By Gordon Brown, Prime Minister of United Kingdom (THE GUARDIAN, 28/05/08):
The global economy is facing the third great oil shock of recent decades. The oil price, just $10 a barrel a decade ago, has reached $135, pushing up the price of petrol and domestic heating as well as contributing to higher food prices. And I know that families up and down the country are feeling the impact in the cost of filling up at the petrol station and in the rise in gas and electricity bills.
As every country faces increased costs, it is now understood that a global shock on this scale requires global solutions. This is why the UK is arguing that at the top of the economic agenda for the forthcoming G8 summit in Japan should be a global strategy for addressing the impact of higher oil prices.
The cause of rising prices is clear: growing demand and too little supply to meet it both now and – perhaps of even greater significance – in the future. Higher demand is one of the major results of the scope, speed and scale of globalisation as Asian economies, as well as Opec countries themselves, demand more oil. To take one example: by 2020 there could be as many as 140m cars in China – more than three times as many as today. Overall, by 2020, global demand for energy will rise by 50%.
It is the market’s belief that ever-growing demand will continue to outstrip supply that has pushed up the oil price. And we are becoming increasingly aware of the technical, financial and political barriers to the production of more oil. Every country must find ways of being more efficient and diversifying supply. And as continuing high oil prices present us all with an immense challenge, the way we confront these issues will define our era.
While the world will always seek new sources of supply, and we must continue to reduce barriers to investment, our strategic interests – reducing energy costs, increasing our energy security, tackling climate change – all now point in the same direction: decreasing dependency on oil, through substitution with other energy sources and through energy efficiency. And what we do to change the balance for the medium and long term can have an effect in the short term because it can give greater certainty about future supply and demand, and create a more stable market.
So our goal that Britain becomes a low-carbon economy is now an economic priority as well as an environmental imperative. And if we are to ensure a better deal for consumers, energy security and lower greenhouse gas emissions, Britain, Europe and the world will have to change how we use energy and the type of energy we use.
So, as John Hutton has said, we need to accelerate the development and deployment of alternative sources of energy, reducing global dependence on oil. Britain will increase its investment in renewables, including decentralised generation. We will build one of the world’s first commercial-scale carbon capture and storage coal plants and we have committed to a nuclear building programme to ensure that the UK’s emissions and dependence on fossil fuels do not rise as existing nuclear stations close.
But, as we manage this transition to a low-carbon economy, we must also do more to help the oil market operate more efficiently. Globally, producers and consumers share common interests in market stability. So instead of Opec going its own way, there should be an enhanced dialogue between producers and consumers about the advance of nuclear, coal and renewables and about greater energy efficiency – as well as about future oil reserves.
With greater transparency on both sides, oil producers and consumers should gain a better understanding of trends in supply and how they affect the price of oil. Just as we are examining how we can maximise the recovery of oil from the North Sea oilfields, so all oil producers should re-examine whether the barriers that exist to strategic investments should be broken down. And in advance of the G8 summit, I will be proposing further work internationally to achieve a better dialogue on supply possibilities and trends in demand.
But each country has also to act now to help those hit by high fuel bills. In Britain this means increased winter fuel payments; a new one-stop service on home energy efficiency; free insulation for people on low incomes and the over 70s and a £150m programme financed by the utility companies to cut fuel bills for lower income families.
And we will do more. In the next three years, energy firms will insulate another 5m homes. Three million more households should get access to free or discounted energy-efficiency products. And “smart” metering will allow informed decisions about energy use.
This domestic action will help. But however much we might wish otherwise, there is no easy answer to the global oil problem without a comprehensive international strategy. We have made a start, but over the coming weeks, as this new economic challenge moves to being the first item on every country’s agenda, getting the world to act together will be the top priority at the EU and G8 summits and beyond.