PROPONENTS of Net Zero have been doubling down on their theories in the wake of spiking oil and gas prices.
Ed Miliband has finally let the cat out of the bag. It has nothing to do with lower prices, as he has claimed in the past – prices have risen year by year because of Net Zero. And it has nothing to do with energy security either, which he is happy to farm out to China. He told MPs last week that the biggest threat is the so-called climate crisis.
Saner people disagree. With the world in the middle of an energy crisis and Middle East oil and gas stuck the other side of the Strait of Hormuz, they argue that we should be making the most of our own reserves of the stuff below the North Sea. Even the Climate Change Committee accepts that we will still need oil and gas for years to come, and lots of it.
But first, let’s get things into perspective.
Despite the recent rise, gas prices are nowhere near 2022 levels. Indeed they were just as high a year ago. It’s a similar story with oil.
Energy markets often panic, as they did in August 2022, but usually settle back within a few weeks. As any businessman will tell you, you should not make long-term business decisions based around a short-term panic.
https://tradingeconomics.com/commodity/uk-natural-gas
These prices are ‘futures’, in other words prices agreed for forward contracts. That means we are not necessarily paying that price at present, as much of our consumption is at prices contracted in the past. But if this price is eventually applied to all of our supply, the recent price increases would add about £10billion a year to the cost of buying gas.
In terms of electricity prices, upon which most attention has been focused, the extra cost will be less than £3billion, because only about a quarter of gas usage goes to make electricity. This pales into insignificance against the £15.9billion being added to our bills this year to subsidise renewable energy.
Office for Budget Responsibility
In terms of natural gas, the UK produces about half of what it consumes, with LNG (liquefied natural gas) imports accounting for another 16 per cent. In short, most of our gas comes by pipeline from the North Sea, whether from UK or Norwegian fields.
We also still produce much of our crude oil, about 60 per cent. Contrary to Miliband’s myths about sheikhs and dictators, we buy very little from the Middle East and nothing at all from Russia. Three-quarters of crude oil imports come from the US, Norway and Libya.
We are, of course, not immune from the knock-on effects of global energy price shocks on the wider economy. That is why in any sane world, we should be aiming to maximise whatever reserves of oil and gas we have left under the North Sea. Particularly given that we still get three-quarters of our energy from gas and oil.
Yet everything Labour have done since entering office has had the opposite effect:
· Banning new oil and gas exploration
· Increasing the windfall tax
· Reversing Rishi Sunak’s capital spending tax breaks, which softened the windfall tax for new wells
· Failure to support the new Rosebank and Jackdaw oil and gas fields
· Toughening the rules for environmental impact assessments
· Abolishing the North Sea Transition Authority’s statutory objective to maximise the economic recovery of UK petroleum.
Tightening rules on flaring, venting and platform electrification
If Miliband is concerned about GHG emissions, it should be a no-brainer. Producing our own oil and gas create much lower emissions than shipping energy halfway around the world. Destroying our own oil and gas production does not mean we will need any less oil and gas.
We are told that North Sea reserves are declining rapidly, yet Norway continues to develop fields. Last year it drilled 49 exploration wells and made 21 new discoveries.
The most expensive source of gas is LNG, because it can be sold all around the world to the highest bidder and costs a lot to process and ship. The more we get from the North Sea, the less we have to rely on importing LNG.
Meanwhile, the Exchequer receives billions in tax revenue and thousands of jobs are created. Everyone is a winner!
It is still not too late. As a matter of urgency, Labour need to end the ban on new licences, end the windfall tax, scrap the Net Zero duties which are hammering our oil and gas sector, and fast-track permissions for Rosebank and Jackdaw.
They won’t, because Miliband’s objection to North Sea oil is not based on logic or fact. It is ideological.
It is also hugely damaging to the UK.
But the biggest irony about all of this is that restricting oil and gas supply has been the deliberate policy of the UN and the rest of the climate establishment from the outset. They have done everything they could to discourage new exploration and drilling, and make existing operations more difficult.
They have imposed punitive taxes, bans and onerous regulations, while trying to turn the finance taps off. The result has been tight supply and high prices, which in turn become critical when we get a situation such as the latest.
They cry now about high prices for consumers. But they are only crocodile tears.
