John Hayes
Main Page: John Hayes (Conservative - South Holland and The Deepings)Fuel Prices
John Hayes Excerpts(12 years, 2 months ago)
Commons ChamberRead Full debate Read Hansard Text
The Minister of State, Department of Energy and Climate Change (Mr John Hayes)
The House has long known that I am energy personified, and I am delighted that the Prime Minister has now recognised that fact and given me this important new role. I am equally delighted to speak on these matters from the Dispatch Box for the first time, although, as the shadow Minister, the hon. Member for Rutherglen and Hamilton West (Tom Greatrex), said, he and I have already met in debates in Westminster Hall and in Committee.
Several hon. Members have rightly paid tribute to my hon. Friend the Member for Harlow (Robert Halfon). My hon. Friends the Members for Bedford (Richard Fuller), for Nuneaton (Mr Jones) and for Camborne and Redruth (George Eustice) have all made the point that he has done the House a great service in allowing us to have an important debate on an important issue, which affects so many of our constituents.
Fuel is of fundamental significance to consumers, and it is in our mutual interest to ensure that motorists and businesses are confident that they are being treated fairly and that, when the cost of crude oil comes down, reductions are passed on transparently and without unnecessary delay. This Government have eased the burden on motorists by £5.5 billion by not implementing the policies of the previous Government. I do not want to make this debate an unnecessarily partisan one—although my emphasis is on the word “unnecessarily”. The truth is that, had we put in place the previous Government’s plans, prices would be higher.
The shadow Minister pointed out, with typical decency, that we have also put in place the rural fuel duty rebate scheme, which is cutting the price of fuel in very remote communities by 5p a litre. The Government will continue to monitor the effectiveness of that scheme and, obviously, if there is more to say on that matter, I will come to the House and say it.
Hon. Members on both sides of the House have pointed out that the retail price of fuel is affected by a wide range of factors, including crude prices, tax and duty, the exchange rate, and the cost of refining and bringing the product to market. In the end, the effect on consumers is a profound one, and it is because I share the view of my hon. Friend the Member for Harlow and others that this is a matter of social justice that I am delighted that we shall have eased the burden on motorists by approximately £5.5 billion between 2011 and 2013. Average pump prices could be approximately 10p a litre lower than if we had implemented the previous Government’s so-called fuel duty escalator in 2011-12.
The petrol and diesel retail market in the UK is subject to the same legal constraints and the same framework governing competition and trading standards that relate to businesses in general. Price differences in different areas are likely to reflect local supply and demand, and may differ depending on fuel transportation costs and different retail business models, as my hon. Friend the Member for Bedford, among others, has said.
Oil prices rose this year owing to international developments such as uncertainty in the middle east and north Africa, and continued growth in demand. The Wheatley review and the International Organisation of Securities Commissions are looking at these matters, as the House will know. The House will also know that the UK works with the G20 to enhance transparency in the oil market, as recommended by many contributors to the debate. In the end, as my hon. Friend the Member for Warrington South (David Mowat) said, this is at least as much—and arguably more—about retail practice as it is about the oil industry. The oil price is, of course, set by global markets. The key causes of high prices this year are well understood.
Steve Baker (Wycombe) (Con)
Many Members have talked about the volatility of oil prices and the functioning of the markets. There is a correlation between the volatility of oil prices and US Federal Reserve monetary policy. Before the end of Bretton Woods, there was hardly any volatility in the oil price; it has been introduced only subsequently. If there is a secular trend in oil prices at all—priced in, say, gold, which happens to be a scarce commodity—it is downwards. I do not think we are paying enough attention to the US exporting both inflation and volatility through US Federal Reserve monetary policy.
Mr Hayes
That is a typically incisive and insightful contribution from my hon. Friend. I will say a little more about volatility, but the House will have heard his argument. It seems to me to be as impressive as his arguments usually are, and I shall certainly give further consideration to the matter.
In the spirit of being open-minded—this is, of course, an immensely open-minded Government—let me mention the Wheatley review into LIBOR, which is considering whether benchmarks or indices in other markets also need to be looked at. It will, of course, include this market and it aims to publish its conclusions by the end of September. I look forward, too, to the recommendations from the International Organisation of Securities Commissions, and the Government will consider how to take those forward in the G20 and how to implement them in the UK to ensure oil price benchmarks are not open to manipulation. As a result of this debate, however, and of the arguments made by my hon. Friends and others, I will write to the Financial Services Authority about the concerns raised here today. There is no point in our having these sorts of debates if they do not inform and inspire Government policy. In the case of this Minister, they will do just that.
