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Why the fall in sterling keeps petrol pump prices high

Graham Watson

24th September 2022

You might be forgiven for wondering why there's been a lot of talk about the depreciation of the pound this week. Well, here's a great example.

Why the fall in sterling keeps petrol pump prices high

Because all commodities are traded in dollars, a fall in the value of the pound means that we have to sacrifice a greater quantity of pounds to get the dollars required to buy oil, and other commodities.

Thus, while oil prices are back to pre-Ukraine levels, the price at the pump is 11p more expensive than it would have been had the pound remained at February's £1:$1.35.

Graham Watson

Graham Watson has taught Economics for over twenty years. He contributes to tutor2u, reads voraciously and is interested in all aspects of Teaching and Learning.

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