George Osborne's plan to curb rising energy bills by unleashing a fracking revolution was dealt a further blow yesterday after a cross-party committee of MPs cast doubt on whether any boom in shale gas production will bring down gas prices.
A study by the Commons Energy and Climate Change Committee concluded: "It is by no means certain that prices will fall as a result of foreign or domestic shale gas development."
Tim Yeo, chairman of the committee, said: "Ministers should be careful not to base energy policy on an assumption that gas prices will fall in future as a result of shale gas production. Rising global demand for gas, particularly from Asia, could limit any potential price reductions."
Mr Yeo's comments contrast with Mr Osborne's assertion in last month's Budget, when the Chancellor announced generous tax breaks for fracking companies and hinted at financial incentives to persuade local communities to join the shale gas rush.
"I want Britain to tap into new sources of-low cost energy such as shale gas. Shale gas is part of the future. And we will make it happen," said Mr Osborne, who has placed gas at the centre of Britain's power-generation strategy.
Shale gas is extracted from the rock through the controversial practice of fracking, or hydraulic fracturing, a technique that releases the hydrocarbons by blasting a mixture of sand, chemicals and water into them.
Cuadrilla, an energy firm chaired by the former BP chief executive Lord Browne, is currently the only company that is fracking in the UK, although it is still at the exploration stage.
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