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Lord Whitty: My Lords, as we made clear in our 10-year transport plan, which my noble friend Lord Macdonald explained to the House in July, part of our strategy must be to speed up the change to alternative fuel technology based vehicles, both in terms of public service vehicles, such as buses and taxis, and in terms of transport more generally. The process will be relatively slow but it can be speeded up. There is already fiscal encouragement to take up gas-fuelled and electric cars which are appropriate in certain niche markets. We are encouraging that. The Government are also running, through the Energy Savings Trust, the Powership Programme to encourage the switch to alternative fuel vehicles. The DTI is funding the Foresight Programme which is encouraging R&D in alternative fuels. I have recently met representatives from both the oil companies and the motor manufacturing companies to try to encourage a more co-ordinated approach to the development of alternative fuels.

As regards hydrogen cells, that is a new technology which is not that far over the horizon. It will be some years before it becomes commercially valid but it is one of the technologies that we should wish to encourage.

Oil Prices

3.57 p.m.

Lord Renton of Mount Harry asked Her Majesty's Government:

Lord McIntosh of Haringey: My Lords, oil prices are clearly at unsustainably high levels. Together with other oil consuming countries, the UK is calling for action from OPEC and other oil producing nations which would contribute to a reduction in oil prices and greater stability in oil markets. The Government fully recognise the need for oil prices to return to a level consistent with continuing global economic prosperity and stability for both oil producing and consuming countries and particularly for the developing countries.

Lord Renton of Mount Harry: My Lords, I thank the noble Lord for that reply and congratulate him on mastering yet another brief. But there is something slightly shallow in the Government's response in saying that we are trying to persuade OPEC all the time to increase production. Does he recall that the Secretary-General of OPEC said last week that, on average, Western governments get three times as much from a barrel of oil as the average producing country? Surely that is the main argument of OPEC at the moment; namely, that western governments are taxing too highly.

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Against that background, to follow up what was almost a debate which has just taken place between the noble Lord, Lord Whitty, and my noble friend Lord Rotherwick, are the Government prepared to accept that the only answer is to be much more positive about finding alternative sources of energy, and particularly to develop different energy factors and driving power for the motor car? Unless that happens, we shall continue in the present argument with OPEC.

Lord McIntosh of Haringey: My Lords, I agree with the second question posed by the noble Lord, Lord Renton. It is extremely important for us to encourage new fuel technologies of many kinds, including those for use in motor cars which are responsible for a high proportion of the oil that we use and a high proportion of pollution.

As to the noble Lord's first question, he appears to suggest that we are the only ones to suggest that it would be desirable for OPEC to reduce its prices. I believe he is aware that OPEC has a target price of 22 to 28 dollars a barrel, which is considerably lower than the present price. OPEC has a plan whereby if the price is above its target price for 20 consecutive days it will meet to make decisions about increasing oil production. OPEC has the same interests as we do.

Lord Barnett: My Lords, can the Minister assure the House that, whatever happens to oil prices, the Government will not increase or decrease the level of petrol tax and duty by two or three pence as the occasion arises?

Lord McIntosh of Haringey: My Lords, behind the question posed by my noble friend is the suggestion that it would be undesirable for us to accede to pressure brought about by blockades. I entirely agree with that. It is not for me to say whether the Chancellor in his pre-Budget report will make a statement about petrol prices or petrol taxation.

Lord Palmer: My Lords, in relation to the second supplementary question asked by the noble Lord, Lord Renton, can Her Majesty's Government say what plans they have for a cost-effective plan for British bio-diesel fuels, which can only help to contain the price of fossil fuels?

Lord McIntosh of Haringey: My Lords, I agree with the noble Lord, Lord Palmer, as much as I agreed with the noble Lord, Lord Renton. Bio-diesel and the use of shale oil and fuel cells are all attractive technologies. The paradox is that they become more financially viable if oil prices are higher. That is a factor which is in conflict with our overall objective to have oil prices reduced. Certainly we shall give every available support to those alternative technologies.

