Fuel and Electricity (Control) Bill

– in the House of Commons at 12:00 am on 29th November 1973.

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Again considered in Committee.

Question again proposed, That the clause stand part of the Bill.

Photo of Mr John Biffen Mr John Biffen , Oswestry

Given the existing situation in world oil markets, given the dominant position currently accorded to the Arabian producers, we must look forward and facilitate exploration and development of oil resources outside the Arabian areas. To do that will require substantial cash flows and profits to the oil companies. Without such cash generation, they will not be able to carry out the immensely capital-hungry exploration to reveal the kind of resources we have welcomed in the North Sea, and exploit them. They will increasingly have to take their profits "downstream", to use the jargon of the trade—in other words, near the points of consumption, rather than, as was historically so often the case, near the points of production.

Therefore, we should be exceedingly short-sighted if we were to exercise the price control vested in the Secretary of State in subsection (1)(b) in any way which was detrimental to the healthy profit levels of the international oil companies, whose future exploration I regard as essential in widening the base of energy supplies, not only for this country but for the Western world generally, for we shall find in this matter that the trade is truly international and that we cannot insulate ourselves from the realities of the international energy market, nor should we seek to do so.

On Second Reading my right hon. Friend the Secretary of State gave the impression that he regarded the powers of control with which he was vested in subsection (1)(b) as a means of keeping prices lower than they might otherwise be, presumably lower than they would be if the companies were subject merely to the disciplines of the Price Commission. If that was his judgment, I view that judgment with apprehension, for, although it might be the one which would receive the most immediate approbation, I think that in the long term and in the not-so-long term it would prove to be the most detrimental, because as a nation we shall have to learn in many ways that the days of cheap energy are behind us.

Photo of Sir Peter Emery Sir Peter Emery , Honiton

It has been a wide-ranging debate, but we are dealing with a clause which covers probably the widest aspects of the Bill. I shall do my best to deal with as many as possible of the matters which have been raised.

My hon. Friend the Member for Hastings (Mr. Warren) rightly drew attention to the need for co-ordination in the control of air traffic at our airports and throughout our air space. He listed six recommendations which have been put to him. The British airlines have, as I recently announced in answer to a Question, voluntarily co-operated with the Government in bringing about the 10 per cent. cut that was asked of them. The suggestions which my hon. Friend made go much further than that. I welcome them and I think that the airlines would do so. There is a saving of not only energy but of money. Subject only to considerations of air safety and, to some extent, the turn-round of aircraft and the time scales involved in running out from the bays to the runway along the ferry track, I am only too willing to draw to the attention of my hon. Friend the Minister for Aerospace and Shipping the suggestions which my hon. Friend has made. They will be taken up most fully if that has not been done already. I know that some of them have been considered by the Civil Aviation Authority and the British Airports Authority.

I now turn to the points which were raised by my hon. Friends the Members for Gainsborough (Mr. Kimball), Harborough (Mr. Farr) and Oswestry (Mr. Biffen). Their point about the countryside I echo. My constituents have many of the problems which are faced by my hon. Friends' constituents. I have only to substitute different names for the stations, and different mileages, to be faced with the same considerations.

My right hon. Friend the Secretary of State for Trade and Industry and my hon. Friend the Minister for Industry have given asurances that the problems of the countryside will be considered. The supplementary allocation and provision for domestic hardship specifically deal with the matter. I must make it clear, however, that if rationing is to come about it will mean a definite change in the behaviour pattern of many people who live in the country. They will not be able to jump into their car at any moment and dash back into town or into the village. They will have to think carefully about the use of petrol for domestic purposes. They will, I hope, be co-operating much more on a community basis. That applies particularly to the villages where there is no public transport, whether it is a journey into the centre of Leicester, Gainsborough or Lincoln, where I had some connections at one time. It applies to journeys to Oxford and journeys from Budleigh Salterton.

