Gary's News and views

Gary Streeter MP for South West Devon

Gary writes a weekly article which appears in the Plympton Plymstock and Ivybridge News in South West Devon. The articles are published here.


Thursday, 17 March 2011

Oil. Black, slimy, expensive. It makes the world go round. In the 1970's surging oil prices caused rip-roaring inflation here in the UK that took many years and much pain to counter. Is it going to do the same in 2011?
Our global economy relies heavily on oil, not just because it is the raw material of which most of our fuel is made, whose prices feed through into the cost of everything we buy. The price of crude oil is therefore one of the most eye-catching indicators we have in understanding the future challenges we may face. The price is currently $114 a barrel, with some predicting massive hikes to come.
There are three reasons why crude oil prices are likely to climb steadily over the next few years.
First, the economies of China and India, in other words 2 billion people, one third of the world, are growing significantly and sucking in more and more of the world's oil production. More Chinese and Indian people buying and using cars will ensure that demand for oil continues to increase. I am no economist but I do know that prices rise as demand increases.
Second, oil is running out. How much is left to exploit nobody knows but there are plenty of people around who predict it will all be gone in 30 years or so. That is the blinking of an eye in terms human history. So increased demand and reduced supply (in the long term). Hmmm this is not looking good.
But add to this equation the current volatility of the main oil producing region, North Africa and the Middle East, and the challenge is even clearer.
This all matters to us because if we think that forecourt prices of petrol and diesel are likely to come down any time soon, we need to think again. I have been pressing the Chancellor to reduce fuel duty in the forthcoming budget and perhaps he will. But this will be tinkering, albeit welcome.
The long term prognosis is: oil prices are going to rise. We have better get used to it. We must urgently increase the pressure on the automotive industry to manufacture engines that can do many more miles to the gallon. We had better find ways to change our lifestyles and tackle our over-reliance on oil and pray that somebody out there invents a new fuel soon. 
Adaptability is a great human quality. Just as well.

posted by Gary @ 18:03