Oil Supplies

Part of the debate – in the House of Commons at 12:00 am on 11th June 1979.

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Photo of Mr David Howell Mr David Howell , Guildford 12:00 am, 11th June 1979

With permission, Mr. Speaker, I wish to make a statement about the oil supply situation.

Following disruption of oil supplies from Iran from the early part of the year, a tight world oil situation has developed, with total supplies on present estimates likely to be well short of expected demand world-wide. The position in Iran could easily worsen again and the prospect from the other suppliers is at best fragile.

Against this background the United Kingdom position is as follows. Supplies are currently coming into the United Kingdom market at about the same rate as this time last year, but demand is well up, we have had a cold winter, and it is obviously vital now to rebuild stocks for the autumn. This means that actual supplies to United Kingdom consumers are on average about 5 per cent. below the increased levels on which people were counting. However, this does not give the full picture, since the supply position stemming from Iran has affected different oil companies supplying the British market in very different ways. This has led to serious shortages for some particular customers and some particular regions, especially as the first effects work through.

The oil companies have been rationing their allocations to their customers and the Government have specifically requested the United Kingdom Petroleum Industry Association to achieve a more even and effective distribution overall and to meet particular difficulties as a matter of urgency where customers are threatened with real hardship.

At the same time, the Government have taken steps to achieve an overall cut in demand of 5 per cent. in line with our EEC and international obligations. It is both in our interest and in the world's interest to ease oil pressures by working with our trading partners to prevent a panic scramble for oil.

I have made it clear that in the public sector measures must be taken to cut down by the 5 per cent. overall, consistent with the maintenance of essential services. In industry, on the roads and, we hope, in the home, we must strive to achieve a cutback of at least 5 per cent. by all, so that the limited allocations will bite more evenly than if some consumers simply carry on as normal and leave others seriously short. In all this the oil companies—both major and independent—plainly bear a heavy responsibility.

Looking immediately ahead, I am not satisfied with the arrangements that I have found for supplies of oil into the United Kingdom market, particularly when we are a major oil producer. We certainly have to trade North Sea oil internationally and with commercial skill to live and to invest. But we must get the balance right. I am also considering taking royalties in kind which may help United Kingdom refineries and suppliers meet their customers' demands. But, even with these measures on the supply side, energy conservation must now be given a permanent and central place in our policy, and I shall be proposing more measures on this front.

As for rationing, or Government-organised priorities for whole categories—with, of course, tighter cuts for those not in the preferred categories—I believe that at present levels of shortfall this would lead at once to far more rigidity and unfairness, quite apart from the cost to the taxpayer and the economy of the necessary paraphernalia. Nor would it produce a drop more oil. If the world situation deteriorates sharply again, we may be forced to pay that price, but in the present conditions the sensible way forward is through steps to improve supplies in the United Kingdom market, combined with economical use of oil by everyone and strong conservation measures. I shall, of course, seek to keep the House fully informed of the situation in the coming weeks.