HC Deb 08 June 1981 vol 6 cc1-3
1. Mr. Hardy

asked the Secretary of State for Energy if he will take further action to ensure that energy prices do not place industry in an uncompetitive position.

6. Mr. Michael Morris

asked the Secretary of State for Energy if he will take further measures to ensure that United Kingdom industry is on a par with EEC and United States industry in terms of prices for primary energy, including oil, gas, electricity and coal.

The Secretary of State for Energy (Mr. David Howell)

The Government are determined that United Kingdom energy prices should be as competitive as possible and, within the limits of economic energy pricing, will continue with all efforts to see that achieved. But our energy prices cannot be based on other countries' energy supply costs, nor can they be varied with movements in exchange rates and they must reflect market conditions in the United Kingdom.

Mr. Hardy

The Secretary of State's answer suggests that there has been some movement over the last eight or nine months, but does he fully understand the nature of this self-inflicted wound which is causing enormous disadvantages to a number of industries or sections of industry which are otherwise highly competitive internationally?

Mr. Howell

I acknowledge the difficulties in an era of high energy costs, but the hon. Gentleman overlooks the concessions that have been made. The present concession on gas pricing is valuable to customers taking firm and interruptible gas supplies alike. Large continental increases in gas supplies are imminent and there is a prospect of British Gas holding its contract renewal prices at levels where the disparities with the Continent will close. That will help industry. Other measures are being taken with electricity and that assistance should not be underestimated.

Mr. Morris

Is my right hon. Friend aware that the actions he has taken are greatly welcomed by British industry? Bearing in mind the fact that that took time to achieve, can he reassure British industry that in future there will be some proper means of monitoring and that we shall have action or a statement from his Department to ensure that we become more competitive in this vital area of energy costs?

Mr. Howell

We watch the disparities and comparisons closely. There are obvious disadvantages in taking snapshots each month when fluctuations in exchange rates can alter comparisons. I give an assurance that we shall continue to explore with the electricity supply industry every possible avenue available for curbing costs, although long-term comparison with the French industry is difficult because of its nuclear advantage. We shall continue to watch all aspects closely.

Mr. Tom Ellis

The Minister says that we cannot compare our energy costs with the costs of energy production in other countries. What multiple of costs of production of North Sea oil is represented in the price?

Mr. Howell

I am not sure that I follow the hon. Gentleman's question in detail. It would be wrong for us not to sell our precious North Sea oil resources at their full market worth. Our internal United Kingdom prices are determined by competition. Competition is the best servant of the customer. The present evidence that there are tight refining margins on oil products brings home the fact that competition is working.

Mr. Merlyn Rees

In view of the Secretary of State's answers, although not to the last question, what is the point of the second NEDO report that apparently is being undertaken on comparative prices?

Mr. Howell

There is not a second report. The right hon. Gentleman is not correct. It is proposed that there should be an authoritive update of the January situation in the autumn when we can take stock of the effect of the Budget concessions, the changes in the exchange rates and other international developments which may alter the situation considerably.

Mr. Skeet

My right hon. Friend must be aware that the price of North Sea oil is too high. Although BNOC has reduced the price by $2 a barrel, from $39.25, should not the price have come down by twice that amount to give advantages to industry?

Mr. Howell

The price of North Sea crudes is a matter for the oil companies and BNOC. They make their commercial judgments upon it. They have said that they intend to open negotiations for term contracts for the third quarter at a level $2 down on the previous quarter. That is their commercial judgment, and they must be left to work it out and carry it through.

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