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Oil Prices

Volume 476: debated on Thursday 22 May 2008

At the moment, of course, it is difficult to estimate what the price of a barrel of oil will be next week, let alone in 2020, as the hon. Gentleman seeks to persuade me to do. Obviously, our Department, while not forecasting oil prices, does publish future price assumptions going forward to 2030. We obviously regularly review these and consult on them, but he will appreciate that the huge increase in the price of a barrel of oil has caught the whole world by surprise and we are in, frankly, difficult and uncharted waters.

It certainly caught the Minister’s Department by surprise, because a parliamentary written answer that he gave me last week showed that his Department thinks it will be $70 a barrel in 2020, so perhaps I can help him with his own figures, which suggest that he may be rather out of touch. Oil consumption is increasing dramatically, not least with China, India and other countries coming on fast. We have more difficulty in getting oil out of the ground—

Order. It is not for the hon. Gentleman to make a speech at this stage; it is a supplementary question. Does he wish to put a supplementary question?

Thank you, Mr. Speaker. The question is this: given the ludicrous forward projection that I referred to, will the Minister revise his figures, because otherwise his foreign policy, his energy policy and his transport policy will be completely skewed?

We make a number of assumptions—we have a number of scenarios—going forward. The hon. Gentleman has quoted one. The day that I have to rely on him for statistics is the day that I go somewhere else for my entertainment.

Notwithstanding that question, there are serious issues to consider, and serious people in the House want to address them. Oil prices are going up for a whole range of global factors—difficulties in Africa, Iraq and so on—and we need to think long and hard about them. We are discussing them with oil producers, as I did recently at the International Energy Forum. These are not easy issues. Frankly, simple questions do not help a serious debate.

My hon. Friend must realise that he can estimate just how much profit the oil companies are making. How much do we expect them to put on to the price of a gallon at the pumps for diesel or petrol when we know that they are exploiting the situation from the cartel position that they have got themselves into? When will we deal with that?

Obviously, considerable revenues go to Her Majesty’s Treasury as a result of those oil prices. I repeat that we are dealing with very difficult global circumstances, and the situation is not peculiar to the United Kingdom or Europe. We are discussing the matter with oil producers. Also, of course, moving forward, it will be an incentive to introduce new cleaner and greener car technologies, which are less reliant on traditional fuels. In a sense, that will be a useful side effect of this difficult situation.

The people of Northampton in particular have been caught by surprise by increasing fuel prices. When we look around the midlands, we find that they are by far the most expensive—more expensive than Nottingham, Leicester, Milton Keynes and Peterborough on average. Indeed, a number of MPs, led by the MEP Chris Heaton-Harris, wrote to the Office of Fair Trading to ask whether it could do anything. I ask the same of the Minister, because Northamptonshire in particular suffers from sizeably high prices. Will he help us to ensure that we can compete fairly on that basis?

If specific issues are affecting Northamptonshire, and it sounds as though they are, I shall be happy to meet the hon. Gentleman to understand them better.

My hon. Friend will be aware that oil prices reached $130 a barrel this week. The projection is that by the end of the year they could be $150 a barrel. Given that there is an irrational indexation between oil contracts and gas, so that gas prices are pulled in train behind oil prices, does he agree that it is time to look at how we decouple gas prices from oil prices? There is no rationality for that indexation. All that it does is make huge profits for the energy companies.

I rather agree with my hon. Friend that the whole issue in the gas industry—gas production and gas fields—is often, although not always, different from that in the oil industry. That linkage is not rational, but as he knows, because he has great expertise in this area, it is global and is not peculiar to the United Kingdom or Europe. However, we need to work hard to understand that linkage and to see whether there are ways of decoupling it. At a time of huge increases in wholesale prices for fossil fuels—coal, of course, as well as oil and gas—irrational linkages do not help us.

Yesterday an independent industry expert predicted that the price of oil could reach $200 a barrel over a 10-year period. Will the Minister explain how the Government intend to help businesses that will be severely affected in the short term, while also providing a long-term strategy?

Obviously matters involving tax, which is a factor here, are for the Treasury rather than for our Department, so I will not trespass on that territory.

Globally, we do need increased production, and many of us have had talks about that with some of the key players. Bodies such as the International Energy Forum enable producers and consuming countries to meet. An estimated 80 per cent. of oil resources worldwide are now in the hands of the national oil companies rather than the independent players, and, as the hon. Gentleman will appreciate, that involves a good deal of difficult geopolitics.

In the long term, we need increased production, and yes, the price of a barrel of oil being sky-high will encourage that. As for short-term and medium-term measures, we must all put more emphasis on energy efficiency in business, in industry generally, and indeed in our own households. We need to work harder to build on the good programme that we have to increase the number of new technologies, so that we can constrain energy demand or even reduce it in the future.