OIL SUPPLIES (Hansard, 6 April 1948)

§ Mr. Erroll

Thank you for your Ruling, Mr. Speaker. I sincerely hope that when the time comes the House will give the necessary permission. We are entering upon a period of great seriousness in regard to oil supplies for Britain. For the first time in her history America is becoming a net importer of oil. She can use her immense dollar resources to attract such supplies as she requires from the oilfields of the world. In the face of this very serious situation, we have to secure our own supplies when we are short of dollars in what is not only a serious situation, but also one which is steadily deteriorating. The Economic Survey recently issued by the Government refers to this matter and says that there will he a period for us of very considerable shortage and difficulty. Those are strong words even for the Economic Survey.

Unfortunately, during his period of office the Minister of Fuel and Power has not given us any very striking evidence of his competence to deal with the matter of oil supplies. We know, of course, that he has been busy on nationalisation Bills and that oil supplies, except when it comes to rationing the ever-diminishing quantities, have had to take second place. I will give two specific examples of what is taking place. First of all, there was the coal-oil conversion scheme. That was started when the Minister's predecessor was in office, but he has continued it. Firms were urged to make rapid conversions of their plant from coal-burning to oil-burning. Many of those conversions were carried out speedily at the special request of the Minister. Now, barely 18 months later, many firms are being asked to convert back again to coal in view of the 129 shortage of oil and, incidentally, they are having to bear the cost of a double conversion.

An even more serious situation has arisen in regard to oil for ships' bunkers. There is no excuse here, because the Minister could have been warned by the deteriorating fuel oil situation for Britain of the difficulties which would very shortly arise in regard to oil for ships' bunkers. Nevertheless, it seemed to catch him unawares. It was well said at the annual meeting of the Chamber of Shipping two or three months ago, that it was not only the rising prices of oil for ships' bunkers but the uncertainty of securing supplies that was their great difficulty. One gentleman said that the outlook was sombre indeed. Some very striking figures were given regarding the cost of bunkering a Liberty ship on the round voyage from Australia via the Cape. The cost has increased since last October by no less than £5,500 to the immense figure of £18,000. That is the cost of the oil alone for the round trip. That is the way costs are going, and even with the increase in the prices, it is still very hard to know whether one can get the oil when one arrives in port. There has been very serious deterioration here and it seems that the time cannot be far distant when there will have to be some restriction on oil bunkering for ships.

Some of the difficulties facing increased oil supplies for Britain and for British ships are outlined in the Economic Survey, but an explanation of difficulties is not the same as finding a solution. I want to know what the Minister is doing to overcome the difficulties. I will outline some of the problems under three separate headings. First of all, there are the Middle East oilfields. I want to know whether we are really doing enough to get them into full-scale production. Would it not be a sound investment to spend dollars even on making special oilfield equipment available? Would it not even be worth spending dollars to obtain the machinery and other equipment? Every pound we spend in the Middle East oilfields will save dollars when the oilfields are in full production or, better still, will earn dollars or other hard currencies. It is worth while giving an over-riding priority to the factories of Britain to secure delivery of oilfield machinery and equipment to the Middle East oilfields.

130 The Iraq Petroleum Company have been doing valiant work over the last two years trying to double the pipeline from the fields at Kirkuk to the Mediterranean. They have been harassed by climatic and other difficulties but their greatest obstacle has been the slow delivery of supplies from Britain. Exports to these fields should have top priority even over the now popular textile drive, and that should be engaging the attention of the Government today. In another part of the Middle East there has been the lamentable spectacle of oil being pumped back into the field. The Minister recently referred to the fact that no less than one million tons of oil had been pumped back into the Anglo-Iranian fields in Persia owing to unbalance in the development of the field due to shortages of essential equipment.

The second great problem is that of tankers. Everybody knows that there is a shortage of tankers. It is referred to in the Economic Survey. Is enough priority being given to British tanker construction? Is the Parliamentary Secretary, who recently came from the Ministry of Transport, really making sure that his late Ministry is getting the tankers out of the British yards? Additional British tankers could carry dollar oil and thus earn dollar freights in addition to saving the dollars which we at present have to spend on hiring American tankers. I hope the Minister will not criticise the Americans in regard to their oil tanker policy. Many of their tankers were laid up after the war and it was not possible to release them for our routes because they were designed for the Pacific run and were not suitable for the Atlantic and other routes. I believe that in any case in their desire to help to relieve the situation, the Americans have released more tankers from carrying winter oil up the East coast of America and have made them available for foreign use.

