Using evidence from Extract below, and fully labelled demand and supply diagrams of your own, answer the following two questions:

1. What happened to the supply and demand for vehicle fuel in the autumn of 2021, including effects on equilibrium price and quantity for vehicle fuel over that time period?

(25 marks)

1. What are the intended effects on fuel supply and demand of the government policies aimed at counteracting those market effects that effect households and businesses?

(25 marks)

Extract

Filling stations in the UK are running dry, as a shortage of truck drivers and panic buying leave British motorists stranded. The government insists there's plenty of fuel. The shortfall, instead, appears to stem from a long-running lack of truck drivers - the UK had a deficit of about 60,000 drivers before the pandemic and the shortfall has grown to 100,000 in recent months, according to the Road Haulage Association (RHA). It's unclear whether, and how quickly, the government's plans to bring in workers from the EU can repair the supply chain.

'This announcement is the equivalent of throwing a thimble of water on a bonfire', British Chambers of Commerce president Ruby McGregor-Smith said of the government's plans for worker visas.

Brits are scrambling to buy fuel, exacerbating a shortfall that some officials say was relatively minor until motorists started hoarding gasoline and diesel. The lack of fuel results from 'panic buying, pure and simple', Petrol Retailers Association (PRA) chairman Brian Madderson told the BBC. Some two-thirds of the PRA's 5,500 members are out of supplies, he said, while the remainder are running low and may soon be exhausted. The UK has more than 8,000 filling stations.

What is causing the truck driver shortage in the UK? Many countries, from the US to Germany, have a deficit of trained truck drivers. In the UK, the shortfall has been inflamed by retirements, post-Brexit difficulties in hiring workers from the EU, and drivers leaving the industry for higher-paying jobs in other sectors, according to the RHA. Some 40,000 driving tests were cancelled last year because [of] Covid-19, and the RHA says the pace of certification and licensing is too slow to make up for the disruption. Some reports and studies cite working conditions as a reason as well as tax changes, known as IR35, that have crimped earnings by as much as 25%.

How officials are trying to alleviate the fuel crisis

UK politicians are trying to repair the damage by, among other things, issuing 5,000 temporary visas for foreign drivers, training thousands of new drivers, and encouraging drivers to return to the industry. Politicians are suspending competition rules, known as the Downstream Oil Protocol, to make it easier for energy companies to target parts of the UK with the most severe strains in fuel deliveries.

'The industries must also play their part with working conditions continuing to improve and the deserved salary increases continuing to be maintained for companies to retain new drivers', transport secretary Grant Shapps said in the statement.

Extracted from John Detrixhe, The Quartz, 'Why the UK has a fuel shortage', 27 September 2021