Brown holds fuel crisis meeting with oil industry chiefs


9.45am BST



* Jenny Percival, Nicholas Watt and Larry Elliot
* guardian.co.uk,
* Wednesday May 28 2008

Gordon Brown and Alistair Darling are meeting oil industry chiefs today as pressure mounts over soaring fuel prices.

Writing in the Guardian ahead of the talks, the prime minister said there was no quick fix to the "third great oil shock".

He called on nations to unite to stabilise the price of the commodity, which has increased from $10 a barrel a decade ago to $135 today.

And he said that the UK will argue that a global strategy to tackle the impact of higher oil prices will be put at the top of the agenda at the next meeting of the G8 group of industrialised countries.

Brown will use this morning's meeting with energy chiefs in north-east Scotland to attempt to secure a higher output from the UK's declining North Sea oil fields.

Downing Street said the meeting was a private one, although further details may be released later.

The talks come the day after hundreds of lorry drivers poured into London to demand a cut of up to 25p a litre in fuel duty.

They are under pressure to respond to the rising price of fuel by scrapping a 2p increase in fuel duty, due to come into force in October, and to reverse a £200 increase in vehicle excise duty on environmentally unfriendly cars bought during the last seven years.

Cabinet ministers paved the way yesterday for a change to vehicle excise duty.

John Hutton, the business secretary, said the government had to be careful to avoid "hammering people", while Jack Straw, the justice secretary, held out the possibility of a change when the chancellor, Alistair Darling, delivers his pre-budget report in the autumn.

In his article today, Brown today makes clear that he understands the pain felt by consumers. "I know that families up and down the country are feeling the impact in the cost of filling up at the petrol station and in the rise in gas and electricity bills," the prime minister writes.

Any change would be seized upon by opposition parties as the government's second climbdown on tax policy in a month; in the run-up to the Crewe and Nantwich byelection, Brown sanctioned a £2.7bn tax giveaway to soften the impact of the abolition of the 10p starting rate of tax. Downing Street and Treasury sources indicated last night there were no imminent plans to cut fuel and car duties.

But ministers are keen to show flexibility on fuel duty and that they are heeding the concerns of backbenchers and ministerial aides who have voiced concerns about the increase in vehicle excise duty on environmentally unfriendly cars.

If fuel prices remain high, the chancellor is looking seriously at freezing the fuel duty increase on October 1. This would cost £550m if delayed until next spring.

The special car tax increase is not due to come into force until April 2009, which gives the chancellor until next year's budget to announce any changes. Labour MPs are keen to remove the retrospective element of the increase, which applies to cars bought after 2001.

Hutton made clear yesterday that the government was aware of the criticisms when he appeared on Radio 4's Today programme. "We've got to do the changes in a way that inflicts the least damage on people's personal family budgets and incomes," he said. "We're trying to get this balance between encouraging choices to go green but not hammering people."

Straw said people should wait for the pre-budget statement in the autumn. "The chancellor and the prime minister have said quite explicitly that we are listening to public concerns about this."

Brown will make clear today the government understands the impact of $135-a-barrel oil prices when he pledges global and domestic action to tackle the problem.

But in the Guardian article, he stressed there was a limit to what the government could do alone. "Our goal, that Britain becomes a low carbon economy, is now an economic priority as well as an environmental imperative." He said the best long-term solution for consumers and the environment would be a radically different energy policy.

"If we are to ensure a better deal for consumers, energy security and lower greenhouse emissions, Britain, Europe and the world will have to change how we use energy and the type of energy we use," he said.

Without a global push to limit demand and become more energy efficient, prices would remain high, he writes.

"As every country faces these increased costs, it is now widely understood that a global shock on this scale requires global solutions," he says, urging Opec to come clean about its reserves of crude and for the G8 summit in Japan in July to look at ways of cutting demand and boosting alternative sources of supply.

But Vince Cable, the Liberal Democrat Treasury spokesman, rejected suggestions that the Opec countries should increase oil production to help tackle rising oil prices.

"The things that are holding back Opec production have nothing to do with cartel behaviour," he told BBC Radio 4's Today programme, adding that "the problem at the moment is world demand is still rising rapidly".

He said there is no capacity to increase production, adding: "Appealing to the oil producers to produce more is a empty gesture."

