Fuelling the debate - Spend & Save - Money - The Independent

Fuelling the debate

'I fear we may have to live with expensive petrol for some time yet'

I cannot imagine anyone missing the direct effect that the higher price of oil is currently having on this country. Personally, I feel a little miffed. Having been delayed in France because of lorry drivers blocking the route home, I rather thought we might escape the worse excesses of the protests against higher fuel prices. But given that petrol is even more expensive here than it is on the other side of the channel, I suppose it is no wonder that British hauliers gave vent to their feelings.

I cannot imagine anyone missing the direct effect that the higher price of oil is currently having on this country. Personally, I feel a little miffed. Having been delayed in France because of lorry drivers blocking the route home, I rather thought we might escape the worse excesses of the protests against higher fuel prices. But given that petrol is even more expensive here than it is on the other side of the channel, I suppose it is no wonder that British hauliers gave vent to their feelings.

It is one thing to be inconvenienced by these protests, but the real question is whether dearer energy will have a serious knock-on effect on the economy. The rapidity with which the oil price has bounced has added to the upset. In 1999 oil dipped below $10 a barrel. In eighteen months it has multiplied three-fold.

The first major oil shock that followed the Yom Kippur War in 1973 all but brought the economy of this country to its knees. Oil quadrupled in price and contributed to a massive rise in the rate of inflation. In today's global market, higher fuel costs are more difficult to pass on in the form of higher prices. True, inflation will be affected because of the rise in the cost of petrol, but it is corporate profits that are most likely to be dented.

This is not an encouraging scenario, although we should put the current oil price into historic context. For a start, we are still below the level reached 20 years ago when the Iran/Iraq war disrupted supplies and Brent crude flew to over $40 a barrel. It is probably more sensible to argue that the sub-$10 price reached last year was the aberration, rather than the recent push to over $30 a barrel.

It is worrying that OPEC's announcement of an increase of 800,000 barrels a day had no real effect - they have however indicated that they can increase still further the supply of oil, so perhaps one should not become too concerned. The tightness of supply does though highlight that the world economy is buoyant and that the additional demand now coming from developing countries looks likely to put increasing pressure on supply in the future.

The real problem remains the level of tax exacted by governments, which has always seemed an acceptable way of raising revenue because it should, in theory, encourage people to become more fuel efficient. It is also easy to collect and contributes mightily to the Exchequer.

Unlike in France, it is hard to see our current government bending under the pressure, so I fear we may have to live with more expensive petrol for a little while yet. Still, the reaction does appear overdone. Fossil fuels will not be with us forever and renewable energy sources will enjoy an increasing amount of attention. Those who forecast a pull-back in the oil price to below $20 a barrel earlier this summer are no doubt now realising that the supply/demand ratio is too tight to call. But equally I consider it unlikely that oil prices will continue to rise or that there will be dramatic consequences for our economy.

* The writer is the Chairman of the Greig Middleton Asset Allocation Committee

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

News
John Travolta is a qualified airline captain and employed the pilot with his company, Alto
people'That was the lowest I’d ever felt'
Life and Style
healthIt isn’t greasy. It doesn’t smell. And moreover, it costs nothing
News
peopleThe report and photo dedicated to the actress’s decolletage has, unsurprisingly, provoked anger
Property
Home body: Badger stays safe indoors
property
PROMOTED VIDEO
News
The programme sees four specialists creating what they believe are three perfect couples, based on scientific matchmaking. The couples will not meet until they walk down the aisle together
tvUK wedding show jilted
Arts and Entertainment
US pop diva Jennifer Lopez sang “Happy Birthday” to Gurbanguly Berdimuhamedow, president of Turkmenistan
musicCorporate gigs become key source of musicians' income
Arts and Entertainment
You've been framed: Henri Matisse's colourful cut-outs at Tate Modern
artWhat makes a smash-hit art show
Arts and Entertainment
While many films were released, few managed to match the success of James Bond blockbuster 'Skyfall'
filmsDaniel Craig believed to be donning skis as 007 for first time
Sport
Mikel Arteta pictured during Borussia Dortmund vs Arsenal
champions league
Voices
Yes supporters gather outside the Usher Hall, which is hosting a Night for Scotland in Edinburgh
voicesBen Judah: Is there a third option for England and Scotland that keeps everyone happy?
Arts and Entertainment
Pulp-fiction lover: Jarvis Cocker
booksJarvis Cocker on Richard Brautigan
Arts and Entertainment
Robin Thicke and Pharell Williams in the video of the song, which has been accused of justifying rape
music...and he had 'almost no part' in writing it
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Sales Executive

    £20 - 24k (Uncapped Commission - £35k Year 1 OTE): Guru Careers: We are seekin...

    Payroll & Accounts Assistant

    £20 - 24k + Benefits: Guru Careers: This is a great opportunity for an enthusi...

    SQL Developer - Watford/NW London - £280 - £320 p/d - 6 months

    £280 - £320 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

    Senior BA - Insurance **URGENT**

    £400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

    Day In a Page

    Mystery of the Ground Zero wedding photo

    A shot in the dark

    Mystery of the wedding photo from Ground Zero
    His life, the universe and everything

    His life, the universe and everything

    New biography sheds light on comic genius of Douglas Adams
    Save us from small screen superheroes

    Save us from small screen superheroes

    Shows like Agents of S.H.I.E.L.D are little more than marketing tools
    Reach for the skies

    Reach for the skies

    From pools to football pitches, rooftop living is looking up
    These are the 12 best hotel spas in the UK

    12 best hotel spas in the UK

    Some hotels go all out on facilities; others stand out for the sheer quality of treatments
    These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

    Widespread fear of Isis is producing strange bedfellows

    Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
    Topshop goes part Athena poster, part last spring Prada

    Topshop goes part Athena poster, part last spring Prada

    Shoppers don't come to Topshop for the unique
    How to make a Lego masterpiece

    How to make a Lego masterpiece

    Toy breaks out of the nursery and heads for the gallery
    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
    Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

    Ian Paisley’s decision to make peace with his IRA enemies

    His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
    'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

    'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

    Exclusive extract from Janis Winehouse's poignant new memoir
    Is this the role to win Cumberbatch an Oscar?

    Is this the role to win Cumberbatch an Oscar?

    The Imitation Game, film review
    England and Roy Hodgson take a joint step towards redemption in Basel

    England and Hodgson take a joint step towards redemption

    Welbeck double puts England on the road to Euro 2016
    Relatives fight over Vivian Maier’s rare photos

    Relatives fight over Vivian Maier’s rare photos

    Pictures removed from public view as courts decide ownership
    ‘Fashion has to be fun. It’s a big business, not a cure for cancer’

    ‘Fashion has to be fun. It’s a big business, not a cure for cancer’

    Donatella Versace at New York Fashion Week