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Oil Consumption

Volume 987: debated on Thursday 3 July 1980

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asked the Secretary of State for Energy what is his estimate of the effect of the rise in the price of oil since 1 July 1979 on the consumption of oil; and by how much further consumption would be reduced if the price rose another 50 per cent. in real terms.

The rise in the average level of oil product prices in the United Kingdom since July 1979 has been about 5 per cent. in real terms. The effect on oil consumption has been correspondingly small, amounting to 1 or 2 per cent. of the 15 per cent. reduction in demand which occurred in the first half of 1980 1980 are based on a survey of some 900 large industrial consumers. These source differences must be considered in any comparison made between the two sets of data.Fuel prices to domestic consumers vary according to location and quantities consumed and, in the case of coal, individual merchants. Table 2 gives an average price for coal in the Grimsby area and a unit price for gas and electricity for consumption of 400 therms per annum and 5000 Kwh per annum respectively in the same town.In regard to the final part of the question I can mention that the price of fuels tends to follow the price leader which at the present time is oil. The market mechanism, if allowed to operate, ensures that in the long run, the cost and price of fuels at the margin are equal after due allowance has been made for differing costs of distribution effciency in use, convenience etc. For various historical reasons these conditions are not being met by today's fuel prices.compared with the same period of 1979. Studies would suggest that a further price rise in real terms of 50 per cent. would, all other things being equal, result in a reduction in consumption of between 10 and 25 per cent. in the short term, with additional long term effects.