We must act in the knowledge that we will have to ask for the greatest cooperation in fuel economy. I was asked some direct questions about the meals-on-wheels service. I have already had contact with the Women's Royal Voluntary Service and the matter will be dealt with specifically. The action that is taken will probably be through local government sources, but I can give that assurance.

Secondly, the 50 mph speed limit is legal The Bill allows the extension of existing powers under Section 77 of the Road Traffic Regulation Act 1967 which enables the Secretary of State to impose speed limits for the purposes of safety. The powers in Clause 4(3) enable an Order in Council to be made to extend the powers in the interests of fuel economy rather than in the interests of safety.

The fourth question asked by my hon. Friend the Member for Harborough was about the accumulation of fuel. I understand his argument perhaps even more clearly than he does, because I represent a tourist area. The accumulation of petrol may cover three concurrent months. That is the build-up which will be allowed.

For mopeds, petrol or two-stroke diesel fuel may be taken in cans. Publicity to this fact was given yesterday and today, so that garages which were under a misapprehension should understand this. In the same way, fuel may be taken in cans by farmers and horticulturists from their regular suppliers. The definition of a "regular supplier" is one who has three times in the last six months supplied a horticulturist or farmer. I fully understand the great part played by horticulture and agriculture in the economy. The Government have no intention of asking horticulturists or farmers to accept greater burdens than the rest of industry or any other sector of the nation.

My hon. Friend the Member for Oswestry asked about the power under Clause 2(1)(b). I shall give one or two examples of the way in which the Government see this power initially being used. Under the mutual aid schemes, supplies to garages or outlets with an outage of a certain form of fuel will be arranged by the Oil Industry Emergency Committee. It may happen—we hope not—that a dispute about the price at which the oil should be supplied by one supplier to another arises. A man might say, "I do not see why I should let my oil go in that direction. I shall let it go only at a massive premium." Although that is the normal competitive attitude, we believe that that should not be allowed in the operation of mutual aid. The Government therefore have the power to direct the supply at a special market price which seems reasonable to them.

Secondly, we are aware that the applications for price increases by the oil companies are dealt with individually by the Price Commission and come forward at different times. The Government may feel that in a time of shortage it would be better if all the oil companies brought in their price increases on the same date so that there shall not be variations at the pumps as between the various oil companies. This is another area of a different sort in which these price powers could be used.

I accept the necessity for the development of every aspect of oil outside the Middle East area. I also accept that any nation which has a harsh or limiting price policy that will massively limit the ability of one of the major international oil companies to obtain a fair return on sales is likely to be at the back of the queue in terms of the distribution of oil available in the world if it is not already allocated. But at present when we look at the price factors it would not appear, as my hon. Friend the Member for Oswestry suggested, that the problem of profits would be a vital factor to be considered. The level of profitability of most of the oil companies in this period would not necessarily lead one to believe that that sort of situation would arise.

Photo of Mr Peter Hordern Mr Peter Hordern , Horsham

My hon. Friend knows that I have an interest in these matters, since I am a director of an oil company. Is it not the case that the price which oil companies can now obtain from the market is already lower than that in any Western European country, with the possible exception of Italy? Are not the points made so ably by the hon. Member for Oswestry (Mr. Biffen) on future exploration even more important in relation to Clause 2(1)(b), in the sense that if prices are not allowed to reach at least an appreciable level, such as they have reached in other countries, the supply of oil delivered to this country will be slowed down instead of increased?

Photo of Sir Peter Emery Sir Peter Emery , Honiton

I know that my hon. Friend the Member for Horsham (Mr. Hordern) is an expert in these matters. However, I must say that it does not appear that, judging by the situation in the last five or six days, every other nation in Europe has a higher price than that which applies in this country ; that was certainly not the case last week. There are a number of applications before the Price Commission and these are being considered.

1 revert to the point made by my hon. Friend the Member for Oswestry that the profitability of oil companies has not been such as to lead one to believe that there has not been a greater degree of profitability and investment, even discounting the decrease in value in terms of money. I take his argument with a pinch of salt. Since I myself am a poacher turned gamekeeper, I have used that argument myself. I know that there are problems and also fallacies in the argument, as well as some degree of truth.

