UK’s Reeves Urges G-7 to Boost Energy Supply as Starmer Meets Businesses

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(Bloomberg) — UK Chancellor of the Exchequer Rachel Reeves will urge Group of Seven partners to boost domestic energy supplies and warn the recent surge in oil and gas prices is playing into Vladimir Putin’s hands.

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Reeves will say Western counties need to ramp up investment in renewable energy and nuclear power to wean themselves off gas when she speaks with G-7 finance and energy ministers and central bankers in an online call on Monday. She is expected to warn Russia is benefiting from high energy prices and that cutting dependence on fossil fuels will reduce Putin’s leverage, according to a statement released on Sunday.

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Prime Minister Keir Starmer will also host business leaders from energy, shipping, banking and insurance in Downing Street to discuss the Iran conflict on Monday. They include representatives from Shell Plc, BP Plc and Lloyd’s of London. 

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Concerns are mounting over a prolonged energy shock after the destruction of key infrastructure and a near-halt in tankers passing through the Strait of Hormuz following the outbreak of war across the Middle East. The conflict widened over the weekend as Yemen-based Houthi militants entered the war by launching missiles at Israel.

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It threatens to squeeze households and hit UK economic growth at a perilous moment for Starmer as he tries to turnaround Labour’s dire polling ahead of the local elections in May. That is seen as a major moment of danger for the PM with heavy losses likely to stoke speculation of a challenge to his leadership.

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Education Secretary Bridget Phillipson on Sunday played down the prospect of an immediate announcement on support for drivers after a surge in petrol costs since the war started. The chancellor had planned to increase fuel duty in September, but pressure is mounting from opposition parties to ditch the rise.

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“For now, there is no need to take action because consumers can know when they go to the pump, that freeze remains in place,” she said on Sky News’s Sunday Morning with Trevor Phillips. “Of course, we will take a view closer to the time.”

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Phillipson said that motorists should carry on as normal despite concerns over fuel shortages. She also warned that the conflict could affect inflation and interest rates but told the BBC that the government will “make sure that people are well supported.”

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The chancellor has some breathing space before the turmoil on global energy markets hits household gas and electricity bills. The UK’s price cap will fall in April before an expected rise when it is next updated in the summer.

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The Bank of England expects higher motor fuel costs to drive inflation up to 3.5% in March with traders betting on the central bank to hike interest rates to contain the threat on prices. Economists warn inflation could rise to double the central bank’s 2% target after a predicted increase in household energy bills in July.

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While US Secretary of State Marco Rubio said the war will end within weeks rather than months, experts warn a prolonged impact was likely even if there was a rapid de-escalation. BOE rate-setter Megan Greene said on Wednesday that “there will be lasting implications of this, even in the best-case scenario.”

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