Did Tories spur petrol panic to avoid recession?


3:03 pm - March 29th 2012

by Sunny Hundal    


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Some people on Twitter believe almost every government action is a conspiracy to hide something else. I don’t always buy that, but the latest theory doing the rounds has some merit.

At midnight tonight, the First Quarter of the year ends. The UK is already in danger of falling into recession and the OECD is predicting it.

UK GDP fell by 0.3% in the fourth quarter of last year. Technically, two quarters of contraction in a row means a recession.

We already know the UK economy is stagnant and sick. We know that Osborne’s “most pro-growth budget ever” didn’t work. So a technical recession will make little material difference. But the political implications will be huge.

So could the government prevent a recession in such a way? I suppose that will require finding out how much extra money people have spent in panic-buying, and determining whether it will be significant enough to make a significant difference.

But its worth keeping in mind that this also increases the chance of a downturn in Q2.

It isn’t a far-fetched idea to assume Osborne will do almost anything to avoid a technical recession now and save himself for another slew of bad headlines.

I’d be interested in seeing the actual numbers though. Anyone have them?

Update: 0.1% of quarterly GDP would be around £375 million. So to get a 0.2% boost in GDP numbers, consumers would have to spend around £800 million extra over the last few days. Seems a bit of a stretch.
(hat-tip to @DuncanWeldon and @MartynWilliams2, who has also expanded on this in the comments)

Update 2: Actually, this is very unlikely for reasons I didn’t take into account.

As Will Straw points out, most oil is imported. So stock depletion of oil counts against consumer boost. Plus, the provisional figures for GDP will exclude last minute panic buying and will be the ones the media focuses on.

So the chance of this happening? Very slim

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Sunny Hundal is editor of LC. Also: on Twitter, at Pickled Politics and Guardian CIF.
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Reader comments


No. Come on.

If we are going to indulge in a little consipracy, do we not think it was more an attempt to turn the public against the strikers before the talks to add to the pressure on the union?

2 days of a bit of panic buying is probably not enough to have a great impact on 3 months’ worth of consumer spending figures.

It depends on the figures. When people from the Financial Times (see Ben Fenton above) think its a serious possibility…

I know my local council has taken the step of ordering fuel for the reserve tanks much earlier than would normally be required as a precautionary measure induced by panic buying shortages. If all the other councils have taken similar measures that would likely be a fair whack of a spend.

The GDP loss if a strike actually comes to pass will be far greater than any effect from a bit of panic buying, not least because all you will be doing is shifting demand forward in the quarter a bit, not increasing overall demand.

So this is total and absolute nonsense.

Hardly any of the numbers from the final month of the quarter are in the provisional GDP estimate. It is the provisional guess that generates most of the headlines when they are released. The later revisions which are more accurate hardly get any headlines.

Fag packet workings below

There are 30 m cars on UK roads, if each has tank 1/3rd full and spends £50 topping up, that means spending of £1.5 billion

UK GDP is ~£1.5 trillion/yr, so about £375 bn in Q1. So fuel sales could be 0.4% of GDP. Coincidentally that is how much we shrank by in Q4 of 2011 according to the latest figures.

Of course, not everyone will fill up, some of the money that gets spent on petrol now won’t be spent on other things, and so on. But it is not inconvievable that this will add 0.1% to spending in Q1.

It will of course make spending less in Q2, because it is very unlikely that people will drive more as a result of this and so spending is just brought forward. In fact people may drive less overall, ditching unecessary journeys and driving more economically as a result of fears about petrol.

For what it is worth, the fact I did the maths doesn’t mean I think that is why they did it. Far more likely that it was a ruse to paint Ed Miliband as a Unite stooge to make people forget Government had cocked up the budget and earned many bad headlines.

Worked a treat hasn’t it?

Tyler

As I already said above, it probably is nonsense, but not for the reason you give. GDP for the year will not be affected by shifting spending from Q2 to Q1, but two consecutive terms of negative growth could be avoided.

And presumably Government did what it did because they thought it would weaken the case for a strike and make one less likely, thus avoiding GDP being hit and making them look like heroes.

9. Luis Enrique

Martyn,

good work – but Petrol Retail Association says petrol sales up 81% – can’t see time period specified but lets say over last 48 hours. I think if all 30m cars spent £50 on petrol in the last 48 hours, petrol sales would be up a whole lot more than 81%.

