Jeremy Warner's Outlook: Britain has squandered its North Sea inheritance. Now we are paying the price
With oil and gas prices now sky-high, there's virtually nothing left to see us through the famine
Tuesday, 10 June 2008
Both the spot and forward price of wholesale gas rose to record levels again yesterday, making steep increases in gas bills this winter a virtual certainty.
There are a number of reasons for this phenomenon, and profiteering by suppliers is not really one of them. The most significant is the rising price of oil. Gas prices on the Continent tend to be linked by contract to the oil price, so that, if the price of oil rises, so too does the price that suppliers and consumers have to pay for their gas.
In Britain, we used to be partially insulated from these shocks by plentiful supplies of North Sea gas, yet these are now fast depleting. Our reliance on imported gas is rising fast. From 27 per cent of need last year, it is set to rise to around 40 per cent this year, 75 per cent by 2015 and some 90 per cent by 2020. This makes us more exposed to inflated world prices.
What's more, because the oil-related price on the Continent tends to be higher, our European neighbours have been shopping with impunity for cheaper gas here in the UK through the interconnector.
Gas use and therefore prices should be relatively subdued at this time of year. Yet the continentals are ensuring that demand remains strong right through the warm summer months. It's cheaper for them to buy our gas than alternatives, or to draw on reserves kept in storage. In some cases, continental storage facilities are being replenished from still relatively cheap British supplies in anticipation of much higher prices to come this winter.
Too late now, but Britain has squandered the blessing of North Sea oil and gas by allowing the stuff to be bought up at relatively cheap prices during the years of plenty. With prices now sky-high, there's virtually nothing left to see us through the famine. At no point was any serious thought given to a more strategic use of our oil and gas reserves. We are now paying the price.
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Copyright 2008 Independent News and Media Limited
Why should there have been any serious thought? The UK , along with the other Anglo-Saxon nations, squandered common sense years ago when if fell, hook, line and sinker, for the monetarist, neo-liberal and corporatist economic system. In such a system, planning is an anathema, and government "interference" in the splendours of the market is not to be tolerated. Sell eveything off, leave it to private enterprise and the riches will come, to some at any rate. The only advantage of what is happening now with the economy is in such dire straits, is that only direct government intervention can even hope to save it from implosion. The end of cheap oil is the return of the sovereign state, and the end of monetarist dogma, RIP, unlamented.
Posted by John Monro | 10.06.08, 23:56 GMT
Business is dominated by short-term profits and our politicians are also gripped by short-termism, unable to see beyond the next opinion poll. Systemic change is needed.
Posted by Mark D | 10.06.08, 19:17 GMT
Er, whatever happened to the "free" market, Jeremy?
I think you'll find it does not do "strategic", since it presents accountants with a problem of costing.
Like it's predecessors, this government has put its faith in the markets, to the extent that several government ministers have told us over the years that a new generation of nuclear power stations will receive no public subsidy. (I've just seen an elephant flying down the main road.)
Presumably the new Infrastructure Planning Commission does not count as a subsidy since accountants will be unable to cost its benefits?
The case of farming raises the question of "strategic" under another guise.
We keep being told - most recently by Dominic Lawson, that only "free" markets can bring down the price of food.
John Hillary - War on Want - puts the dampner on this particular theory in his letter on page 28 of today's paper.
Turns out that free markets are short-termist and driven by balancing two raw emotions: fear and greed.
Posted by Tom MacFarlane | 10.06.08, 12:38 GMT
The interconnector was conceived in the early 90s. were you against its construction then? or are you being wise after the event?
Posted by roy | 10.06.08, 11:08 GMT
This is yet another example of the benefits of EU membership.
Posted by Dennis Ambler | 10.06.08, 10:05 GMT
Story is a bit misleading, there is still as much oil in the North Sea as has already been taken out. there are significant fields still to be explored off the west coast. As oil price increases then many of the deposits that were previously seen us uneconomical become viable.
The real shame is that we have squandered our oil wealth and been left with no long term benefit. Norway has for the last 12 years been setting aside some of its oil revenue into a trust fund, currently it is worth some £130 billion. this is where Wall Street goes to when it needs bailed out. the real question is why have we not done the same, or why do we not start doing the same?
Posted by gavin | 10.06.08, 09:35 GMT
Okay, our oil and gas is running out. What can we do?
Time to use the other 'clean' natural resources we are lucky enough to have been blessed with, to a greater extent that any other country in Europe:
Wind and tidal energy.
So the wind doesn't blow all the time? It is usually blowing somewhere! Anyway, we can use the power whilst it is and switch back to fossil fuels when it isn't. At least it would extend the life of our gas and oil resources and is not as dangerous as nuclear.
In addition, I have evacuated solar tubes supplying all my hot water for a good 6 months of the year, despite not having the preferred south facing roof. The other 6 months see good contribution also. I,m laughing all the way to the bank as the system cost me £1400 to install by myself.....Hhmmm, the new average yearly energy cost to a household! I know of installers charging just £3000 for systems, so they are now cost effective. And do you know what? I don't have to pay 5% VAT on the free energy!
Posted by Richard | 10.06.08, 08:44 GMT
We squandered the revenues of the 1980s and 1990s on two bouts of high unemployment, made considerably worse by government policy. Worse, was the Thatcher obsession with private transport to the detriment of public transport. We must have the worst trains and buses in Europe as a result.
And then the present government has presided over the sale of our former public utilities to all and sundry. The so-called "free" market in energy is a farce, which is in reality controlled by a cartel who are laughing all the way to the bank at our expense.
There's a silver lining. It now pays to drive less, to insulate our homes properly, and to look at alternatives to fossil fuels. Perhaps there's a silver lining after all.
Posted by David | 10.06.08, 05:52 GMT