Gordon Brown last night raised hopes of a fall in oil prices when he said major oil producing countries had agreed for the first time that they are too high.
Speaking at a summit in Saudi Arabia, the prime minister said agreement had been secured with members of the Opec cartel that record crude prices of almost $140 a barrel were causing damage, and investment was needed to increase supply.
Meanwhile, his government is facing fresh calls from First Minister Alex Salmond to set up a Scottish oil fund.
The SNP leader has also written to Chancellor Alistair Darling urging him to introduce a fuel duty regulator to stop pensioners and families on low incomes from being plunged into fuel poverty.
Mr Brown went to the Jeddah summit with an offer to open Britain’s energy markets to oil-rich states, urging them to reinvest some of the $3trillion of additional revenue from the current global oil price spike in UK energy production, including wind, solar and a new wave of nuclear power stations.
He revealed government plans, to be published this week, will put a price tag of £100billion on the UK to meet its share of an EU target to generate 20% of energy from renewables by 2020, much of which could come from oil-rich Gulf states.
Speaking before his address to ministers from 35 major oil-producing and oil-consuming economies, Mr Brown said: “The reason I am here is that I am worried about the petrol price, I’m worried about gas and electricity bills, I’m worried about how millions of people are being affected in their standard of living.
“It is happening in every country in the world. It is a global problem that requires global solutions.
“What we have got is an agreement here – perhaps for the first time – that the oil price is too high and it is detrimental, it is causing damage and that there must be more investment in the supply of oil immediately and for future years.
“We’ve also got an understanding that we’ve got to diversify out of oil and we’ve got to back nuclear, we’ve got to back renewables.”
With rapidly increasing demand for oil from China and India there was upward pressure on prices, which must be countered by increased production, energy efficiency and expansion of alternative power sources, he said.
It was in the interests of nations which have become rich on oil to diversify into renewables and nuclear to assure themselves of future income streams, he added.
Mr Brown told the conference that the world is going through “the third great oil shock in as many decades” which is having a “severe impact” on standards of living around the globe.
In a clear plea to avoid the 1970s-style use of oil prices as an economic weapon, Mr Brown called for a “new deal” for global energy, building “a greater commonality of interest between producers and consumers”.
He said: “I propose that Britain and other oil consumers open up markets to new investment from oil producers, including sovereign wealth funds, in all forms of energy including renewables and nuclear – providing oil producers with a long-term future in non-oil energy.
“In return oil producers should be open to increasing funding and expertise in oil exploration and development through co-operation with external investors, providing increased oil supply in the medium term while growing economies adjust to a less oil-intense long-term future.
“In this way we move from the old conflict of interest between producers and consumers to building what the world needs – a greater commonality of interest.”
Pressure to step up oil production also came from the US, Germany and Australia, which rejected producers’ arguments that speculation, and not under-supply, was the cause of the price spike.
Saudi Arabia has said it will step up production by 200,000 barrels a day from July, and Kuwait said Opec members “will not hesitate” to increase production if the market needs it.
But Algeria, the current holder of the cartel’s presidency, said there was enough oil to supply the market, and Opec would make no decision until September.
Shadow business secretary Alan Duncan, a former oil trader, cast doubt on Opec’s ability to raise production.
He said: “The idea that Opec can just go like that and flood the market with oil and bring the price down shows that Gordon Brown does not understand global markets.”
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