Climate and energy secretary says an oil price of $100 a barrel transforms the economics of climate change
Source: The Guardian March 3, 2011
Britain is facing a 1970s-style oil price shock that could cost the UK economy £45bn over two years, the climate and energy secretary, Chris Huhne, is expected to warn in his first intervention on the issue since the start of Middle East political crisis.
In Thursday's keynote speech on the impact of the oil crisis, Huhne will argue that an $100 (£61) a barrel price for oil transforms the economics of climate change in Britain.
He will disclose the Department of Energy and Climate Change's (Decc) economists have warned that if the oil price rise turns into a 1970s-style shock the cumulative loss to the UK economy would be worth £45bn over two years. Decc's economists made the calculation on the basis of oil prices rising from $80 a barrel last year to $160, according to Huhne.
At $102 a barrel, oil is at a two-and-a-half year high and there have been predictions that if the political turmoil spreads across the Gulf, the price will rise considerably more.
Huhne will say: "If the oil price doubled, as from $80 last year to $160 this year, it could lead to a cumulative loss of GDP of around £45bn over two years. This is not just far-off speculation: it is a threat here and now."
The speech is an attempt to galvanise public support for tough measures to create a green economy, after recent setbacks including attacks on the science of climate change and stalled international negotiations.
Drawing on research conducted for the previous government by Lord Stern, Huhne will argue that a $100 a barrel price is the exact point at which the economics of climate change pivot so that it becomes cheaper for British consumers and businesses to invest in green technology than remain with the status quo.
He will say that if oil only reaches $108 a barrel by 2020 as predicted by the US Department of Energy, which would also lead to higher gas prices, then "the UK consumer will win hands down". He will say the UK consumer would be "paying less through low-carbon policies than they would pay for fossil fuel policies".
This is the moment to invest in green infrastructure, homes and transport, according to Huhne. Fossil fuels are now the costly, high-risk option for energy: it is "crazy" not to prepare for a low-carbon future.