My guess is the percentage of car owners who have gone out and filled up more than normal, because of this panic, is small.

10. Ben Fenton

Hi,
Just thought I would mention that while the thought that a splurge of spending on petrol (pasties was just a joke) might tip the balance on Q1 GDP if they were very tight to the flat/contraction margin, the idea that this was a “brilliant tactical ploy” by the Chancellor or anyone else was intended to be humourous. Yet again, I forgot the sage advice of my first news editor who told me in 1987 that there is “no ironics key on these new-fangled keyboard things”.

Ben Fenton
FT Live News Desk

11. Shatterface

It isn’t a far-fetched idea to assume Osborne will do almost anything to avoid a technical recession now and save himself for another slew of bad headlines.

Its not a far fetched idea that Orborne might fly remote-controlled airplanes into the Houses of Parliament to distract attention from the economy if we use the phrase ‘it isn’t a far-fetched idea’ in the sense you are using it.

12. Frances_coppola

Is this any more unlikely than Mervyn King’s notion that one extra bank holiday will tip the UK economy into recession?

Like Ben, when I originally retweeted Cameron’s comment about filling up tanks, yesterday morning, adding “Q1 GROWTH STRATEGY?” to it, I was not being very serious.

But when more tweets started circulating last night it made me think the numbers were quite interesting so I reached for a trusty fag packet.

Still impressed that spending an extra £3 per person in Q4 last year would have meant flatlining rather than 0.4% shrinkage. Personally I have resolved to have an extra pint this quarter to do my bit for the economy. It’s the least we can do.

And yes, that’s also a joke.

14. Quietzaple

Just about nil, not least because of work lost via queueing and missed meetings etc.

Ask who did what And what were the likely consequences.

Cameron called a Cobra meeting which the Tory BBC promoted causing panics and an 81% increase in petrol sales yesterday and a lesser increase in diesel sales.

Granny Tax, the Cash for Cameron scandal and the 45p tax rate for millinaires, perhaps also the pasty tax off front pages.

Had not Francis Maude prattled his duff jerrycan advice they’d not have had to field Osborne and the Energy Minister to try and retrieve the situation. The news would have been all about the evil unions and Labour’s paymasters.

As it is the Bagage Handlers are being lined up for traditional demonisation.

I love that the guy from the FYT has come on and basically said it was a bit of a joke, and still people will post that they think this is DEFINITELY why Osbourne has done this (leaving aside it was the PM and Frances Maude making the comments, not Gerorgy).

They wanted to turn the public against the union. It backfired in the papers and on the telly, but they spooked enough people into thinking ‘yeah I’m sure its nowt to worry about but I’ll fill up just in case’ to start closing petrol stations. So they didn’t win the battle, but…

@Really??

That would be a better comment if more than one comment out of 16 on here said they still agreed with it.

I’m mostly fascinated how our behaviour feeds through to GDP figures. Guardian has a piece explaining further details about multipliers that are used to account for all the activity needed before you buy petrol – transport, distillation, extraction etc. It is here http://t.co/pV2ivskP

17. Quietzapple

Actually Osborne has now been given time on the ToryBBC to propagandise to try and make up for the cockups of Maude and the laughable and inconsistent Energy Sec. He has carefully worded his statements for literal truth like the pro PR man he wishes to be seen as.

Like Brown he sees himself as the PM’s successor as of right.

Tim Monthomerie is blathering about poor organisation and media relations at no 10 as though the policies were no part of the problem!

They all know that people swallow most of what we are told, but this is a lockup too far, well beyond the brou ha ha of pasty tax, for the BBC doesn’t like to look stupid, as when Gilligan had to go.

This time they’ve been caught out in propaganda and misrepresentation beyond an acceptable level.

18. Planeshift

“My guess is the percentage of car owners who have gone out and filled up more than normal, because of this panic, is small.”

Luis, in the same post you cite stats showing a 81% increase in consumption!

There’s a few stations near me dry already. I saw the queue mid-day so filled up myself. If I hadn’t seen the queue I wouldn’t have bothered. Classic case of individuals acting rationally causing mass irrationality.

Would it be worth ‘talking up’ the possibility of strikes at:

Comet
Dixons
PC World
DFS
Argos
John Lewis
Marks and Spensers etc., etc.
I’m not sure my living room could manage another two 3 piece suites, similarly the kitchen is pretty full but you can never be too careful……………………………… and if it would help the bankers out?