Lord Ezra: My Lords, yesterday I asked a similar Question and referred to alternative sources of energy for the transport sector. In view of the encouraging statement made by the noble Lord, Lord Whitty, in answer to an earlier Question today, and in the light of

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the new oil situation, will the Government consider producing a document that will show how they propose to reduce the dependence of the sector on oil fuels in the longer term?

Lord McIntosh of Haringey: My Lords, the noble Lord, Lord Ezra, could not have squeezed a cigarette paper between myself and the noble Lord, Lord Sainsbury, yesterday, nor between myself and the noble Lord, Lord Whitty, today. We are all saying the same thing.

As to whether there is a new oil situation--I assume the noble Lord means a new oil price situation--which would justify a White Paper, I am not sure that such fluctuations, which tend to be rather rapid and rather severe, would themselves justify a White Paper, but I am not antagonistic to the idea of continuing investigation of the possibilities.

Baroness Sharples: My Lords, both noble Lords have referred to encouragement. How much money are Her Majesty's Government putting towards future fuels?

Lord McIntosh of Haringey: My Lords, that is a broad question to which there is not a single answer. We could be considering a whole series of alternative technologies. The noble Lord, Lord Palmer, raised the issue of bio-diesel and there are the issues of wind and wave energy. Different amounts of money are being made available for many of them, and I do not believe that there is a single figure that I can give. If there is, I shall write to the noble Baroness.

Lord Davies of Oldham: My Lords, I beg my noble friend to answer this question with his customary objectivity. In the light of the high oil prices, what does he think of the Government's record of hitting the lowest inflation rate of the past 25 years of 1.9 per cent?

Lord McIntosh of Haringey: My Lords, we should not exaggerate the impact of higher oil prices on inflation as a whole. The proportion of the gross domestic product that is consumed by energy has decreased over the years. I believe that the latest estimate is that if the current oil prices were to continue, even over a period of a whole year, the effect on inflation would be 0.5 per cent or less.

Lord Mackay of Ardbrecknish: My Lords, at the risk of putting more than a politically incorrect cigarette paper between the noble Lord and his friend the noble Lord, Lord Whitty, is there not a contradiction between their two answers in that the Minister in answering this Question appears to want OPEC to increase its oil output and the noble Lord, Lord Whitty, wants a decrease in the consumption of oil? Surely, joined-up government would be helpful.

Last week I was in Aberdeenshire where the good people of that county asked me a simple question to which I did not know the answer. With more oil coming ashore in Aberdeenshire than anywhere else in

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any other European Union country, can the Minister tell the House why we pay the highest price in Europe for petrol?

Lord McIntosh of Haringey: My Lords, the second question of the noble Lord is of great interest. Of course, we are a net exporter of oil, but the oil that we export is largely sweet crude which is not suitable for our own refineries or for our transport uses. Therefore, although the net figure is small, the amount of import and export, and therefore our vulnerability to OPEC prices, is quite considerable.

On his first question, he must bear in mind that, on the one hand, there is the interest of the producing countries and, on the other hand, the interest of the consuming countries. The answers given by my noble friend Lord Whitty and myself are not in conflict; they simply relate to different matters.

Lord Razzall: My Lords, can the Minister say whether the Government have a strategic oil reserve under their control? If so, will the Government be prepared to follow the American example and release an amount from that strategic oil reserve to help to reduce the price of oil?

Lord McIntosh of Haringey: Yes, my Lords, we have a strategic oil reserve, but it is not of the order of that of the Americans. We ought to put the figures into context. The American strategic oil reserve is something like 570 million barrels, of which they are prepared to release 30 million barrels over a 30-day period. The daily production of OPEC countries is 30 million barrels. The quantum does not encourage the view that releasing strategic oil reserves would have a significant effect on oil prices.

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