ESCAPE TO OIL
BY NICHOLAS
DAVENPORT
THE increasing distrust of British industrial shares which the investor is now showing and his growing affection (or passion) for oil shares are both understandable. Leaving aside the question of how much unemploy- ment is likely to be created by the Chancel- lor's disinflationary measures and how severely certain trades will be hit, what is worrying the investor is the deterioration in the relations between management and labour which may so easily lead to strikes or a go-slow movement. Tempers are obviously short on both sides. Dismissing workers at short notice and blaming the Government, as the British Motor manage- ment has done, is asking for trouble. Calling for strikes against redundancy sackings, whether caused by credit squeeze or auto- mation, is fatuous. Both managements and unions have got to sit down together and co-operate to meet a very difficult situation. Spreading less work over shorter hours is merely raising manufacturing costs and jeopardising our industrial future. What depresses the investor profoundly is that labour appears to be uninterested in the future. If nothing can be done to stop British costs rising faster than those of our competitors in international trade we will have no industrial future at all. That is very plain to the investor, if not to labour unions, and it explains why there has been such a frantic rush after oil shares. Labour enters very little into the cost of manufacturing petroleum, oils and spirits, which, from start to finish, have been pumped, piped,
refined and transported in bulk without any handling in the old-fashioned sense. The relations between management and workers in the oil industry have always been adult and enlightened. This might also be said of the vegetable oil industry, but what has singled out the petroleum industry for special investment attention is the spectacu- lar increase in consumption which has been foreshadowed.
Oil consumption in Great Britain was up 12} per cent. in the first quarter of 1956. It has lately been increasing at the rate of over 10 per cent. per annum and it is expected to double itself over the next ten years. Oil is designated to fill the gap between the age of coal and the coming age of nuclear power. In Western Europe coal is still the main source of energy. Last year, for example, it accounted for 69 per ceSt. of the total energy consumption against only 28 per cent. of the total in America. The scope for a further increase in power consumption is enormous for, per head of the population, we' are only con- suming in Western Europe 58 per cent. of what the American does.
Although nuclear power may produce a large part of Great Britain's electricity by 1975, in Western Europe as a whole it is not expected to make any significant con- tribution in under twenty years. The bulk of the energy gap in 1975 will have to come from imported coal and oil and the incen- tive to substitute oil for coal will increase with the rising cost of coal production. The Government has estimated that the oil content of our total fuel consumption will be over 50 per cent. higher by 1965. Two American experts (Mr. Joseph Pogue and Mr. Kenneth Hill) have calculated that in order to balance world oil demands by 1965 the Middle East production will have to rise by 155 per cent. The fact that the only oil company in the position to increase its own production by 155 per cent. in that time is British Petroleum, whose strength in the Middle East 1 recently reviewed, accounts for the unseemly scramble for BP shares in which investors on both sides of the Atlantic have been indulging.
Oil is as greedy for capital as it is sparing with labour. One of the major oil companies has reckoned that nearly £100 million will have to be spent by the UK oil industry in the next ten years. (No wonder that Trini- dad Oil had to sell out to its big American partner.) But the urge to spend more capital to use less labour, which will tend, of course, to make labour plentiful in the end, is the inevitable result of the continual rise in wages. The trade unions would be well advised to understand the significance of the present escape to oil.
Previous page
