§ 11.18 a.m.
§ Lord BALFOUR of INCHRYEMy 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 whether, in the interest of the balance of payments, it is necessary to sell all North Sea oil at prevailing OPEC world prices; or whether they would consider some price differential for oil destined for United Kingdom consumption which, while remaining profitable, would at some lower figure aid British industry and transport.
§ Lord STRABOLGIMy Lords, the Government do not believe that differential pricing of North Sea oil to domestic consumers would be a desirable way of distributing the benefits from oil among the British people. It would be contrary to the Treaty of Rome, since it would distort competition within the EEC; and it would lead to a misallocation of resources, and result in the wasteful use of our national oil reserves. North Sea oil consumed in the United Kingdom will provide a balance of payments benefit 1305 in the form of import savings. This benefit will naturally be related to prevailing world prices and will be independent of domestic pricing policy.
§ Lord HARMAR-NICHOLLSMy Lords, does not the noble Lord think he is foresaking common sense for neatness in giving that Governmental Answer? It is clear that it is home industry that needs some help, if that is possible, in order to he able to compete with other countries. This seems to be a way, by utilising our own resources, of giving a slight benefit to ourselves; and we can help industry which, in the long run, will he helpful to the whole nation.
§ Lord STRABOLGIIf oil were available more cheaply to industry in the United Kingdom than in countries which compete with us in world trade, British goods would be given a competitive advantage. But passing on the benefits of cheap oil would be tantamount to selling our oil abroad at less than its proper market value.
§ Lord BALFOUR of INCHRYEMy Lords, may I ask the Minister whether his reply does not mean that Britain must tag along behind the price levels decided by the OPEC countries, which prices will he based on the enrichment of their own territories and not on world considerations for trade? Would it not be wise to consider some differential so that British industry should have a fair chance in relation to world prices of oil?
§ Lord STRABOLGIMy Lords, a better distribution of the benefits from oil is obtained if it is priced at its full market value and taxed accordingly. The fiscal regime established by the present Government will, we believe, ensure that the British people will receive a fair share of the benefits from our national oil resources. As regards OPEC prices, the prices for North Sea oil are determined by the companies in line with world market prices. Her Majesty's Government have an interest in ensuring that North Sea oil is priced at its full market value.
§ Lord HALEMy Lords, could the noble Lord say when the conclusion was reached that the fixing of prices by OPEC 1306 was an accurate method of assessing the market value or the market shortage? Would the noble Lord also say what steps the EEC are now taking against Saudi Arabia for undercutting the prices of other countries, or against the other countries concerned about over-pricing Saudi Arabia?
§ Lord STRABOLGIMy Lords, I did not say that our prices are governed by OPEC. There are oil producers other than the OPEC countries.
Viscount ST. DAVIDSMy Lords, would the noble Lord not confirm that, unless OPEC keeps prices up, the difficulties of extracting oil from under the North Sea would mean that in fact it would become uneconomic to do so?
§ Lord STRABOLGINot necessarily, my Lords. A reduction in oil prices could also have its compensations for the economy. Over the period that we remain net importers our balance of payments would benefit, and even thereafter there could be gains from a general increase in world trade. North Sea development prospects depend more on the longer-term prospects for oil prices than on short-term fluctuations.