UK is facing bigger economic shock than 1973 oil crisis as energy prices soar and ban on Russian imports is set to pile on more pressure, MPs warn

• An economic shock worse than the 1973 oil crisis could hit Britain this summer
• Rocketing inflation and rising oil prices could hit Britons in their pockets
• Tory MPs have warned over the Government’s policy response to the crisis

An economic shock worse than the 1973 oil crisis is looming for the UK amid fears prices could hit $240 a barrel this summer, MPs said last night.

The warning came as energy prices around the world are soaring, with the ban on oil imports from Russia set to pile more pressure on already struggling British households.

Rocketing inflation – currently 5.5 per cent – could leave the average family £1,750-a-year worse off, according to think-tank the Institute for Fiscal Studies.

Petrol prices at noon and 1pm yesterday at Reading Service Station as prices raised 5p in just ONE HOUR 

WILL THE FRACKING BAN BE LIFTED? 

The fracking ban could be lifted if it can be done in a safe and sustainable way, the Business Secretary said yesterday.

In what appeared to be the first sign of a U-turn, Kwasi Kwarteng confirmed the Government was ‘open’ to looking again at extracting shale gas as concerns grow over soaring energy prices.

Downing Street declined to deny talk of a rethink and said Boris Johnson was considering ‘all options’ to reduce reliance on Russian oil and gas.

Fracking is a process in which liquid is pumped at high pressure underground to fracture shale rock and release gas or oil.

A moratorium was placed on the industry after it caused minor earthquakes in Lancashire in 2011 and 2019.

Tory MP Steve Baker, of the Conservative Net Zero Scrutiny Group, told the Daily Mail: ‘I’m afraid I fear an economic crisis worse than the 1970s, but I don’t wish to be too alarmist because what actually happens will depend on the policy response.’

He said: ‘I fear that we still have the biggest bond market bubble in history, that we had inflation coming anyway, and this crisis will feed the inflation that’s coming.

‘That will force the Bank of England’s hand on interest rates.’

Liberal Democrat leader and former Energy Secretary Sir Ed Davey said: ‘We could be facing the biggest economic shock since the 1973 oil crisis yet the Government’s answer is to clobber people with an unfair tax rise.’

Referring to plans to raise national insurance, he stressed: ‘It’s time to spike the hike and offer families some much-needed respite.

‘The last thing our economy or the British people need right now is for incomes to be squeezed further.’

The 1973 crisis was triggered when Arab countries acted to quadruple the price of oil and imposed an embargo in protest at the West’s support for Israel during the Yom Kippur War.

In the ensuing chaos, UK inflation reached nearly 23 per cent in 1975. The price of a barrel of Brent crude oil hit 130 dollars this week after the US and UK announced bans on imports from Russia.

That is 75 per cent higher than three months ago – and nearly three times where it was two years ago.

But there are fears the price could surge to $240 by summer if Western countries continue to sanction Russian oil exports.

Industry consultant Rystad Energy told the Bloomberg news network that wider sanctions on Russian oil would create a 4.3million barrel a day hole that ‘cannot simply be replaced by other sources of supply’.

David Cameron last night urged the Government to slash taxes to help families weather the cost of living crisis.

The former prime minister warned that Britons face a ‘huge squeeze’ on living standards with rocketing bills set to make 2022 a ‘very tough year’. Mr Cameron –who led an austerity drive during his own time in Downing Street – told Andrew Marr on LBC yesterday: ‘If you can keep the cost of government down, and people’s taxes down, you help them through the cost of living crisis.’

Meanwhile, the Government was yesterday warned that the cost of supporting households with gas and electricity bills could soar by more than £12billion.

Chancellor Rishi Sunak last month promised to give families a discount on bills. But since war broke out in Ukraine the cost of oil and gas has shot up even more.

The Institute for Fiscal Studies said to give households the same degree of protection as Mr Sunak originally intended, the Government will need to find more than £12billion on top of the original £9billion it had planned to hand out.

This will take the total cost of the package above £21billion.

Mr Sunak, who makes his Spring Statement on March 23, had also planned to give workers in the public sector, such as teachers and nurses, a long-awaited pay rise.

But experts say if he wants their wages to increase in real terms at the rate he intended he will need to give them an extra £1,750 each – or £10billion in total. 

AS THE PRICE OF PETROL ROCKETS BEFORE OUT EYES

Pressure was growing for Rishi Sunak to cut petrol taxes last night amid warnings the average cost of filling up a family car will surge past £100 within days.

Tory MPs and motoring groups say millions who rely on their vehicles are facing ‘unbelievable financial pain’.

Prices have hit an all-time high of 158.2p a litre and diesel a record 165.24p thanks to the soaring price of oil after Russia’s invasion.

At Reading Services on the M4 yesterday, the price of both petrol and diesel soared by 5p in just one hour.

If unleaded reaches 184p per litre on average, that will see the typical price of filling up reach £101.

Tory MP Karl McCartney said the Chancellor should take ‘action to cut fuel duty or VAT until prices fall’.

And motorists could face even more misery in the coming weeks – as eco-protest group Extinction Rebellion said it plans to block major UK oil refineries next month as part of its campaign to force the Government to stop using fossil fuels.

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