Gordon Brown and Alistair Darling are meeting oil industry chiefs today as pressure mounts over soaring fuel prices. Writing in the Guardian ahead of the talks, the prime minister said there was no quick fix to the "third great oil shock".
He called on nations to unite to stabilise the price of the commodity, which has increased from $10 a barrel a decade ago to $135 today. And he said that the UK will argue that a global strategy to tackle the impact of higher oil prices will be put at the top of the agenda at the next meeting of the G8 group of industrialised countries.
Brown will use this morning's meeting with energy chiefs in north-east Scotland to attempt to secure a higher output from the UK's declining North Sea oil fields. Downing Street said the meeting was a private one, although further details may be released later.
The talks come the day after hundreds of lorry drivers poured into London to demand a cut of up to 25p a litre in fuel duty. They are under pressure to respond to the rising price of fuel by scrapping a 2p increase in fuel duty, due to come into force in October, and to reverse a £200 increase in vehicle excise duty on environmentally unfriendly cars bought during the last seven years.
Cabinet ministers paved the way yesterday for a change to vehicle excise duty. John Hutton, the business secretary, said the government had to be careful to avoid "hammering people", while Jack Straw, the justice secretary, held out the possibility of a change when the chancellor, Alistair Darling, delivers his pre-budget report in the autumn.
In his article today, Brown today makes clear that he understands the pain felt by consumers. "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," the prime minister writes.
Any change would be seized upon by opposition parties as the government's second climbdown on tax policy in a month; in the run-up to the Crewe and Nantwich by election, Brown sanctioned a £2.7bn tax giveaway to soften the impact of the abolition of the 10p starting rate of tax. Downing Street and Treasury sources indicated last night there were no imminent plans to cut fuel and car duties.
But ministers are keen to show flexibility on fuel duty and that they are heeding the concerns of backbenchers and ministerial aides who have voiced concerns about the increase in vehicle excise duty on environmentally unfriendly cars.
If fuel prices remain high, the chancellor is looking seriously at freezing the fuel duty increase on October 1. This would cost £550m if delayed until next spring. The special car tax increase is not due to come into force until April 2009, which gives the chancellor until next year's budget to announce any changes. Labour MPs are keen to remove the retrospective element of the increase, which applies to cars bought after 2001.
Hutton made clear yesterday that the government was aware of the criticisms when he appeared on Radio 4's Today programme. "We've got to do the changes in a way that inflicts the least damage on people's personal family budgets and incomes," he said. "We're trying to get this balance between encouraging choices to go green but not hammering people."
Straw said people should wait for the pre-budget statement in the autumn. "The chancellor and the prime minister have said quite explicitly that we are listening to public concerns about this." Brown will make clear today the government understands the impact of $135-a-barrel oil prices when he pledges global and domestic action to tackle the problem.
But in the Guardian article, he stressed there was a limit to what the government could do alone. "Our goal, that Britain becomes a low carbon economy, is now an economic priority as well as an environmental imperative." He said the best long-term solution for consumers and the environment would be a radically different energy policy.
"If we are to ensure a better deal for consumers, energy security and lower greenhouse emissions, Britain, Europe and the world will have to change how we use energy and the type of energy we use," he said. Without a global push to limit demand and become more energy efficient, prices would remain high, he writes.
"As every country faces these increased costs, it is now widely understood that a global shock on this scale requires global solutions," he says, urging Opec to come clean about its reserves of crude and for the G8 summit in Japan in July to look at ways of cutting demand and boosting alternative sources of supply.
But Vince Cable, the Liberal Democrat Treasury spokesman, rejected suggestions that the Opec countries should increase oil production to help tackle rising oil prices.
"The things that are holding back Opec production have nothing to do with cartel behaviour," he told BBC Radio 4's Today programme, adding that "the problem at the moment is world demand is still rising rapidly".
He said there is no capacity to increase production, adding: "Appealing to the oil producers to produce more is a empty gesture."
Cable, a former oil industry economist, said he would wait before postponing the 2p increase in fuel duty. "We have to wait until the autumn, we have to see what conditions are like," he said.
(By Jenny Percival, Nicholas Watt and Larry Elliot,
The Guardian, 28/05/2008)