UK MPs Put ‘Net Zero’ Ideology Above Energy Security
Last week, there was an Opposition Day on Tuesday 24th March and the Conservatives took the opportunity to force a vote on the UK oil and gas industry
Their motion called on the Government to remove the Energy Profits Levy, end the ban on new oil and gas licences and approve the Rosebank and Jackdaw fields to increase secure domestic energy supply.
However, Parliament decided to put their ‘net zero’ ideology above the national interest and the motion was voted down by 297 votes to 108.
Nearly 300 MPs voting for energy insecurity and industrial decline.
Not a single Labour, Liberal Democrat, Reform, Restore Britain or SNP MP voted in favour of the motion.
Time to explore why this was a catastrophic error and tantamount to treason.
Catalyst for the Oil and Gas Motion
The UK’s energy policy has been a disaster for at least two decades, but the catalyst for the Tories to lay this motion was the disruption caused to global oil and gas supply caused by the war in Iran.
As a reminder, in peaceful times, about 20 percent of the world’s oil supply transits through the Strait of Hormuz. Since the beginning of the war, traffic through the Strait has plunged by 95%.
This disruption to supply has caused energy prices to rise significantly, see Figure 1 (data from Trading View).
Using the start of February as a baseline, Brent crude prices are up 45 percent to $96 per barrel on 25 March and UK gas prices are up over 60 percent to 130p/therm although both prices have dropped a little from their highs.
Impact of War in Middle East
Supply of oil and gas is likely to remain constrained and prices elevated for some time, even if there is a peace deal because so much infrastructure has been damaged. For instance, Qatar’s Ras Laffan Liquified Natural Gas plant has been hit causing extensive damage that has knocked out 17 percent of Qatar’s LNG export capacity, and force majeure has been declared on some export contracts.
Repairs will take 3-5 years to complete. Bahrain has declared force majeure after its Sitra oil refinery was attacked and Iraq has cut output from its southern oil fields. Other oil and gas facilities have been hit in Saudi Arabia, Kuwait and UAE.
The Gulf region is a major global hub for nitrogen-based fertilisers. Qatar has halted production of urea and exports of have been disrupted due to the closure of the Strait of Hormuz which could lead to a global food crisis.
Exports of Helium, critical for semi-conductor manufacture have also been hit. The supply of petrochemicals like polyethylene and polypropylene has been hit which will have downstream impacts on the global plastics industry.
The Gulf also accounts nearly a quarter of global sulphur supplies. Sulphur is also used to make sulphuric acid, a critical chemical in making phosphate fertiliser and in refining critical metals like copper, nickel, cobalt and uranium.
Aluminium production has also been disrupted, particularly in Bahrain and Qatar, where Norsk Hydro has declared force majeure.
The International Energy Agency (IEA) has warned of the largest supply disruption in the history of the global oil market. Sky News has warned the UK is facing the biggest economic hit from the Iran war of any major country.
Some impact is already being felt as China has banned export of fuels like petrol, diesel and aviation spirit, while the CEO of Shell has warned of fuel shortages in Europe as soon as next month.
UK Vulnerability
The UK is vulnerable to events in the Middle East because our industry has been systematically degraded over several decades by misguided governments.
We no longer make ammonia, used in downstream products like nitrate fertiliser. Jim Ratcliffe has warned that our chemical and petrochemicals industries are on their knees because of high energy prices and ‘carbon’ taxes.
The UK’s aluminium production has fallen from over 300,000 tonnes in the early 2000’s to less than 50,000 tonnes. Of course UK oil and gas production is down too, forcing us to rely more on imports.
Labour Government Response
Given that coal, oil and gas provide nearly three quarters of the UK’s energy (see Figure 2), we might hope that the Government would react decisively to secure energy supplies in the face of such an energy supply shock.
But the actual response has been feeble.
To protect consumers, there is a new fuel price checking website, called the Cheaper Fuel Finder to combat price gouging. Energy minister Michael Shanks has announced the plug-in solar panels will be available in supermarkets and new homes will be forced to have solar panels and heat pumps installed.
