The pound was stronger yesterday but dropped slightly today following the fuel crisis. The government has the army on standby to help ease fuel supply problems following days of long queues, panic-buying and pump closures. Analysts warn that this will only offer temporary relief, and that the UK needs to do more to more find a more long-term and viable solution to its current HGV driver shortage.
Analysts have noted their concerns about the impact of fuel shortages on everyday life, soaring energy prices and labour shortages which could eventually dent the UK’s economic recovery.
Fears of driver shortage hitting fuel supply has led to a surge in demand with up to 150 military tanker drivers ready to deliver to petrol stations which have run dry because of panic buying. There is no shortage of fuel, but simply a shortage of fuel in petrol stations, due to a lack of lorry drivers. While this was expected to have minimal effects, the problem has been exacerbated due to the behaviour of motorists who have rushed to stations panic-buying fuel. The transport secretary Grant Shapps said there were "tentative signs" of stabilisation in petrol stations and the Petrol Retailers Association said that the number of motorists at petrol stations was beginning to calm. As Shapps noted, "Once we all return to our normal buying habits... the quicker we get back to normality." The UK is short of more than 100,000 lorry drivers which has affected many industries, especially food suppliers and supermarkets.
In a joint statement, fuel companies, including BP and Shell, have reassured the public that supplies have not been affected and that demand will return to normal levels.
Higher Inflation Could Help the Pound Rise Higher
In the meantime, the pound is expected to rise as inflation pushes higher and the BoE is forced to raise interest rates. Higher inflation is the result of a combination of factors, including supply shortages and shortages of HGV drivers. While the central bank has stated that inflation is only temporary, there are concerns that it will remain high for a longer period of time.
Bank of England Governor Andrew Bailey has expressed his concerns about the current issues with supplies that have pushed inflation higher, and he noted that the Bank is ready to act if this becomes a long-term issue. He said that higher inflation can be dealt with higher interest rates and that a rate rise before the end of this year is not impossible.
The rising energy prices that have pushed inflation higher are a major concern in the UK, and the question is whether more persistent inflation than expected will prove to be the case and how the Bank of England will change its monetary policy to respond to this. The Bank of England last week warned that their forecast for high inflation at 4.0% will be exceeded. In August, the Bank raised their peak forecast from 3.0% to 4.0%.
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