Petrol next
JOHN BULL
Oil prices overseas are rising steadily. Tanker rates remain at a high level. Libya, Iraq and Saudi Arabia want to increase their share of oil company profits. These are the trends which matter', rather than the belated lifting of the embargo on supplies to Britain, the United States and Germany announced at the end of last month. Indeed, it will be difficult for the Government to resist for much longer the argu- ment that the extra 2d a gallon for petrol is insufficient to cover the sharp rise in costs which has followed the Israeli/Arab war. The Ger- mans, for instance, have had to put up with four price increases for certain products. .
Comparing July with May, Britain doubled her oil imports from Venezuela, nearly trebled her off-take from Iran and stepped up ship- ments from the United States by over 1,000 per cent. Even so, our total intake of crude oil and products totalled only 5.2 million tons in July against 6.7 million in June and 8.9 million in May. We have been living off stocks—and pay- ing more for fresh supplies. On a cost, insurance and freight basis the figures show that the average price per ton in July was £7 Its com- pared with £6 8s per ton in May. That represents an increase of 18 per cent. From the Govern- ment's point of view, the important exercise is to separate out the effect of higher freight prices from higher product prices. The former will last
just as long as the Suez Canal is closed: the latter may prove to be a fixture.
On the face of it, shipping costs are the main culprit. Rates have rocketed up. Earlier this year you reckoned to pay 32s a ton to bring oil from the Persian Gulf to West European waters. Today the price is close to 140s a ton. The matter can be put another way. At the last count (unofficial) British Petroleum had spent £80 million since the war in foreign currency on tankers whereas normally the company would have spent perhaps £15 million to £20 million in the same period. It would be wrong, however, to assume that every ton of oil coming into Britain is charged at pre- mium rates—the oil companies' own tanker fleets carry a good part of our supplies. One's confidence that freight rates will drop like a stone once the Canal is open is founded upon the fact that there is a vast amount of tanker capacity available—certainly much too much for the pattern of trade established before the war. The Chamber of Shipping has recently (12 August) counted up the oil tanker tonnage
'laid up for lack of employment': there are still twenty-four ships in that category.
The new attitude taken by the governments of the producing countries looks much more serious. Libya is providing a lead which the others are following. She bases her stand on the Libyan Petroleum Law, the relevant passage of which reads as follows: 'the price fob sea- board terminal for Libyan crude oil . . . [shall be] . . . arrived at by reference to free market prices for individual commercial sales of full cargoes.' The Libyans reckon that the world- wide increase in prices, particularly in European markets, should be taken into account. Further- more, they say that adjustments should also be made for the more favourable geographical position of Libya in comparison with the Per- sian Gulf and for the increase in freight rates which have bolstered that favourable position. It does not seem to matter that the companies are making less rather than more profits. Iraq and Saudi Arabia are playing variations on the same theme. Both push a proportion of their oil through pipelines to the Mediterranean: hence they claim to offer the same advantages that Libyan operations provide—and hence they want a higher posted price. The oil companies will try to settle for 'temporary' surcharges but 1 doubt whether they will succeed.
This brings us back to two domestic problems : how much extra on petrol? and, what price oil company shares now? My guess is that the companies will ask for 2d to 4d on all products and that the Minister of Power will agree providing domestic consumers- rather than industrial users carry much of the burden. The public will be told that it is only 'temporary.' As for shareholders. i do not advise them to ditch their Shells and BPS now. The companies will recover as they did in 1956. Oil —and gas—is still a very profitable business.
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