HC Deb 12 February 1951 vol 484 cc36-9
The Parliamentary Secretary to the Ministry of Fuel and Power (Mr. Robens)

The House will recall that, towards the end of 1949, when the dollar reserves of the sterling area were very low, the Government decided that action must be taken to reduce the dollar expenditure on oil. That was then of special importance, because expenditure on oil was the largest single item in the dollar drain. It was, indeed, then estimated that the sterling area's net dollar outgoings on oil would be 625 million dollars in the year 1950.

The British controlled oil companies expected to have in 1950 more oil than they needed to supply their established markets. It was, therefore, decided that the United States companies, who were, of course, anxious to maintain their business in the sterling area, should be required to use this oil in place of oil which they would otherwise have imported from dollar sources. This policy became known as "substitution." When we explained the plan to the United States companies, we added that we would, of course, be very ready to consider any other proposals which would give us the same dollar saving that we hoped to get from "substitution."

We have been discussing such alternative proposals with the United States companies for several months. The object has been to find out how far, and by what methods, the United States companies could reduce the dollar cost of the oil which they supply to the sterling area, and so bring such costs into line with the average costs of British companies.

As hon. Members will recall, an agreement was made with the Standard Vacuum Oil Company in April last year, and another with the California Texas Oil Company in July. In May, agreements were made with the Standard Oil Company (New Jersey) and with the Socony Vacuum Oil Company, on the disposal of their share of Iraq oil. I am glad to tell the House that we have now made further agreements with these two companies which have settled all the other issues that were outstanding between us.

As the result of these agreements, the dollar content in the oil distributed by these companies in, or through, the sterling area should be progressively reduced to the level of the average gross dollar content of oil produced by British companies. We have, in consequence, agreed that substitution should end at once, and that, in their trade in the sterling area, the Jersey and Socony companies should not be subject to any restrictions which do not apply to British companies. These new arrangements will, of course, supersede those which we made when petrol rationing was removed.

We calculate that substitution and the agreements which partially replaced it in 1950, saved us about 45 million dollars on the oil supplied in that year to the sterling area by the United States companies. The dollar savings on this oil will progressively increase; by 1954 it should be about 250 million dollars a year. This large saving will not be wholly due to the policy of substitution, or to the various agreements which we have made with the United States companies in the last 12 months. On the contrary, a large part of it will result from action which the United States companies had themselves already proposed.

I should further explain that our present dollar expenditure on oil supplied by the United States companies will not be reduced by the full amount of 250 million dollars; the consumption of oil in the sterling area is constantly increasing, and the United States companies will, no doubt, share in this expanding trade. But, if present expectations are fulfilled, and if there is no material change in present prices, we should get in 1954 a third more oil than we got in 1949, and at a dollar cost of a quarter less.

These two new agreements have, as I have said, brought the policy of substitution to an end. I hope we can, therefore, now regard the differences of opinion which there have been on this difficult problem of sterling and dollar oil as having been settled.

Hon. Members may also like to know the general dollar outcome of our oil transactions in 1950. Provisional estimates suggest that our net dollar outgoings were under 500 million dollars, instead of the 625 million which, as I have said, was the estimate a year ago. I have already referred to the savings in the dollar cost of the oil supplied by the United States companies. Substantial savings also resulted from the combined efforts of the British companies to economise in dollar expenditure and to increase their dollar receipts.

I am sure that hon. Members in all parts of the House will wish me to express their appreciation of the sustained and public-spirited efforts made, both by the United States and by the British companies, to lighten the heavy burden on our balance of dollar payments due to oil.

Mr. Geoffrey Lloyd

Since this represents the decisive abandonment of the Government's policy of substitution in favour of the policy of negotiations with the oil companies, which was often recommended on this side of the House, would it not have been better to have adopted this course much earlier, and, incidentally, have enabled us to bring petrol rationing to an end much earlier? Does not the Parliamentary Secretary realise that the essential basis of all these policies is the enormous increase of production, amounting to 100 per cent. over the pre-war production, of the British private enterprise oil companies?

Mr. Robens

No, Sir. This is a matter on which there may well be a difference of opinion. We did not like substitution any more than the American oil companies, but the dollar position was such that the Government decided that an immediate saving on oil was absolutely essential. Members will appreciate that the negotiations preceding agreements of the kind I have just announced are long and complicated, and we could not think of any other measures which would lead to an immediate dollar saving as great as that obtained by substitution.