An oil industry bigwig says the government may be forced to prioritise hospital and food production if the Middle East triggered oil crisis deepens
The government could be forced to “ration” energy if the Iran war drags on, an expert has warned.
A virtual blockade of the Strait of Hormuz has crippled exports of oil from the Gulf. Oil prices have soared as a result, reaching around $106 a barrel in early trading on Monday.
Iran is using the strait, a narrow waterway through which a fifth of the world’s oil and liquefied natural gas flows, as a battlefield by threatening to attack tankers that try to venture through it. Concerns are growing about the impact, the longer the conflict goes on.
Nick Butler, ex-head of strategy at oil giant BP and a former advisor to Labour PM Gordon Brown, warned: “There will be a real, physical shortage of supply in a few weeks time.
“How long that goes on we don’t know, but I think the government here must now be preparing for a significant shortfall of supply over the next two months. I think it does mean a form of rationing.
“I think we learnt from the tanker drivers dispute in 2000 that oil and gas supplies are absolutely crucial to the running of the economy and you can’t bring on new supplies quickly.”
Prof Butler, now visiting professor at Kings College London, urged the government to develop new oil fields in the North Sea. “But in the short term, we have to look at what supply we have and look at the crucial sectors, the health service, food supply, those are key elements that must be protected and beyond that is for the government to decide how to ration what is left, if we get to that situation,” he told BBC Radio 4’s Today programme.
Prof Butler added that he feared any global shortage of oil could cause other issues, explaining: “It implies competition between countries for supply.
“We are not on our own in this. Europe is 90% dependent on imports of both oil and gas. We are about 60%, 65% dependent. Everybody will be looking for whatever is available.”
PM Keir Starmer responding to the question of rationing, by saying: “Obviously we are taking all necessary measures to make sure there is the right the supply of energy. It’s really important we do so.”
The surge in the cost of oil has coincided with a spike in fuel prices for millions of drivers. The scale of the rise, and the fact motorists are being hit so quickly, has prompted warnings from the government and watchdogs to forecourt owners amid claims of potential profiteering.
Meanwhile, new mortgage borrowers continue to be impacted by the fall-out from the conflict.
Industry experts Moneyfacts revealed the average two-year fixed mortgage rate has jumped from 5.10% to 5.20% over the weekend. The average five-year fixed rate mortgage rose from 5.19% to 5.25%.
The number of mortgage deals on offer has also fallen again, dropping below 7,000 to 6,972.