can do very little about home-produced food prices because they are part of an EU wide market (and , of course, the world market too). So food production and prices are not under the control of the UK government and have not been so for nearly forty years.
They can do sod all except produce verbiage.

rjs

if every government in the world tries to stabilize and supplies are limited, someone fails...

Grumpy Old Man

Something like 80p in every £ spent on petrol is tax. If the Govt. decided each financial year how much it was going to raise from fuel duties, as the fuel price rose and fell they could adjust the tax take accordingly and ensure a stable price at the pump.

As to food production all but the most infirm are capable of growing their own, either in their own gardens or on LA allotments. If Govt. directed LA's to make more land available for this task where existing allotments are oversubscribed, or allowed private landowners(merciful heavens) to make ground available , then the rising cost of food could be buffered for the poor.
I'm not saying it would be easy, but it is possible.

John H

ISTM there's a more basic reason: food prices are complex, with lots of variables in terms of what type of food you buy, in what quantity and how often. Food prices are also more "opaque" simply because you have to go into a shop to see them.

For fuel, however, the pricing is simple - one or two headline figures, of which only one is likely to be relevant to each individual - and more "in your face", being displayed outside every petrol station you drive past.

So changes in fuel price are much more noticeable, and hence more likely to prompt a reaction sooner than food prices.

John H

A related point which just occurred to me: the argument (originally put to me by my mother based on her experiences in the supermarket) that the end of price labels on food sold in supermarkets (in favour of displaying the price on the shelf) made increases in prices less noticeable, because you didn't get home and see that the price label on the new jar of coffee (say) had a higher price than the old one in the cupboard.

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