Seems more like a ploy to divert attention from other topics like party donations, though it’s probably more opportunistic than anything else.

Cameron’s Lot are as coherent – from a strategic and presentation perspective – as John Major’s govt.

22. vicarious phil

“It isn’t a far-fetched idea to assume Osborne will do almost anything to avoid a technical recession now and save himself for another slew of bad headlines.”

I take it this bit is also a joke? He’s Chancellor and he’s just delivered his budget, the biggest opportunity he’ll have all year to influence whether the economy grows or not. It’s too early to know whether his budget will work, but maybe just maybe, if he’ll do almost anything to avoid a technical recession , many of the “almost anything”‘s would be contained in his budget.

“We know that Osborne’s “most pro-growth budget ever” didn’t work.”

Do we? How? I’m not an economist but I’m guessing measuring the impact of the budget could take a little longer to feed through?

The thought of a “conspiracy” has crossed my mind but unfortunately it looks as if our government are completely inept rather than evil geniuses. If they had tried to provoke a bung spree then people would probably have decided that there wasn’t a problem.

The handling of the issue has been incompetent though. Yes, a strike could cause problems and in that case it might be a good idea to make sure that you have a bit more in the tank. However, a strike needs 7 days notice and seeing as negotiations are set to start on Monday it’d be at least 2 weeks. By that time everyone will have had to go back to fill again.

At least it’s taken some heat away from the pasties… and the cash for influence scandal… and the granny tax… and the 50p tax… and the health reforms…

>“We know that Osborne’s “most pro-growth budget ever” didn’t work.”

>Do we? How? I’m not an economist but I’m guessing measuring the impact of the budget could take a little longer to feed through?

That quote refers to LAST year’s budget. The past twelve months haven’t exactly seen record growth, have they?

And, @19: I know you were joking, but I can’t help but be tickled by the idea of strikes at employee-owned John Lewis. Just picture them announcing, “Our negotiations with ourselves have broken down…”

Francis Maude should be in the dock, given that he said that people up and down the nation break the law in regards to holding large quantities of petrol in jerry cans and with the bloody reason why holding so much is illegal has happened – http://www.bbc.co.uk/news/uk-england-york-north-yorkshire-17560534

23

Very likely it was an inept attempt at a conspiracy, this lot are pure evil idots imo.

27. Luis Enrique

Reactions: Twitter, blogs
  1. sunny hundal

    Did the Conservatives encourage a petrol panic to technically avoid recession? http://t.co/VqM95qrV

  2. Mac

    Did the Conservatives encourage a petrol panic to technically avoid recession? http://t.co/VqM95qrV

  3. No, The Petrol Panic is Not a Government Conspiracy | Gossipian

    […] Right-on blog Liberal Conspiracy, hummus eating home-away-from-home for left-wing Guardianistas, gives far too much weight to idiotic Twitter conspiracy theorists in asking: “Did Tories spur petrol panic to avoid recession?” […]

  4. RecessionInfo 4 All

    Did Tories spur petrol panic to avoid recession? | Liberal Conspiracy: Some people on Twitter believe almost eve… http://t.co/KVkf4xqq

  5. Gassol

    Did Tories spur petrol panic to avoid recession? | Liberal Conspiracy: Did Tories spur petrol panic to avoid rec… http://t.co/ipeqQ0WN

  6. Tom Webb

    Libcon's now descended into outright conspiracy theorising. http://t.co/reor3LVf #idonteven

  7. Simon Morris

    Did Tories spur petrol panic to avoid recession? http://t.co/LckbEU8g < Not big on conspiracy but it's fortunate timing at the quarter end.

  8. Eileen Cowen

    Did Tories spur petrol panic to avoid recession? http://t.co/PFPqAQFR via @zite

  9. ElaineSco

    @ScotlandTonight This is an interesting piece.Folk were thinkin Cameron did this panic thing to bump up consumer buying http://t.co/v7eyc96D

  10. The Sev

    @nigelwhiteoak seems unlikely and even if true less likely to work. I attribute more to stupidity they malevolence.

    http://t.co/6OguGRhM

  11. The Sev

    @dongrif plus its unlikely to work. http://t.co/6OguGRhM

  12. the controversy of conspiracy « JRFibonacci's blog: partnering with reality

    […] Did Tories spur petrol panic to avoid recession? (liberalconspiracy.org) […]





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