It is absolutely right that we enhance transparency in the oil and commodity markets. The Government continue work to improve the functioning of the global market and to reduce price volatility through engaging with key oil-producing countries to promote investment in oil production and responsible behaviour in the market—the matter raised by my hon. Friend the Member for Wycombe (Steve Baker) a few moments ago. To that end, we have also championed a new charter for the International Energy Forum, and we will continue to monitor closely the impact of initiatives being taken in several other G20 countries, including Germany and Austria, to improve fuel price transparency.
Demand is another issue, and reducing the UK’s long-term dependency on oil and petroleum products is a Government priority. This includes developing ultra-low-carbon vehicles, high-speed rail networks and renewable heat incentives. We are working within the G20 to reduce oil demand globally—for example, through the work to reduce fossil fuel subsidies. At the same time, it is important to ensure that the market is well supplied, and we are working with the International Energy Agency, including on post-Libya stock release.
The Office of Fair Trading call for evidence is central to our considerations today. I encourage all Members to submit evidence to the OFT, and I know that many who have spoken in the debate will do just that. Of course we must not intervene until that call for evidence is complete. My Department believes that changes in the price of crude are indeed passed on to the pumps, although, as is clear from the data, there is a considerable time lag. There is certainly a case for greater transparency, about which, as my hon. Friend the Member for Harlow will know, the OFT has specifically asked for evidence.
In summary—this is not my final summary, Mr Deputy Speaker, but merely my preliminary summary: I did not want to dampen the enthusiasm with which my speech was being met—I strongly welcome the OFT’s decision to call for more information about the way in which the petrol retail market works.
As has been said, the OFT has said that it will consider whether reductions in the price of crude oil are being reflected in falling pump prices; whether the practices of supermarkets, which have been mentioned by a number of Members today, and major oil companies may be making it more difficult for independent retailers to compete with them—I shall say more about that in a moment; whether there is a lack of competition between fuel retailers in some remote communities in the UK; and whether the concern about price co-ordination and the structure of road fuels markets that has been expressed by other national competition authorities is relevant in the UK. That is a first step, and reflects the fact that, to date—as was pointed out by my hon. Friend the Member for Warrington South—no clear evidence has yet been provided to demonstrate that there is reason for concern about competition in the market. Nevertheless, the inquiry is welcome: I want to make that absolutely clear.
I ask my hon. Friend the Member for Harlow, and other Members with an interest in the subject, to engage with the OFT’s study—I have no doubt that my hon. Friend was going to do so anyway, but I wanted to place that on the record—and to participate fully, as my Department will: I commit myself today to ensuring that that happens. What is important at this stage is for Members or their constituents who have evidence relevant to the scope of the OFT's call for information to make it available before 17 October.
As I have said, my Department’s analysis shows that changes in the wholesale price of crude, both increases and decreases, are passed on, but I shall nevertheless ask my officials to look at the matter again and revisit their analysis, as a direct result of the debate and my hon. Friend’s wider contribution to discussions on this subject.
The important issue of what might be called “fuel deserts” was also raised today. The OFT is seeking evidence relating to the decline in the number of independent petrol stations and the rise of hypermarkets. That too has been mentioned by a number of Members, including my hon. Friend the Member for Warrington South and my hon. Friend the Member for Bedford. The Government have taken tough action in the past to address the potential of local monopolies. For example, this summer, following an OFT investigation, Shell gave undertakings to sell a number of its petrol stations because of concerns of this kind.
Some Members mentioned the problems of rurality. The hon. Member for Inverclyde (Mr McKenzie) and my hon. Friend the Member for Camborne and Redruth (George Eustice) represent rural constituencies, and I am quite deeply affected by the problems myself. I know from my own experience in Lincolnshire that rural communities can be disadvantaged when the number of petrol retailers falls and journeys to obtain petrol and diesel become longer. I will also ask my officials to look at the relationship between storage capacity and the declining number of retailers; the picture is mixed because of the size of tanks that are kept in different places, but I am interested in the issue.