The real bottleneck remains the question of oil refineries. The Economic Survey says that plans for new refineries will take years to mature and will be delayed. Surely that is one thing that ought not to be delayed. The provision of additional refining equipment ought to go ahead without any delay in view of the importance of oil both for us in Britain and for maintaining our balance of payments. The "Petroleum Times" in its issue of 131 13th March is rather more outspoken. In its leading article it says: Already … British refinery plans, announced long ago, are so behind schedule that no company will release a "progress report. That is a deplorable state of affairs, particularly as the sterling oil industry is making a contribution of about £100 million per annum towards the balance of payments by the oil it produces going to countries outside the sterling area. Surely in the field of refineries there ought to be no delay, particularly as much of the equipment is not of a specialised nature but could be manufactured in British factories and shipped over quickly. If only the priority were given and if only the urgency were appreciated by all those who can make the equipment for these refineries, things would go ahead much faster than they are going today.

For a nation to be short of oil can rightly be interpreted as a grave strategic weakness by any hostile Power. The shortage is quite obvious. What is not so obvious is the steps we are taking to remedy the shortage in this important field. There are great difficulties, but the public is entitled to know what is being done to overcome them. The Minister has been busy with nationalisation, and particularly with the nationalisation of the gas industry, but I hope he can now reveal a far-reaching and comprehensive programme which will satisfy Britain's future requirements.

§ The Parliamentary Secretary to the Ministry of Fuel and Power (Mr. Robens)

May I, by leave of the House, reply to the hon. Member for Altrincham and Sale (Mr. Erroll) and say that he has put forward his case with his usual charm and accuracy. He slipped up only when he talked about the incompetency of my right hon. Friend which, of course, I cannot accept in any circumstances, and when I have dealt with many of the points raised by the hon. Member, I hope he will see that a great deal has been done—indeed almost the impossible has been done—to deal with what is undoubtedly an extremely difficult situation. The hon. Member paid me the courtesy of advising me of a number of the points he intended to raise, and therefore I am able to give him a fairly full reply and one which I hope will satisfy him.

132 The hon. Member referred to coal oil conversion. I am certain that it is not his desire this evening to score political points on this important issue, and therefore I do not want to do so either. However, in 1946 when the question of coal oil conversion was first considered, he will recollect that there was a surplus of sterling fuel oil and an acute shortage of coal. Today we have a world shortage of fuel oil due to the enormously increased consumption throughout the world and, of course, we cannot accept responsibility for increased consumption in countries other than our own. The biggest quantitative increase, as the hon. Member indicated, has been in the United States of America, though from the point of view of percentage increase, the increase in this country and in other European countries has been higher. However, in fuel oil as in everything else to do with oil, the world tends to be knocked sideways by what happens in the United States of America, because that country not only produces but consumes two-thirds of the present world total oil consumption. Not only that, but the United States of America is actually consuming today more than the entire world consumption in 1938. Therefore, a small percentage variation in American consumption has a marked effect on the rest of the world.

What would the hon. Member have done if he had been in the position of my right hon. Friend; if he had been faced with those factors in 1946 of a shortage of coal and a surplus of sterling fuel oil? I think he would have done the commonsense thing and have said, "There must be conversion. The coal industry has to be given an opportunity of getting up its production capacity and, whilst we have fuel oil in surplus, we ought to use that fuel oil to save the coal because we want it for export in the quickest possible time." What did we do? We did not force coal oil conversion on to industry. The fact was that there was this great shortage of coal in industry as everywhere else and industries themselves, because they needed to keep their factories going, had an opportunity to get fuel oil to replace the coal they could not have. All that the Ministry did was to make an orderly conversion to fuel oil instead of a disorderly and chaotic approach. I am certain that if the Government had not 133 done something about coal oil conversion in an orderly way, private enterprise would have gone ahead itself, and it could not have been in the orderly way made possible by the arrangements of my right hon. Friend.

In the United States of America there is not the same relation between Government Departments and industry, but there they have gone in extensively for fuel oil conversion and they are in exactly the same position today as ourselves, that they are short of oil and have to hold up their fuel oil conversion. After all, it is a changing situation and one has to be flexible about these things. Indeed, one would not be an administrator if one were merely to set a hard and fast line and never deviate from it. The circumstances of the case must be taken into consideration at the time and then, with the best advice, what resources there are must be utilised. So it was a little unfair, and not in accordance with the usual line of the hon. Member, to reflect upon the competency of my right hon. Friend, and I think it was just a prelude to a little wordy battle and that he did not really mean it. I am certain that the action of my right hon. Friend was right at the time, and has proved to be right. The changing situation of the world has made a marked difference and, as the hon. Member knows, my right hon. Friend will be making a statement shortly on the problem of fuel oil conversion.

