Fuel Supplies: War in Iran

Question

Asked by

To ask His Majesty’s Government what plans they have to ensure the continuity of fuel supplies in the light of the war in Iran.

The UK benefits from a strong and diverse fuel supply. The fuel supply industry has been clear that fuel production and imports continue as usual. The Government continue to monitor the situation closely and will act if necessary. The essential lesson of this conflict, however, is that while we are dependent on fossil fuel markets, we are exposed to volatile prices. The answer must be to go further and faster towards homegrown clean power that we control.

I thank my noble friend for his Answer. Two matters prompted my Question: first, reports that 20% of the world’s oil supply passes through the Strait of Hormuz, and, secondly, reports at the weekend and since that the UK has only four weeks of fuel supplies in reserve. Given that, can he tell me how much of the UK’s supply is dependent on the oil that passes through the Strait of Hormuz? If current disruptions to worldwide oil supplies continue, how long will it be before the Government are forced to introduce restrictions on or rationing of fuel supplies?

I thank my noble friend for his question. His first statistic is correct. His second statistic, not that it is necessarily one that has his support, is categorically untrue—it is categorically untrue that there are only four weeks of fuel supply in the UK. However, the Government are closely monitoring the situation to ensure that supplies remain resilient. The UK remains a net exporter of petrol, with domestic capacity sufficiently filling this demand, while diesel volumes are met mostly by domestic production and imports from trusted partners. Only a small percentage is obtained from the Middle East. The majority of crude oil used for UK production comes from the United States and Norway, with just 1% from the Middle East. The UK obtains a proportion of jet fuel from the Middle East, but the fuel supply industry has been clear that fuel production imports are continuing across the UK as usual.

My Lords, I declare my interest as part of a consultancy that provides geopolitics analysis to the Government of Qatar. Does the Minister agree that the continuity of fuel supplies may involve negotiations with those who have de facto control of the Strait of Hormuz rather than with those whom we wish had control of the Strait of Hormuz?

The issue of fuel supply through the Strait of Hormuz is relative to world supply and world prices; that is, because the UK obtains only a very small proportion of its supplies from the Middle East, the effect is more likely to be on prices across the world as other people seek to make up their supplies from different sources. The noble Lord is right that how we clear the Strait of Hormuz for those supplies has to be a question of disengagement, détente in the present conflict, and negotiation not in an ideal world but with those with whom we find ourselves in a negotiating position.

My Lords, do the Government understand that they have already presided over the closure of two of our oil refineries with their high-carbon taxes and unfriendly energy policy? Will they take urgent action to avoid the closure of the remaining ones, which would leave us without domestic supply and with shortages?

The noble Lord will not be surprised to hear that I do not agree with his analysis of why the two refineries that have closed in the UK have done so, but the four refineries that we have in the UK are all producing well and in a robust condition. The Government will continue to monitor that process, but there is no reason to believe that further refineries are likely to close in the near future.

My Lords, does the Minister agree that while the conflict with Iran has driven up oil and gas prices, this is not currently a fuel supply crisis, and motorists and households should therefore continue to purchase fuel and gas as usual? If the conflict persists and international supplies are further disrupted, what steps are being considered to safeguard aviation fuel supply and to prevent significant increases in aviation fuel prices in the longer term as we head towards the summer?

The noble Earl is right; this is currently, in essence, a price crisis and not a supply crisis. That will remain the case for quite a long time, depending on how long the war continues. If the war continues for a very long time, there obviously will be issues not necessarily of supply to the UK but offset issues relating to other people trying to eat the UK’s lunch, as it were, in their quest for supplies elsewhere in the world. The Government have already taken action in terms of taking part in the IEA’s release of substantial amounts of oil to make sure that that does not happen in the medium term and co-ordinating with efforts internationally to make sure that jet fuel, for example, is available on a world basis. Aircraft and other companies in that field hedge their supplies very long in advance, and therefore this is not an issue for the immediate future.

My Lords, I refer to my interest as declared in the register as chair of the National Preparedness Commission. It is not just oil that passes through the Strait of Hormuz. A third of global trade in fertiliser passes through the strait. I appreciate that this is not immediately within my noble friend the Minister’s portfolio, so if he does not have the information in his folder, perhaps he can write to me and place a copy in the Library, but what consideration is being given across government to the implications for farmers in this country but more particularly for global farming and long-term food supplies if this disruption continues?

My noble friend is right that this does not fall within my brief particularly, but I do know a bit about the subject he is raising, which is synthetic ammonia supplies from the Middle East. We do not have ammonia production in this country at the moment, so there is potentially a long-term issue of ammonia supplies coming into the UK and into a lot of other countries across the world, as my noble friend mentioned. Part of the solution is to go for different sources of ammonia which are not synthetic, particularly green ammonia and other forms of fertiliser such as digestate, which can fulfil substantially the role played by ammonia in the farming cycle.

My Lords, I am not sure that any of the figures we have heard in the last few minutes are correct or substantial. In fact, there is a huge amount around the world of spare oil capacity and oil production potential which can be and is being brought into play. There is the vast boost in American shale, obviously, from which we get a lot already. There are the reserves which have been released under the scheme which I chaired in 1979 at the IEA, and those reserves are only a small part of more reserves that can be developed at any time we wish. There are pipelines which bypass the Strait of Hormuz. All I am saying is that the situation can be overexcited by an ill-informed media. Does the Minister agree that we should be careful not to excite these dangers and realise that this is a manageable situation if we take a strong line on what can be done to reopen the Strait of Hormuz when we can and in the meantime do not get so worked up that everyone starts talking about rationing and other idiotic ideas?

I hope the noble Lord does not consider that the figures and other facts that I have presented this afternoon are all erroneous, because I assure him that they are not, but he is right to say that this is not a question just of whether stuff goes through the Strait of Hormuz or nothing. There are a great many other ways in which oil, petroleum products, gas and so on can be taken from their source to where they want to go without going through the Strait of Hormuz. For example, pipelines across Arabia are already beginning to take some of the oil that otherwise would go through the Strait of Hormuz out to port, and the same is true with gas supplies. It is not all about LNG coming in vessels going through the Strait of Hormuz. I totally agree with the noble Lord that we should not be too taken up by overexcitable, ill-informed press speculation but should concentrate on the real facts and the real opportunities that there are to gather ourselves a sustainable oil and gas supply, which also includes making sure that as much as possible of our energy supply comes from home sources in the medium and long term.