Oil Prices (Hansard, 22 March 2000)

§ The Minister for Science, Department of Trade and Industry (Lord Sainsbury of Turville)
My Lords, as your Lordships know, the oil market has been very volatile of late, with prices rising from 10 dollars per barrel of oil in February 1999 to over 25 dollars per barrel currently. The Government monitor the market closely because significant changes in oil prices could, if prolonged, impact adversely on the UK economy. However, whether oil prices are low or high, the Government remain committed to the operation of free, open markets, where price is determined by fundamentals and not by regulation or intervention.

§ Lord Ezra
My Lords, I thank the noble Lord for that Answer. However, the substantial increase in oil prices to which he referred has already had a serious impact on the international economy. It was one of the major factors which led the USA to raise its interest rates the other day, with more rises to come and possibly with similar action elsewhere. Bearing in mind the enormously adverse impact that the oil price increases had in the 1970s, have the developed countries since then produced strategies (both short and long-term) to deal with the possible recurrence of that situation? In particular, does the noble Lord recall that the International Energy Agency, of which the UK is a founder member, has as a specific remit: To maintain and improve systems for coping with oil supply disruptions"? I should like to ask what it has recommended in the present situation.

§ Lord Sainsbury of Turville
My Lords, so far as concerns our own economy, I believe that it is of interest that oil is far less important to UK industry in the year 2000 than it was in the 1970s. It is now mainly used for transport. In addition, energy intensity has fallen since the 1970s. Despite the significant rise in oil prices over the past year, that has resulted in a very modest increase—less than half of 1 per cent—in the RPI. I believe that it is also worth noting that on 6th and 7th March the price seemed to peak and we are now beginning to see it come down. Today, it stands at approximately 25 dollars per barrel. I believe that that indicates that the markets are probably anticipating that when OPEC countries meet on the 27th they will increase their production schedules. Therefore, either way, we are very far from a position where we need to intervene or to take regulatory action of the kind that I believe the noble Lord has in mind. I should add that it does not seem long since I answered a question at the Dispatch Box about what the DTI would do to help the oil industry to cope with very low prices.

§ Lord Elton
My Lords, surely the Government have taken a series of actions in relation to the rising price 269 of oil, culminating in yesterday's action in the Budget. Diesel fuel costs over 50 per cent more in this country than it does in the Republic of Ireland. That causes considerable distortions of trade across the Border.

§ Lord Sainsbury of Turville
My Lords, I believe that that is a separate, although rather interesting, question. Obviously, it relates to the tax issue. However, the tax increases which were announced yesterday are simply in line with the rate of inflation.

§ Lord Barnett
My Lords, as I do not have too many opportunities to congratulate the DTI, perhaps I may congratulate my noble friend on proposing to do nothing at all about the price of oil. Would he care to list, or perhaps place in the Library, those areas where the DTI has it in mind to interfere?

§ Lord Sainsbury of Turville
My Lords, I believe that that is an ever-decreasing list of areas.