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Oil Prices

Volume 449: debated on Wednesday 19 July 2006

To ask the Chancellor of the Exchequer what effects his Department's econometric model predicts of a sustained $10 per barrel rise in the world oil price in each of the five subsequent years compared with a base forecast on (a) gross domestic products (GDP), (b) GDP growth, (c) consumer price inflation, (d) the unemployment rate, (e) the employment rate, (f) Government borrowing as a percentage of GDP, (g) policy interest rates, (h) balance of trade as a percentage of GDP, (i) the current account of the balance of payments as a percentage of GDP, (j) public debt at end year as a percentage of GDP, (k) the effective exchange rate and (l) the real effective exchange rate; and what other economic assumptions are made in each case. (86640)

The effects on the UK economy of a sustained $10 rise in oil prices would depend on the factors driving oil prices—for example, the extent to which prices increased due to demand pressures or supply constraints.

The Chancellor of the Exchequer announced in the Budget that, because of continuing oil market volatility, the annual inflation-only increase in main fuel duties would be deferred until 1 September 2006.

Oil has been trading in recent weeks in a range of $66-$78 per barrel. The risk of oil price volatility remains high, and the Government will not therefore go ahead with the planned inflation-only increase in main road fuel duties on 1 September—and related increases for rebated oils, biofuels and road fuel gases—and will review the position again at the time of the pre-Budget report.