Storm Isha is coming to the end of a fierce UK tour that showcases yet again the economic insanity of failing to plan and invest in long-term energy security.
Traffic Scotland reported gales of more than 100 miles per hour on the Tay Bridge overnight on Sunday amid widespread damage and disruption that halted ferry and train services and diverted flights away from Glasgow, Edinburgh and Aberdeen airports. Some 82,000 homes and businesses across Scotland suffered power cuts and more than 30 flood warnings are in place across the country. Multiple closures and restrictions have been issued across the road network.
All of this comes at hefty cost and more is in the offing as tribute act Storm Jocelyn is expected to land later today with winds gusting up to 80 miles per hour. But hey, there is one bright spot: gas prices slumped to a six-month low yesterday as Isha’s hurricane forces drove a surge in wind energy production. UK benchmark prices fell more than 6% towards 65p per therm, compared to prices of more than 136p in October.
Lower energy prices are of course welcome news for both consumers and businesses – more about that later – but failure to invest for the long haul by successive governments has left UK energy prices completely exposed to the erratic acts of nature and foreign aggressors.
A relatively mild winter so far has helped to keep gas prices down, and since Russia’s invasion of Ukraine both the UK and Europe have generally shifted their gas dependence to the United States, with these imports largely immune from Houthi attacks in the Red Sea. But gambling on volatile weather conditions does not equate to a coherent energy policy, and for that matter, who would care to wager on the actions of a US administration potentially under the leadership of a new president to be elected later this year?
READ MORE: Red Sea shipping attacks threaten to rekindle UK inflation
The number of Scottish companies in critical financial distress rose by almost 26% in the final quarter of last year, according to latest figures from rescue and recovery specialist Begbies Traynor, as firms continue to grapple with higher costs including inflated energy and fuel bills. Across the whole of the UK, more than 47,000 companies are said to be on the brink of collapse as more than a year of higher interest rates, rampant inflation, weak consumer confidence and unpredictable input costs have created a “perfect storm” that is impacting “every corner of the economy”.
Those beleaguered consumers aren’t faring any better with researchers at data science firm Outra calculating that the number of UK households enduring fuel poverty – those spending more than a tenth of their income on heating – rose from 3.83 to 4.29 million following the rise in the energy price cap to £1,928 at the start of January. The largest number of new households entering fuel poverty were in Birmingham, following by South Yorkshire, Newcastle and Glasgow.
So the prediction from Cornwall Insight that energy regulator Ofgem will bring the price cap down to £1,620 in the second quarter of this year is a relief for many. Looking further out, the consultancy group says the average annual household bill could drop to £1,497 from the start of July, raising hopes that this downward path will continue throughout the rest of the year.
READ MORE: Households pay as the UK gambles on volatile gas market
But as Cornwall principal consultant Craig Lowery was at pains to point out, waiting and hoping that we avoid another global incident that sends energy prices higher is not a sustainable strategy for government. Getting back to pre-crisis levels will require long-term strategies that increase domestic renewable energy sources and reduce reliance on volatile imports.
This point was echoed by the London School of Economics which yesterday published a paper calling on Westminster to invest £26 billion a year in the low-carbon economy to revive UK prosperity, rather than planning tax giveaways. The LSE economists said public investment at that level would likely generate about twice as much accompanying investment from the private sector, paying off in efficiency savings, economic growth and carbon reductions.
So how were MPs spending their time in Parliament yesterday afternoon? Well, the House of Commons was voting on the second reading of the Offshore Petroleum Licensing Bill, which will guarantee that new drilling licenses are granted each year.
Not all of those in the ruling Conservative party back the legislation, but those who do argue that continued drilling in the North Sea and elsewhere is necessary to ensure energy security as the UK moves towards its net zero targets. There are plenty of reasons why continuing to drill will actually have little impact on domestic energy prices, chief among them that most of what comes from underneath UK waters is shipped elsewhere for refining, and is thus “lost” in the sea of global price movements.
READ MORE: Should SNP be talking up Labour's chances?
But regardless of one’s views on the need to keep drilling in the North Sea, this bill is a waste of time. The North Sea Transitioning Authority, which is responsible for issuing licenses, can already do so when deemed necessary and this will not change under the new legislation.
This cheap politicking is designed to create a dividing line ahead of this year’s general election between the Tories and Labour, with the latter having said it will not allow any new oil and gas licenses if it wins power.
That commitment came alongside Labour leader Sir Keir Starmer’s pledge to invest £28bn a year in a “green prosperity plan” that looks almost identical to those proposals yesterday from the London School of Economics. However, it has been reported that those proposals will come under review this week by the opposition leadership as some within Labour are understood to favour dropping the pledge.
The Conservatives have had 14 years in power to start making good on the UK’s crumbing energy infrastructure and have failed to do so, but the state of play today is the result of 45 years of underinvestment by an extended string of ruling governments. By dropping its green commitments, Labour risks the opportunity to prove it is more than a flimsy carbon copy of the Tories.
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