Motorists are set to benefit from a substantial decrease in fuel prices over the next 18 months, as analysts forecast a significant drop in the cost of oil to $60 (£47) a barrel.
The anticipation of reduced petrol prices follows predictions of a global oil oversupply by 2030. Citigroup experts foresee a glut in supply forcing companies to lower prices, with crude oil expected to fall to $60 a barrel from the current $80.
This anticipated drop will not only make it cheaper to fill up at petrol stations but also potentially lower airfares as aviation fuel costs decline.
The International Energy Agency recently warned of a “staggering” excess of global oil supplies by 2030. Citi’s forecast suggests this will lead to a “very large surplus” by late 2025, driving down the price of petrol and diesel.
While this news will be welcomed by drivers, it presents challenges for North Sea fossil fuel producers already burdened by high taxes. They face the prospect of further levies, as Labour unveiled plans to extend the windfall tax on oil and gas by a year to 2029 if it wins the general election.
Labour’s proposal includes a 3% increase in the levy and the removal of the industry’s offshore tax breaks. Sir Keir Starmer stated that this plan would generate £8.3 billion in taxes to fund Labour’s Great British Energy project, a publicly-owned company aimed at “delivering power back to the British people”.
The plan has been applauded by environmental groups, though industry analysts warn that the combination of falling prices and increased taxes could render the North Sea the “world’s most hostile environment” for oil and gas operators.
Ashley Kelty, an oil analyst at Panmure Gordon, commented: “Labour’s plans will leave the UK colder and poorer. It will make the North Sea the world’s most hostile environment for oil and gas operators – apart from those operating in war zones.”
Kelty and others believe Labour’s proposals could halt most new developments in the region, potentially affecting projects such as the Cambo oil field in the west of Shetland.
Chris Wheaton, an analyst at Stifel, echoed these concerns, stating: “Labour’s tax plans would kill off the North Sea. There will be very little new investment, and that means UK oil and gas output will decline very fast – much faster than demand. The UK will become increasingly dependent on other countries for more of its energy.”
Ed Miliband, Labour’s shadow energy secretary, defended the plans, saying: “Labour is offering the country the most ambitious climate and energy plan in British history – investing in our country through Great British Energy so we can cut energy bills for good, make our country energy secure, create good jobs, and protect our home for our children and grandchildren by tackling the climate emergency.”
