HC Deb 19 May 1980 vol 985 cc7-9
6. Mr. Cadbury

asked the Secretary of State for Energy whether he will make a statement on the implications for future oil supplies of recent developments in the Middle East.

Mr. David Howell

We expect the market to be roughly in balance this year, even allowing for some further production cuts by OPEC. But the balance is fragile and could be upset at any time, for example, through political developments in producing countries.

Mr. Cadbury

My right hon. Friend will be aware that Saudi Arabia is producing an extra 1 million barrels of oil a day to help to stabilise the world price of oil. Is he confident that this extra oil will continue to be produced beyond June when that commitment officially comes to an end?

Mr. Howell

There can be no certainty about levels of world oil production. Saudi Arabian production has been maintained at this higher level for a year now, and that has obviously contributed towards maintaining the supply-demand balance that I have described and offsetting to some extent, but not entirely, the upward drive from nerve buying for oil, even though the demand is not there, simply to increase stocks. The Saudi Arabian extra 1 million barrels of oil a day have helped the matter, and I hope that that will be maintained.

Mr. Dalyell

Does the Cabinet agree with those commentators in the Royal Institute of International Affairs and elsewhere who see a real danger of action against Iran involving reaction by the Saudis and other Arabs who, in the final analysis, might show solidarity with Iran?

Mr. Howell

I am not sure that that is an immediate question about oil, although it is related to oil since the availability of oil is near the heart of the Middle East and Iranian problems. The general answer that I must give is that there are grave dangers in the Persian Gulf and in the oil-producing areas all the time. We must plan our supplies and energy future on the assumption that there will be political upsets and constant upward pressures in the oil market.

Mr. Sproat

In view of the uncertainties and instability in the Middle East, what new measures does my right hon. Friend have in mind to encourage even more exploration in the North Sea?

Mr. Howell

The new measures that we have in mind are strongly reflected in the seventh round of licences, which has recently been announced and for which applications will be taken and awards made towards the end of the year. I am confident that with this new round and with additional incentives to explore in existing territory we shall see a substantial move forward in exploration. In fact, we have already seen a halt to the years of decline in exploration drilling. The mood is changing, and I think that we shall see a continued improvement in exploration.

Mr. Ashton

Is the Minister aware that although it takes five weeks for a tanker to get from Saudi Arabia to Britain, it took the oil companies two days only to put up the price of oil last week? The Saudis put up the price by 2½p a gallon approximately on Thursday and the oil companies put up the price by 4p on Saturday. What action does the Minister intend to take to end this closed shop of big brothers who are holding the motorist to ransom?

Mr. Howell

I do not know whether the hon. Member knows the North of England. If he does, he will know that in a number of areas there is strong competition at the pumps, and that competition is taking pence off the price of a gallon of petrol at the pump. The hon. Gentleman will realise that if he drives around his own constituency. The recent price rises announced by some companies—though not all—are not connected with the Saudi Arabian oil price change. They reflect the higher cost of oil working through the pipeline all the time. Those are the factors that are driving up the price, and we in Britain cannot be insulated from the higher price of energy.

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