Independent petrol stations are often located in more rural areas, and can provide a valuable service for local communities. As was mentioned by the hon. Member for Rutherglen and Hamilton West (Tom Greatrex), there is concern about the effect on rural resilience in the event of further closures of such petrol stations. As I said earlier, the OFT has signalled that it is seeking evidence relating to the decline in the number of independent petrol stations and the rise of the hypermarket retailers, to which the hon. Gentleman and others referred. I particularly thank my hon. Friend the Member for High Peak (Andrew Bingham) for emphasising the effect that that has on his constituents. I must make it clear again that the Government have not been reluctant to take action in the past, and would be happy to do so again if the evidence legitimised such action.
Earlier this year, my Department commissioned a study of the retail market for road fuels, to develop further our evidence base on the size and shape of the market and our knowledge of the impact of the structural change to the market over recent years. I will write to interested Members with details of the findings in due course and share them with the OFT. That is what it says in my script, but I will do more than that: I will write to all Members of the House, because I know that all Members are interested in these matters. We will keep the whole House fully informed of the steps the Government are taking.
As a result of the arguments my hon. Friend the Member for Harlow has made today, I will also instruct my officials to ensure that this study should include detailed analysis of how far people have to travel to reach their nearest petrol station, and how this has changed over time. He may count that as a significant victory for him and a tribute to the work he has done.
In conclusion—
Tom Greatrex
While the Minister is in the mood to instruct his officials to do various things in response to this debate, may I reiterate my point about the work the previous Transport Secretary said would happen, but which it appears the Department is now saying will not happen until after an OFT inquiry? Will the Minister look into that, and see whether it could happen sooner rather than later?
Mr Hayes
I thought that was the best point among many that the shadow Minister made in his speech. The OFT plans to report in January 2013. As the hon. Gentleman knows, it is looking specifically at the issue of transparency, and we want to feed its findings into our work. I will certainly take a look at the timing issue he describes, however, to make sure we are acting in a coherent and consistent way.
Mr MacNeil
I am grateful to the hon. Gentleman. Will he consider increasing the rural fuel derogation and extending the rural areas that are covered by it, not only in Scotland but in Wales and England?
Mr Hayes
Given what I have said about my credentials in respect of rurality, the hon. Gentleman can be absolutely convinced that my concern for rural areas in England, Scotland and the rest of our United Kingdom will be at the very heart of all I do.
I again thank my hon. Friend the Member for Harlow for securing this debate, and in response to his three core points I say the following. First, petrol prices are high, but had we implemented the previous Government’s policies, they could have been 10p per litre higher, and we have taken location-specific action through the rural duty rebate scheme.
Secondly, DECC analysis shows that changes in the price of crude are passed on at the pump—although there is a significant time delay. The Government are keen to establish whether there is evidence to the contrary, however, and we will revisit our analysis. The OFT will also look at this, and I encourage those with evidence to give to submit it before the due date.
Thirdly, price transparency is important to build consumer confidence. In the call for information, the OFT noted that DECC and the Department for Transport have been in discussions with the fuel industry on possible ways to improve information on fuel prices, and we have agreed to await publication of the OFT’s findings before taking further steps. Let there be no mistake, however: I shall make sure that coherence informs our approach to that cross-departmental work.
The Government take seriously the potential for manipulation of reported price benchmarks and look forward to the International Organisation of Securities Commissions recommendations. We will consider how to take them forward in the G20 and how to implement them in the UK, to ensure that oil price benchmarks are not open to manipulation. As I have said, I will write to the Financial Services Authority to express Members’ concerns. I encourage my hon. Friend and others in this House to work constructively with the OFT and await the result of its call for information. As has been said, at this stage the OFT has not ruled out a more detailed market study. This first step of the call for information will enable the OFT to take a view on potential market concerns and the need for further work. The OFT will publish early next year, alongside recommendations for action by others to support fair and open competition in the market.
Let me end by saying that energy is vital for growth, as fuel provides the power for our economy. However, this is also about the effect on consumers—it is indeed about social justice. In my job, as the people’s Minister from the people’s party—the party of Wilberforce, Shaftesbury and Disraeli—the people’s concerns for social justice will motivate, inspire and inform all I do, in this matter and in others.