HL Deb 02 October 2000 vol 616 cc1126-8

2.46 p.m.

Lord Ezra asked Her Majesty's Government:

What are the respective roles of the European Commission and the International Energy Agency in the light of the current high oil prices.

The Minister for Science, Department of Trade and Industry (Lord Sainsbury of Turville)

My Lords, both the European Commission and the International Energy Agency provide opportunities for Ministers and officials from all member states to discuss experiences and exchange information on issues relating to the oil market. The European Commission has no specific remit on oil prices but co-ordinates member state discussions on a wide range of areas from energy supply security to competition in the motor fuel sector. The International Energy Agency's objectives are to provide independent analysis and factual information on crude and petroleum product markets, to maintain a system for coping with a major oil supply disruption and to maintain contact with non-members and international organisations on energy developments.

Lord Ezra

My Lords, I thank the Minister for that information. Does he agree that volatility in oil prices is likely to persist and will continue to cause serious disruption? In those circumstances, does he agree that the Government, in conjunction with our partners in the EU and the IEA, should consider longer-term solutions than the emergency measures now being contemplated? Should not such solutions include a serious effort to encourage the use of alternative fuels in the transport sector, such as natural gas and electricity, for which the technology has been fully developed? That would have considerable climate change advantages and a suitable regulatory framework would be needed to encourage such developments.

Lord Sainsbury of Turville

My Lords, crude oil prices are likely to remain volatile. There are no obvious long-term solutions that would prevent such fluctuations, particularly as in this case the problem is caused by particular disruptions on the product side as well as the imbalance between demand and supply—which obviously one can do something about. It goes without saying that in the long term we must continue to develop alternative technologies and sources of energy, because that creates greater diversity, which is essential.

Lord Skelmersdale

My Lords, did the Minister see a graph on this subject in the Financial Times a couple of weeks ago? It showed that at the beginning of each recent decade—1969–70, 1979–80, 1989–90 and today—there has been a sudden rise in the wholesale price of oil. Has his department done any analysis to determine why that happened—he has explained today's hike, but not previous ones—and, more importantly, why the price subsequently came down?

Lord Sainsbury of Turville

My Lords, I am afraid that the answer is very simple, as it is on almost all such questions about supply and demand. This House will understand that with a commodity such as this, which can be traded and where supply and demand shift, this issue will arise constantly. It is interesting that in this House not more than 18 months ago we were talking about low oil prices. Many people made the point that we had perhaps entered a new era of low oil prices. It is interesting that today people are saying that we are entering a period of very high oil prices. The reality is that over that period there have been ups and downs relating to supply and demand and no fundamental change has taken place in the underlying structure of that particular industry. Therefore, I believe that this issue does not require more than a simple analysis of supply and demand.

Lord Haskel

My Lords, the Opposition have suggested that 3p should come off the price of petrol. Does the Minister believe that that is a suitable response to the price of oil?

Lord Sainsbury of Turville

My Lords, Mr William Hague made a very good point on that particular issue when he said on 13th September 2000: We would not cut taxes today because there has been a protest yesterday. You can't run the country like that". Apparently, that policy lasted about one week.

Lord Howell of Guildford

My Lords, perhaps I may return to the original Question. I was a little puzzled by the Minister's description of the work of the International Energy Agency. It is an excellent organisation and one which a long time ago I had the privilege of chairing. It co-ordinates within the OECD all the interests of the oil-consuming countries, including all the European countries. Can the Minister explain more clearly what European Union involvement brings to the party and what value it adds? From the reports that we have had it seems that the pronouncements from the European Commission have rather destabilised the situation. Is it really helpful to have this fifth wheel on the coach?

Lord Sainsbury of Turville

My Lords, I believe that one must be clear that the International Energy Agency remit is restricted to four particular areas: co-operation on energy conservation and alternative energy sources; information on international oil markets; co-operation with oil-producing and oil-consuming countries to develop stable international energy trade; and planning against risk or major disruptions. I do not believe that there is consensus within that body as to any action that it should take on market carnet. However, as I explained at the beginning, the EU has very little remit on this issue other than that which comes from the question of the directive relating to countries holding supplies for emergencies.

Lord Islwyn

My Lords, particularly in the current situation, would it not be helpful if Iraq were brought back to full production? Can the Minister confirm that America is now buying Iraqi oil hand over fist, albeit through third parties?

Lord Sainsbury of Turville

My Lords, clearly anything which increases the supply of oil will help this particular situation. However, whether that is desirable is, of course, another question.