Will Brexit Mean Higher Bills?
As if the average household does not have enough to worry about, we could be faced with further hikes in oil and gas prices, if Brexit talks conclude with the UK leaving the EU on the basis of World Trade Organisation (WTO) rules. This is the stark warning from industry body Oil and Gas UK, which predicts that annual trading costs could increase from the current level of £600 million to a worst case figure of £1.1 billion. Costs that would inevitably be passed on the the consumer.
The figures come from a “worst case” scenario analysis, evaluating the possible mechanisms for the UK’s exit from the European Union. However, industry experts have also pointed out that we now have the perfect opportunity to reduce trading costs too. If the UK could negotiate better tariffs with non-EU trading partners, the figure could actually fall to something closer to £500 million.
As Brexit throws up yet more unforeseen consequences for households that are already cash strapped in a struggling economy, domestic oil experts at Emo Oil have suggested that now is the time to check your home fuel oil levels and top up before the double impact of winter prices and Brexit uncertainty sends prices sky rocketing.
So what are the WTO rules, any why could they have such a major impact? Essentially, these form the default fall back option in the event that nothing else is agreed when the UK leaves the EU. Under these circumstances, the EU would apply a three percent tariff on exported petroleum products, and a variety of tariffs on other goods. The net result could amount to an extra £260 million in export costs, and £230 million on imports.
Other Brexit Implications
The research was carried out for Oil and Gas UK by analysts at Ernst and Young, as part of a wide ranging examination of Brexit’s potential impacts across a number of industries. It described the potential increase in costs as “unwelcome,” particularly for an industry that has already seen over 120,000 job losses over the past couple of years as it has struggled with a global slump in oil prices.
Freedom of movement after Brexit is another aspect that has given Oil and Gas UK cause for concern. The industry relies on approximately ten percent of employees from overseas, a little above the national average, and is therefore concerned that any limits on freedom of movement could put the industry at a competitive disadvantage.
The group is lobbying parliament for assurances that the immigration system implemented after Brexit will not add an excessive administrative burden to an industry that is just seeing some green shoots of recovery after years of difficulty.
Knock on effect
One thing is certain, whatever happens in the oil and gas industry has an impact on us all. From the oil to heat our homes to the fuel in our cars to the price of diesel, that affects the cost of every item on the supermarket shelves, it is in all our interests to ensure the best deal possible for the industry.