Orders of the Day — European Community (Energy)

Part of the debate – in the House of Commons at 12:00 am on 18th July 1977.

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Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedford 12:00 am, 18th July 1977

I was talking about total energy, which works it out at about 5 per cent. I agree that with regard to electricity we are high up in the list but we have not been told what the next programme will be. I assume that an intermediate one will be AGRs. I hope that the Minister will keep his eye on the longer-term future owing to the long lead times and bring in the CFR 1, which is absolutely essential on the breeder front.

I mention one other matter which is of essential importance. We are going through a period of temporary glut and the price stability may remain for at least a year, if not longer. But the prospects of the seventies will change materially in the eighties. The key to world demand rests on two States—Saudi Arabia and the United States—with the prospect of the USSR playing a demoniacal political game in the background.

I would just mention one or two facts about this. President Carter has indicated what he wants to do. He wants to cut back American imports to 6 million barrels a day. In 1976, United States imports were 7·3 million barrels a day and the trend in the most recent publication indicates that United States imports will be 10 million barrels a day in 1980 and 11·8 million barrels a day in 1985. This will be serious for the Western world because if the American import bill goes up and if the production in the Western world, particularly in Saudi Arabia, does not keep pace with it, it could lead to a wild escalation of prices.

Let us look at the other side of the question, the supply side. There is no incentive for Saudi Arabia to produce another barrel of oil, because it is sitting pretty as it is. Fortunately, it has acted as a very responsible nation up to date. The population is small. Its reserves of oil are vast, probably 177 billion barrels compared with only 17 billion barrels in the North Sea and 31 billion barrels in the United States. The reserve production ratio of Saudi Arabia is 49 years at current rates of extraction, declining to about 16 by 1990.

Saudi Arabia has a small population, vast reserves and a balance of payments surplus. It could reduce production by 50 per cent. and still run a balance of payments surplus. It could thus stabilise output at a certain level without any detrimental effects on economic development, military commitments and aid programme. One has only to look at current production to find that Saudi Arabia is producing 9·3 million barrels a day. It has been indicated that this ceiling has been lifted temporarily from 8½million barrels a day to about 10 million barrels a day. We come to the rather interesting conclusion that with American imports going up very considerably, with the lack of success of the Carter programme, with the possibility of the Soviet Union entering the market to buy more oil and with the possibility of a ceiling being placed too low, this could mean a disaster for the West.

Let us look at three major areas, the United States, Western Europe and Japan. Japan has to import more than 90 per cent. of its oil requirements. Oil consumption in Western Europe is 13·5 million barrels a day, of which imports amount to 11·6 million barrels. This is very heavy stuff. I draw a conclusion from this which was supported by the Workshop on Alternative Energy Strategies in the Financial Times on 17th May 1977. If Saudi Arabia decides to hold its production at 9 million barrels a day, there could be an oil crisis in the early 1980s and prices will escalate. If Saudi Arabia ceilings at 20 million barrels a day, the crisis will be deferred until 1990.

I would have thought that the Commission would be wiser to concentrate on the major issues which must determine the actions of Government. It should say that the general philosophy is not ideal for all the countries of Western Europe collectively, but individually they must have their own particular allowance. Personally I feel that in this country the nuclear future is essential, exactly the same as has been recognised in the United States which has no shortage of oil capacity or natural gas and in Iran which is one of the major suppliers to the United Kingdom. Many countries in the Western world are going nuclear as well.

But when the crunch comes we in the United Kingdom will not be spared. We are members of the Community of Nine and we shall be asked to make our contribution from the supplies that we have in exactly the same way as the Dutch have been asked to contribute some of their natural gas. If that be the case, I hope that the Government's response will point us in the right direction to a solution that will be favourably received. If, on the other hand, it affords no guidance but simply gives us a history, it may be useful for this House to inform our European partners that it is to their discredit and certainly to ours.