Fuel Prices

Oral Answers to Questions — Treasury – in the House of Commons at 10:30 am on 5 June 2008.

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Photo of Richard Ottaway Richard Ottaway Conservative, Croydon South 10:30, 5 June 2008

What assessment he has made of the effects on the economy of recent trends in fuel prices; and if he will make a statement.

Photo of Jane Kennedy Jane Kennedy Financial Secretary, HM Treasury

Increases in fuel prices, driven by developments in the global oil and wholesale gas markets, inevitably continue to influence UK inflationary pressure. However, the UK is better placed to respond to those challenges than in the past, given that employment is at record highs and that inflation is still low by historical standards.

Photo of Richard Ottaway Richard Ottaway Conservative, Croydon South

Yesterday, the Prime Minister said that he was addressing the root causes of high oil prices. Is the Minister aware that the chief executive of Total said yesterday that oil prices had been pushed up by speculation? That was confirmed by the well-regarded Global Research organisation, which said that

"60 per cent. of today's...oil price is pure speculation...by large trader banks and hedge funds."

Does the Minister agree that there is absolutely nothing that she can do about that, unless she proposes to interfere in the markets?

Photo of Jane Kennedy Jane Kennedy Financial Secretary, HM Treasury

The hon. Gentleman is right about what has been said and what was said yesterday. I understand that that was largely because it was expected that there would not be an increase in production. However, an open economy such as the UK's is inevitably affected by global developments, including those in global food and energy prices.

Overall, UK inflation is lower than that in the US and the euro area and is the second lowest among all 27 European Union countries. Although we are going through a period of difficulty, it would be of benefit to all if more were made of the demonstrable underlying strength of the economy, rather than there being the celebration of the problems that we sometimes hear from Conservative Members.

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

Does my right hon. Friend agree that the issue is not only about production? The argument used to be about the Organisation of Petroleum Exporting Countries and its failure to increase production, and that still applies. However, that is added to by massive speculation. If America, that bastion of capitalism, can set up a Senate Committee to look into the speculation that is shoving oil prices, along with food prices, through the roof, surely it is time that we led a campaign in the international gatherings—at the G8 and among Finance Ministers—to put a stop to that massive speculation, which is hitting many people around the world.

P

All speculation in Commodities should be monitored and capped or stopped. This speculation in the Commodities market is driving up the price of everything not just fuel. The Speculators can no longer get cheap credit, to form Private Equity Companies and then take-over large Companies, like Boots or BAA, and then either take out loans against the collateral or strip out the assests, usually...

Submitted by Paul Rutherford Continue reading

Photo of Jane Kennedy Jane Kennedy Financial Secretary, HM Treasury

My hon. Friend has made his point as only he can; it is a pleasure to see him in his seat. My right hon. Friend the Chancellor will take the advice that my hon. Friend has given the House with him when he attends the next meeting of the G7, which is in Japan in two weeks' time.

Photo of Alan Reid Alan Reid Shadow Minister (Northern Ireland), Shadow Minister (Scotland)

The recent rises in fuel prices have caused an economic crisis on our islands and remote parts of the mainland, particularly the Kintyre peninsula. I thank the Exchequer Secretary for our constructive meeting yesterday. However, will the Government examine the evidence presented and consider the problems that the high price of fuel is causing remote rural communities? Will they look at the rural fuel discount schemes that operate in other countries and seriously consider introducing a scheme for a lower rate of fuel duty for islands and remote communities? Such help is needed for the struggling economies of those parts of the country.

L

If the lowering of fuel duty is to be considered for rural communities, why should it not be lowered for everyone. The price of fuel is absolutely monstrous. If it was lowered all over the UK, then of course the cost of living would be kept down, every time there is an increase in fuel duty, of course we end up paying more for everything. We were in Lanzarote recently and the cost of...

Submitted by Linda Hill Continue reading

Photo of Jane Kennedy Jane Kennedy Financial Secretary, HM Treasury

I am grateful to the hon. Gentleman for the acknowledgement of the meeting that he had yesterday with my hon. Friend the Exchequer Secretary. She has indicated to him how willing she is to look at the evidence, and I am sure that he will bring that evidence forward and that she and her officials will give it some consideration.

Photo of Nick Ainger Nick Ainger Labour, Carmarthen West and South Pembrokeshire

Will my right hon. Friend have discussions with the oil companies about extending or creating a social tariff for heating oil and for domestic liquefied petroleum gas and liquefied natural gas? Although it is right that the energy companies now have a significantly increased social tariff for domestic gas and electricity users, many people in rural areas whose only source of heating is heating oil or LPG have no social tariff available to them. Will my right hon. Friend tackle that problem?

Photo of Jane Kennedy Jane Kennedy Financial Secretary, HM Treasury

My hon. Friend may know that my right hon. Friend the Chancellor has already indicated that that is a good idea that he would like to consider, so my hon. Friend's suggestion is welcome. However, it is worth reminding the House that the volatility of inflation since 1997 has been just a quarter of what it was in the two decades before 1997, underlying the case that we are able to make for the strength of the British economy in being able to deal with the challenges in the weeks that lie ahead.

Photo of Stewart Hosie Stewart Hosie Shadow Chief Whip (Commons), Shadow Spokesperson (Treasury)

In terms of the impact of high fuel prices, not only remote rural areas and island communities—in the northern isles, where prices are at £6.50 a gallon, people are questioning whether it is worth going to work—but economic sectors all over the UK, not least the haulage industry, are being hit hard. Does the Minister agree that the right thing to do in principle would be to introduce a fuel duty regulator to smooth out unexpected spikes in pricing? Does she further agree that the only tool that the Chancellor has—either to apply or postpone routine increases in duty—is now a totally inadequate response to the massive spikes in fuel price rises?

Photo of Jane Kennedy Jane Kennedy Financial Secretary, HM Treasury

The hon. Gentleman makes an interesting proposal that has been considered, but there are concerns that it would actually increase the volatility of fuel prices. It is wrong to suggest that we have only one tool. My hon. Friend the Minister for Energy recently attended the 11th ministerial meeting of the International Energy Forum, securing an ambitious programme of further work on improving market transparency and removing barriers to investment in new oil supplies. As I said, my right hon. Friend the Chancellor will make this a high priority for British input into the G7 summit in two weeks' time. This is an international problem—it is not only being experienced here in the UK—and the most effective response will be a global one from economies throughout the G7.

Photo of Michael Martin Michael Martin Chair, Speaker's Committee on the Electoral Commission, Speaker of the House of Commons, Chair, Speaker's Committee on the Electoral Commission

We now come to topical questions. Could I ask that when hon. Members ask a topical question it is brief and not an opportunity to make a speech?