Lord BRUCE of DONINGTONMy Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
§ The Question was as follows:
§ To ask Her Majesty's Government what steps they propose to take in the event of a further increase in the price of oil by the OPEC countries to ensure that prices of oil products to the public are held at their current levels until stocks acquired prior to such an increase are exhausted.
§ Lord JACQUESMy Lords, the United Kingdom prices of the oil companies and their distributors are subject to the Price Code in exactly the same way as the prices of other manufacturers and distributors.
Lord BRUCE of DONINGTONMy Lords, will my noble friend bear in mind that, according to the Economist publication, the oil companies are at the moment building up very substantial stocks of oil in anticipation of a possible price increase in October? Does my noble friend agree that it will be necessary for the Government's machinery, which is at their disposal, to keep a very careful eye on these matters in order to ensure that undue burdens are not put upon the consumer?
§ Lord JACQUESMy Lords, I can assure my noble friend that the Government are fully alerted to this position. But I would direct his attention to paragraph 42 of the Price Code which states:
Any company in pricing which has consistently used the replacement cost for raw materials is at liberty to continue to do so. But if at the end of the quarter it has made profits in excess of the reference period profits 198 it is required by the Price Commission to use this surplus either to reduce prices or to delay any increase in prices.If the noble Lord refers to page 77 of the latest Report of the Price Commission, he will find figures to support the point I have made.
§ The Earl of ONSLOWMy Lords, is the noble Lord aware that there is at the moment a glut of petroleum products? Is the noble Lord further aware that normally when there is a glut prices fall? Is he also aware that the prices of oil, in true value, have fallen quite substantially since October or November 1973? May I ask what plans Her Majesty's Government have in mind in the event of the price of Middle Eastern crude falling below the economic cost of landing North Sea oil in Scotland or England?
§ Lord JACQUESMy Lords, that is another question, and if the noble Earl puts it on the Order Paper I shall do my best to answer it.
§ Lord MOLSONMy Lords, are we to understand from the reply given by the noble Lord that the Price Code gives adequate consideration to the importance of taking into account the replacement of stocks when prices are rising in an inflationary period? Also, will the Government agree that basing prices on historic costs is largely responsible for the lack of working capital in British industry at present?
§ Lord JACQUESMy Lords, taking the latter point first, I should have thought it was, until the Chancellor made the very important tax concession on stocks. I think that must be taken into account. Paragraph 42 of the Price Code covers the point about the working capital, provided there has been consistency.
Lord BRUCE of DONINGTONMy Lords, arising out of my noble friend's previous reply, is he aware that on a previous occasion when there was a quadrupling in the price of oil the oil companies in this country made thousands of millions of pounds out of their then existing stocks, and that it is simply no case to plead that these are largely paper profits arising from the appreciation of stock values? Will my noble friend take steps to ensure that the public are protected in this matter if there is an increase in the future?
§ Lord JACQUESMy Lords, I think the reply to that supplementary question is in two parts. First, I would ask my noble friend to bear in mind that only a tiny fraction of the profits of the international oil companies are made in the United Kingdom, and in the case of B.P. it is only 10 per cent. Secondly, I would refer him to the Report which I mentioned. If he looks at page 77, he will see there that while the profits of the oil companies in the first quarter of 1974 were 162.5 per cent. of the reference period, in the second quarter they were only 62.2 per cent. There was a loss in the third quarter, and in the fourth quarter they were only 13 per cent. of the reference period. That shows that the Price Commission had done its job remarkably well.
Lord HAWKEMy Lords, if the noble Lord opposite wishes to deny the oil companies any profit, how are they to provide facilities to drill for more oil?
§ Lord JACQUESMy Lords, we are not trying to deny anybody more profit. We are trying to keep profits at a proper level.
§ Lord DAVIES of LEEKMy Lords, is my noble friend aware that the accountancy of multi-national firms is beyond mere elementary arithmetic? Is it not time that the balance sheets of such companies were gone into in depth internationally?
§ Lord JACQUESMy Lords, perhaps I may say that even the accounts of companies which are not multi-national are sometimes beyond most of us.
§ The Earl of ONSLOWMy Lords, as the noble Lord was prepared to answer questions about the accounts of multinational companies, which seem to be much further from the Question on the Order Paper than the question I asked, perhaps he could be inclined to lean his mind towards answering my question.