This might be termed about as much use as a chocolate teapot.
Despite the biggest ever oil supply shock and rising energy import dependency (see Figure 3, from Energy Trends Table 1.3), the Government has not made any commitments to increase domestic hydrocarbon supply.
At Prime Minister’s questions, Keir Starmer steadfastly refused to overrule Ed Miliband and fast track Jackdaw and Rosebank into production.
The Government’s lack of action flies in the face of the Tony Blair Institute, RenewableUK, Offshore Energies UK, Greg Jackson and even backbench Labour MP Henry Tufnell who have all called for more drilling in the North Sea.
Benefits of North Sea Oil and Gas
There are many stories circulating, mostly from questionable alarmist sources, effectively saying that the North Sea is not worth bothering with (see Figure 4) because it is a mature basin in decline.
However, the gas production forecasts from the North Sea Transition Authority (NSTA) assume the current tax and regulatory regime that is discouraging investment remains in place.
It is hardly surprising that production falls steeply when no new exploration drilling is allowed. Incidentally, part of NSTA’s mission is to “accelerate the move to net zero” so their pessimistic stance is unsurprising.
Ed Conway from Sky has been effective in showing that if we move to a more benign environment production would fall much more slowly (see Figure 5).
This new scenario uses data from Offshore Energies UK (OEUK) that assumes a more benign tax and regulatory regime, but does not include potential gas production from onshore fracking.
OEUK has also produced analysis showing oil and gas reserves and resources could almost triple from their low case to a risked 7.5 billion barrels of oil equivalent (26.6bn boe, unrisked) with a major shift in regulations and taxes.
More domestic oil and gas production will deliver well paid jobs and tax revenue for the Exchequer. Lower tax rates will likely deliver a higher overall tax take.
Domestic production will improve energy security through less reliance on imports and improve the trade deficit. Increased gas production will also likely reduce prices because it will displace expensive LNG imports.
Policy Response
In the light of the damage being caused by ‘net zero’ and the disruption in the Middle East, a more rational policy response would include abolishing the windfall tax on UK oil and gas production because the marginal tax rate of 78 percent is discouraging investment.
Capital allowances should also be restored. The regulations forcing developers to calculate Scope 3 emissions and electrify offshore installations should also be scrapped or reformed.
Regulators like the NSTA should have their mission amended to maximise production. The government should also end the ban on new exploration drilling and lift the moratorium on onshore fracking.
‘Carbon’ taxes should be abolished to bring down electricity prices and lift the threat to our remaining oil refineries.
The most expensive subsidies for ‘renewables’, like the Renewables Obligation should also be abolished to further reduce electricity prices and pave the way for tax cuts.
More than half the cost of petrol at the pump come from tax, so there should fuel duty should be cut too.
Many of these tax cuts could be funded by removing subsidies for EVs, ‘carbon’ capture, ‘green’ hydrogen and heat pumps as well as the cuts to the Renewables Obligation.
Conclusions
The UK is already suffering from high energy prices and deindustrialisation. The war in Iran has caused the largest oil-supply shock in history. As a result, energy prices have risen and the supply chains of many materials that are critical to modern economies have been disrupted.
Labour’s response has been a disgrace.
The Tory motion to support more drilling in the North Sea to enhance our energy security was well-timed and has flushed out those who would rather blindly follow ‘net zero’ ideology than act in the best interests of the country.
It is almost as worrying that parties who agree with the new Tory policy of abandoning ‘net zero’ could not bring themselves to vote for the motion.
We used to have a word for betraying your own country; treason.
Failing to act to secure domestic energy supplies is at best wilful negligence and at worst tantamount to treason.
The end of this Parliament cannot come soon enough.
See more here substack.com
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Carbon Bigfoot
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You blokes are in deep shit. Parliament run by energy morons. Time for a revolution….now wait you have nothing to fight with. Maybe you can use pitchforks like the French did ….now wait you have no farming implements or agriculture. Ace is place for all your hardware needs…but that is in the USA. Good luck.
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