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BBC Business reporter Lucy Hooker reported that Chancellor Rachel Reeves has pledged to use all available resources to safeguard the people in the UK from the economic repercussions of the ongoing conflict between Iran and Israel. Reeves emphasized that no options are being ruled out in response to the looming threat of escalating energy costs, as mentioned on the Sunday with Laura Kuenssberg show on BBC. The global oil price saw a significant surge on Friday in the wake of initial attacks by both Israel and Iran, leading to further complications in the form of inflated petrol and diesel prices, ultimately contributing to a broader inflationary impact.
In the aftermath of Russia’s full-scale invasion of Ukraine in 2022, oil prices skyrocketed to nearly $130 per barrel, which directly influenced the surge in prices across various commodities for consumers in the UK, ranging from transportation to groceries. Despite the current price of a barrel of oil hovering around $75, which is lower compared to figures from January, Reeves stressed there was no room for complacency within her or the Treasury’s approach to the situation at hand. Reflecting on the response by the Conservative government in 2022 to address soaring energy prices following the onset of the Ukraine conflict, Reeves mentioned a similar intervention to assist households with energy bills may not be on the immediate horizon.
As the possibility of a disparity in oil and gas prices looms due to ongoing tensions, especially with regard to potential disruptions in shipping via the Strait of Hormuz, there remains a concern of an upward trajectory in energy costs. Nonetheless, industry experts in the oil market have pointed out that the current scenario indicates a lesser push towards increased oil prices compared to three years ago. Reeves cited the ongoing developments in the Middle East as a driving factor behind the elevation in expenditure on defense and energy security, as outlined in a recent announcement regarding the government’s budget plans for the parliament’s remaining term. Investments in various sectors such as nuclear energy, offshore wind, onshore wind, and carbon capture and storage are aimed at bolstering the UK’s self-sufficiency in energy production, she noted.
Former BP chief executive Lord John Browne echoed similar sentiments on the urgency of emphasizing energy security and transitioning away from reliance on fossil fuels. Browne, now heading BeyondNetZero, a fund dedicated to investing in carbon transition technologies, expressed reservations regarding the timeliness of certain government initiatives, suggesting a longer timeframe might be necessary for full realization. Shadow chancellor Mel Stride underscored the significant implications of the ongoing conflict on various economic facets such as oil prices, equity values, trading conditions, inflation rates, and subsequently, interest rates and the overall global economic landscape. Stride criticized the government’s decision to raise taxes on businesses, attributing it to inflated inflation rates and advocating for a stronger UK economy to navigate the current challenges effectively
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