OPEC (Price Fixing)

Oral Answers to Questions — Energy – in the House of Commons at 12:00 am on 9th May 1983.

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Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedford 12:00 am, 9th May 1983

asked the Secretary of State for Energy whether he considers prices fixed by the Organisation of Petroleum Exporting Countries a satisfactory criterion for settling North sea reference prices.

Photo of Mr Nigel Lawson Mr Nigel Lawson Secretary of State for Energy

North sea prices are determined in commercial negotiations which obviously take account of OPEC prices along with all the other market evidence.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedford

Is my right hon. Friend aware that the cost of oil production in the middle east is less than $1 a barrel, whereas the sale price is about $29 a barrel? That does not help the Third world. That is a cartel price and not a market price. Therefore, that should not be the basis on which North sea oil is priced.

Photo of Mr Nigel Lawson Mr Nigel Lawson Secretary of State for Energy

I venture to disagree with my hon. Friend. OPEC accounts for about 30 per cent. of total world production, so it can hardly be held to be a cartel in any meaningful sense. There is no question of the oil price falling to the cost of production in the middle east, as the OPEC countries would not continue to produce oil at anything less than a market price. Sharp fluctuations in the oil price, whether up or down, do most harm to the world economy and to underdeveloped countries.

Photo of Mr Ted Rowlands Mr Ted Rowlands , Merthyr Tydfil

If the full market price is sought, is it not reasonable to expect sharp ups and downs of the type that the Secretary of State claims is bad? Will the right hon. Gentleman tell the House about his visit to the Gulf states and whether it was a love-in between the right hon. Gentleman and the sheikhs?

Photo of Mr Nigel Lawson Mr Nigel Lawson Secretary of State for Energy

I will gladly tell the hon. Gentleman something of my visit to Saudi Arabia, where I saw Sheikh Yamani, to Kuwait, where I spoke to Sheikh Ali Khalifa and to the United Arab Emirates, where I spoke to Dr. Otaiba. Although we have different perspectives on the subject, there emerged a considerable coincidence of interests on the need for stability in the oil market. The journey was harmonious and cordial.

Photo of Sir Peter Emery Sir Peter Emery , Honiton

Is my right hon. Friend actually trying to tell the House that OPEC is not a cartel? If he is, how does he hold that view? Has not the OPEC price been the leading factor that has caused considerable difficulties in the sale price of oil to underdeveloped nations in the Third world?

Photo of Mr Nigel Lawson Mr Nigel Lawson Secretary of State for Energy

I will willingly review the history of the past 10 years. If OPEC were an effective cartel in the way my hon. Friend imagines it to be, the price of OPEC oil would not have gone down from $34 to $29 earlier this year, which was in response to market forces. It was not an act of charity on the part of the members of OPEC.

Photo of Dennis Skinner Dennis Skinner Member, Labour Party National Executive Committee

Is not the reason why the price has been held at the present level and why the Secretary of State got involved in the OPEC talk before the decision was made not substantially to lower the price—quite apart from allowing market forces to operate—that great problems would arise in Mexico, Venezuela and Nigeria, which are heavily in debt to the tune of more than $120 billion, and therefore great difficulties would arise for the international banking system?

Photo of Mr Nigel Lawson Mr Nigel Lawson Secretary of State for Energy

The hon. Member credits me with too much power and influence in this sphere. During the turmoil in the oil market the Government and the British National Oil Corporation acted very much in the interests of this country. The idea that Britain could fix the world oil price is nonsense. I make no such claim.