Cable, a former oil industry economist, said he would wait before postponing the 2p increase in fuel duty.

"We have to wait until the autumn, we have to see what conditions are like," he said.
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This article was first published on guardian.co.uk on Wednesday May 28 2008. It was last updated at 10:07 on May 28 2008.



We must all act together

The oil crisis is a global problem requiring global solutions. And the Opec cartel has to play its part

* Gordon Brown
*
o Gordon Brown
o The Guardian,
o Wednesday May 28 2008
o Article history

The global economy is facing the third great oil shock of recent decades. The oil price, just $10 a barrel a decade ago, has reached $135, pushing up the price of petrol and domestic heating as well as contributing to higher food prices. And I know that families up and down the country are feeling the impact in the cost of filling up at the petrol station and in the rise in gas and electricity bills.

As every country faces increased costs, it is now understood that a global shock on this scale requires global solutions. This is why the UK is arguing that at the top of the economic agenda for the forthcoming G8 summit in Japan should be a global strategy for addressing the impact of higher oil prices.

The cause of rising prices is clear: growing demand and too little supply to meet it both now and - perhaps of even greater significance - in the future. Higher demand is one of the major results of the scope, speed and scale of globalisation as Asian economies, as well as Opec countries themselves, demand more oil. To take one example: by 2020 there could be as many as 140m cars in China - more than three times as many as today. Overall, by 2020, global demand for energy will rise by 50%.

It is the market's belief that ever-growing demand will continue to outstrip supply that has pushed up the oil price. And we are becoming increasingly aware of the technical, financial and political barriers to the production of more oil. Every country must find ways of being more efficient and diversifying supply. And as continuing high oil prices present us all with an immense challenge, the way we confront these issues will define our era.

While the world will always seek new sources of supply, and we must continue to reduce barriers to investment, our strategic interests - reducing energy costs, increasing our energy security, tackling climate change - all now point in the same direction: decreasing dependency on oil, through substitution with other energy sources and through energy efficiency. And what we do to change the balance for the medium and long term can have an effect in the short term because it can give greater certainty about future supply and demand, and create a more stable market.

So our goal that Britain becomes a low-carbon economy is now an economic priority as well as an environmental imperative. And if we are to ensure a better deal for consumers, energy security and lower greenhouse gas emissions, Britain, Europe and the world will have to change how we use energy and the type of energy we use.

So, as John Hutton has said, we need to accelerate the development and deployment of alternative sources of energy, reducing global dependence on oil. Britain will increase its investment in renewables, including decentralised generation. We will build one of the world's first commercial-scale carbon capture and storage coal plants and we have committed to a nuclear building programme to ensure that the UK's emissions and dependence on fossil fuels do not rise as existing nuclear stations close.

But, as we manage this transition to a low-carbon economy, we must also do more to help the oil market operate more efficiently. Globally, producers and consumers share common interests in market stability. So instead of Opec going its own way, there should be an enhanced dialogue between producers and consumers about the advance of nuclear, coal and renewables and about greater energy efficiency - as well as about future oil reserves.

With greater transparency on both sides, oil producers and consumers should gain a better understanding of trends in supply and how they affect the price of oil. Just as we are examining how we can maximise the recovery of oil from the North Sea oilfields, so all oil producers should re-examine whether the barriers that exist to strategic investments should be broken down. And in advance of the G8 summit, I will be proposing further work internationally to achieve a better dialogue on supply possibilities and trends in demand.

But each country has also to act now to help those hit by high fuel bills. In Britain this means increased winter fuel payments; a new one-stop service on home energy efficiency; free insulation for people on low incomes and the over 70s and a £150m programme financed by the utility companies to cut fuel bills for lower income families.

And we will do more. In the next three years, energy firms will insulate another 5m homes. Three million more households should get access to free or discounted energy-efficiency products. And "smart" metering will allow informed decisions about energy use.

This domestic action will help. But however much we might wish otherwise, there is no easy answer to the global oil problem without a comprehensive international strategy. We have made a start, but over the coming weeks, as this new economic challenge moves to being the first item on every country's agenda, getting the world to act together will be the top priority at the EU and G8 summits and beyond.

pm.gov.uk