Photo of Mr Eric Varley Mr Eric Varley , Chesterfield

This is important. In the Second Reading debate I put it to the Secretary of State that the reason for the modifications and the powers taken to alter the Counter-Inflation Act was so that oil prices could rise rather more quickly than under the counter-inflation procedure. The right hon. Gentleman was quite categoric as to the reason why the powers had been taken and said, of Clause 4 in particular : The purpose of Clause 4 is to enable us to be tougher and far more quickly to apply price control to the retail outlets."—[OFFICIAL REPORT, 26th November 1973 ; Vol. 865, c. 59.] Can the hon. Gentleman confirm that the reason for these powers is certainly not to allow oil prices to go up more quickly, but rather to control them?

Photo of Sir Peter Emery Sir Peter Emery , Honiton

I do not contradict what my right hon. Friend said about the powers but they operate in both directions.

I come to the interesting speech made by the hon. Member for Midlothian (Mr. Eadie). I understand the point he made about his hon. Friend the Member for West Ham, North (Mr. Arthur Lewis) wishing to move his amendment. The hon. Gentleman has won a major victory in that particular campaign because the licence disc has to be shown before the petrol coupons can be issued.

The hon. Member for Midlothian asked me a number of questions, the first of which dealt with natural gas. He asked whether the remarks of my right hon. Friend were meant to encourage an appetite for gas. I do not think so. We can now say that the prediction in the White Paper of 4,000 million cubic feet a day will be met by 1975. This is a major move forward. He asked whether I had suggested there would be no problems for industrial consumers in the Midlands. I did not say that. The problem may be one of price because some consumers entered into their contracts at the beginning of the North Sea gas enterprise. On the large contracts they will find that there will be some price movement. I can say that the gas situation is encouraging.

The hon. Member went on to ask me about other sources, and I thought he must have been listening to a speech I made after lunch at Eastbourne at the "Fuel and the Environment" conference. I said : What this new pricing structure for oil means is that old processes must be reappraised. Tar sands and shale throughout the world are in considerable abundance. Indeed it was the Scot Mr. Pratt"— from the hon. Gentleman's constituency in Midlothian— who by these methods started the first oil industry in Scotland, manufacturing paraffin. I went on to say that the conference could draw two conclusions. The first was that the days of a cheap fuel policy for Great Britain belonged to the immediate past. We have all got to realise that.

I went on to meet one of the other questions which the hon. Member for Midlothian put to me by speaking about the tidal barrage, about windmills and all the other sources. Luckily for me I added : … and of course oil conversion of coal". I must have known what the hon. Gentleman intended to say tonight.

Following that, I said : What I would say on any of these concepts is that money, time and research has in the past been put into all these ideas. From a research point of view no funds have been denied for continuing work where it has been able to be seen that there was a possibility of a cost-effectiveness arising from continued research. That is a principle which will continue to apply …". I also paid tribute to the work done on research and development in the fuel industry.

I shall not comment on the US Navy and the possibilites of oil-firing a mothball fleet from coal. I was an airman, and I prefer not to get myself involved in naval matters. However, I promise the hon. Gentleman that I shall draw his suggestions to the attention of my right hon. and noble Friend the Secretary of State for Defence.

Finally, I come to the problems of domestic hardship for people in the Islands. They come into much the same categories as the constituents of my hon. Friends the Members for Oswestry, Harborough and Gainsborough where there is the possibility of their making application for supplementary allowances. Of course the problem will be coped with only partially by these allowances. No one pretends that they will be dealt with fully.

My Department has been in liaison with my right hon. Friends the Secretaries of State for Wales and for Scotland. That deals with another of the questions raised by the hon. Member for Midlothian.

I have tried to deal briefly with most of the points raised in the debate. I hope that it has been of use to the House.

Question put and agreed to.

Clause 2 ordered to stand part of the Bill.