Wednesday, 11 June 2008

Running on empty?

Posted on the Bevan Foundation blog on 11 June 2008

The head of one of the World's biggest oil companies has stuck his neck out to warn that oil prices could double again before we know it

In today's Independent the head of the Russian state energy firm Gazprom said we can expect £2-per-litre petrol. It is hard to see how this won't lead to a global slump.

Arguments about cutting fuel tax entirely miss the point as it would take a significant drop in fuel duty simply to keep up with the rising price of oil.

Ten years ago a barrel of the black stuff was trading at $13 a barrel. Five years ago it had doubled to $25. It hit nearly $140 last week.

The real issue is how do we make our economy resilient to oil shocks.

It is not just the price of petrol that is affected. Our economy is heavily dependent on oil. The price of gas and the price of steel are all closely linked to it – so the cost of building and heating homes is going up. The cost of building roads is set to rocket - the price of Tarmac has alone is up by 25%

And we all know from our weekly shop the price of food has risen sharply. It is closely linked to the rising price of fertiliser and animal feed – all of which rely on oil for their production. And of course there’s the cost of moving goods around.

Around 95% of our transport system is dependent on oil. We’ve been used to fuel costing the same as mineral water and we have designed our towns and cities around the assumption that we can all hop in the car.

But not everyone can. As I point out in today's Western Mail, in communities like Blaenau Gwent and Merthyr, where 35% of families are car-less, many low-income families feel forced to “invest” in a car to access jobs and services. And as the cost of petrol goes up it will be the families on tight budgets that are hit the hardest.

We've got to shift our transport system away from oil dependence. People can dismiss the need to respond to the challenge of climate change because it is an issue for tomorrow, but oil is an issue for today

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