Petrol prices surge on supply shock, squeezing consumers as outlook remains uncertain

Petrol prices have climbed sharply because the US-Iran war has disrupted oil shipments that have to travel through the Strait of Hormuz. UK petrol has risen by around 16–19%, with diesel up even more, increasing transport costs for households and firms alike. This cost-push inflation feeds through supply chains, reducing real incomes and dampening demand in the economy. Although oil prices have recently fallen due to a tentative ceasefire, price rigidity and lingering uncertainty mean pump prices may stabilise rather than fall quickly.

Petrol and diesel prices continue to rise as concerns grow over US-Iran ceasefire - BBC News

1. Using a demand and supply diagram, explain why petrol prices have been rising in the UK.

2. Examine the likely consequences of rising petrol prices on households and on businesses in the UK.

3. Discuss whether government intervention is justified to address rising petrol prices in the UK.