Higher petrol prices should encourage us to save energy, not to start panicking

Of all the vote-grabbing issues that might have been front and centre before next week's local and European elections, the world price of oil must be one of the least expected. The overthrow of Saddam Hussein was supposed to bring down prices and make the market more predictable. Yet now we have headlines proclaiming the £1 litre of petrol and the Leader of the Opposition, Michael Howard, irresponsibly announcing that the Tories would support new fuel protests.

Of all the vote-grabbing issues that might have been front and centre before next week's local and European elections, the world price of oil must be one of the least expected. The overthrow of Saddam Hussein was supposed to bring down prices and make the market more predictable. Yet now we have headlines proclaiming the £1 litre of petrol and the Leader of the Opposition, Michael Howard, irresponsibly announcing that the Tories would support new fuel protests.

The reasons for the surge in prices - which in the US this week reached a record $42 a barrel for crude - are no secret. Although production in Iraq has been edging up as sabotage of pipelines has started to recede, the war has not fostered the conditions for stable production that the US, especially, hoped for. Meanwhile the recent attacks on foreigners in Saudi Arabia, and earlier attacks on oil production facilities there, have scared the markets. Add in the start of the driving season in the United States, when whole families pile into their gas-guzzling 4x4s for cross-country trips, and a steep increase in demand from fast-developing China, and there should be no surprise at all that prices have risen. The likelihood must be that they will rise further.

This is not unadulterated bad news for us, however, or for the British economy. The UK is still a net producer. The higher the demand and the higher world prices, the more money the Inland Revenue creams off in tax and the less, in theory, the Exchequer should need to raise from other sources.

There are certainly people, and they are not all rural-dwelling Tory voters, for whom the higher petrol prices cause real difficulty, and this needs to be recognised. Yet Mr Howard's suggestion that the Chancellor ought to reconsider his 2p fuel duty increase planned for September is motivated by nothing more than political opportunism; it is a late appeal to disgruntled motorists to vote Tory in the 10 June elections.

In truth, for many people higher prices are manageable and, on balance, in the greater interest of this country's environmental health, even desirable. In real terms, the price of petrol is nothing like as high as it was during the oil crisis of 1974, and there is still far to go before it reaches this point. The fact that oil is priced in dollars, while sterling is currently strong, has protected us to an extent. But these are early days.

Any panic about the future of supplies from Saudi Arabia may also be premature. The recent attacks have raised fears about the stability of the Saudi regime and about a possible collapse in the flow of oil from the world's largest producer and exporter, but supplies have so far not been disrupted. The security of oil fields and pipelines has been enhanced, and - perhaps to reassure US companies in particular - the Saudis have also undertaken to increase output in the short term, whatever the Opec cartel decides at its meeting today in Beirut.

If the consensus of experts is right and Saudi supplies remain stable for a few years yet, there is time for alternative sources - the Caspian, the Central Asian republics and Russia, even Iraq - to come on stream in time. It is noticeable that net importers of oil, first among them the United States, are extending their diplomatic efforts in these new oil-producing states.

Diversifying the sources of supply could be one long-term benefit of today's higher prices. Another should be accelerated research and development of alternative sources of fuel. Sources that were hitherto regarded as too costly could now make economic sense. Similarly, it will be in the interests of manufacturers to develop lorries, cars and domestic appliances that use less energy.

Finally, higher oil prices should encourage us all to reconsider our choices, especially of transport and household heating. The convenience of private cars carries a cost - and it is one that we will have to become used to paying.