It is perfectly true that the costs of fuel oil have increased and my right hon. Friend replied to a Question on this matter put by the hon. Member for Bury (Mr. W. Fletcher), pointing out that the increase in price was due to the rise in the world price of oil which this Government do not control and that it must be accepted as a normal commercial risk. The hon. Member also referred to Middle East oil and to oil being pumped back. It is the fact that oil has been pumped back at one of the Middle East oilfields, but it was not because of the bad layout of the field or due entirely to the incompleteness of the plant and machinery at the field. It was due, in the main, to the shortage of tankers to lift that oil, and this re-cycling process will be stopped as soon as the tankers are available to lift the extra oil and bring it to the refineries or wherever we want it taken. In any case a certain amount of re-cycling must 134 inevitably take place. Ships at sea cannot run like railways because of the hazards of weather and problems of loading and unloading. So there are times when tankers tend to get bunched, and if that happens and tankers are not available to take the oil, there must be some recycling. However, I can assure the hon. Member that as soon as tankers are available to lift the oil, it will be dealt with. I give no guarantees, but I do not think the time is far off when from all normal points of view re-cycling should stop, though there always will be re-cycling when there is bunching of tankers.

With regard to the development of the Middle Eastern pipelines, obviously the world shortage of steer has a great effect upon them, for refineries and pipelines are large users of steel and pipeline transportation of oil to the Mediterranean is far more economical than tanker transportation. I cannot express an opinion as to what will happen finally in the Middle East, but it will be readily recognised that there is an economic aspect of this problem. The problem of tankers is one of building, and the hon. Member is entitled to ask what is being done about increasing the tanker fleet. This country lost two million deadweight tons of tanker shipping during the war. Yet by the middle of 1947 these severe losses had been made good and, by the beginning of 1948, our tanker fleet had reached the figure of 5.1 million tons or 600,000 deadweight tons more than in mid-1939. Dry cargo shipping, on the other hand, will not reach its pre-war level before 1951.

Those figures are clear evidence of the very great effort which has been made by the oil and tanker companies to provide sufficient tonnage for their growing requirements. Indeed, it is an accomplishment. Recently oil companies have placed large orders for delivery over the next two or three years. At the end of January, 650,000 dead weight tons of tankers were under construction in yards in the United Kingdom, and of these 260,000 dead weight tons are expected to be completed in 1948. The proportion of tankers in the United Kingdom building programme is steadily increasing, and in January the tankers represented 22 per cent. of the total tonnage under construction compared with 14 per cent. a year ago. This proportion is likely to increase still further. 135 The planning of the tanker building programme rests initially, not with the Government, but with the oil and tanker companies, which are private enterprise. The Government would be glad to see an increasing flow of orders to meet the demands of the growing trade, although it must be admitted that the scope for more tanker building in the immediate future is limited because the yards are fully booked up, not only for tanker orders, but for other types of merchant ships.

In regard to bunkers, owing to the very great increase in the general demand for oil in 1947, and further prospective increases, the oil companies found they had not enough oil to meet the needs of everyone, and reached the conclusion at the end of 1947 that they could not lay contracts for 1948 with all the customers they had served in the previous year. They have, however, collaborated with His Majesty's Government in ensuring a sufficient supply of bunkers to keep the Merchant Navy in full operation, and, in-so far as the bunker shortage had been due to lack of tankers, the situation has been relieved by a scheme worked out by the shipping industry and the coal industry for taking bunker supplies at places nearest the sources of production.

The hon. Gentleman also dealt with refiner capacity and referred to the Economic Survey which clearly shows the general overall position. That Report says very specifically: They will however, take some years to mature, and may be delayed in view of the current shortage of steel. 136 I can assure the hon. Member, and the House, that no one is more anxious than we at the Ministry of Fuel and Power to do everything that can be done to assist the companies with their expansionist schemes, but, in the present difficult circumstances, the allocation of steel to industries which can produce a quick return in foreign exchange cannot be overlooked, in spite of the fact that the allocation of steel for the expansion of British oil companies' projects is probably one of the most productive uses to which steel can be put for the longer term export assets. In any case, the details of companies' schemes are submitted to my right hon. Friend in confidence. I cannot at this Box disclose those details without consultation with the companies concerned. I can assure the hon. Gentleman, and the House, that the schemes of the companies are very imposing, and that my right hon. Friend will do his utmost to forward them.

I hope I have dealt fully with all the points raised by the hon. Gentleman and I hope that, having heard this reply, he will at least be satisfied that my right hon. Friend is doing everything possible to deal with this very difficult problem of oil and that it is not being neglected because of the other work and responsibilities in which my right hon. Friend has also a special interest.