Friday, 17 December 2010


Back in February 2010 an interesting report called ''The Oil Crunch - a wake up call for the UK economy'' was published which warned that will of us faced a serious rise in the cost of heating, transport, food and other goods, the hard-hitting report largely slipped by under the radar. The report researched by the Industry Taskforce for Peak Oil and Energy Security, which rather than consisting of the usual Green suspects, are actually a group of British companies members including Sir Richard, Brian Souter, chief executive of Stagecoach, Scottish and Southern Energy boss Ian Marchant and Philip Dilley, chairman of consultancy firm Arup.

The report which pulled no punches saying that Government must recognise the risks to the economy and produce contingency plans for transport, retail, agriculture and alternative power. It suggested that the challenges facing the UK will far exceed those currently presented by the financial crisis and that the poorest in society will be the most vulnerable to potentially significant increases in fuel costs. There were further dire warnings that unless the Government gets its act together on alternative energy then there is a real possibility that during the term of the next government that fuel price unrest could lead to real shortages in consumer products and compromise the UK's energy security.

I mention this because many of us are in the process of or about to get hit by a hike in domestic energy prices, driven rather than by shortages but by some of the members of the energy cartel that happily puts profit before people and the national interest. Back in November I blogged on the need for a serious investigation into the competitive practises of energy companies by the regulator. Any investigation must be thoroughly in-depth and tackle the cartel-like behaviour of these companies.There can be no justification for profit margins to rise by 40% in less than three months while at the same time inflicting significant energy price hikes on consumers.

British Gas customers are to face a 7% rise in gas and electricity bills which comes into effect on 10th December. As a result of rising wholesale prices, said British Gas. oddly enough British Gas has become the second major UK energy supplier to announce price increases for the winter months - when there is a greater demand, and coincidently a greater profit to be made. Scottish and Southern Energy also intend to raise their domestic gas charges by 9.4% at the start of December, blaming wholesale prices for the increase in customer bills. This price increase announcement, was made just before just before they reported a 6.1% fall in pre-tax profits to £386m in the first half of the company's financial year.

Back in October 2009 the then Tory Energy Spokesman, Greg Clark (currently a Minister of State in the Department for Communities and Local Government) said that the "cartel" of the big 6 energy firms would be referred to the Competition Commission by an incoming Conservative Government. The then Tory Energy Spokesperson also condemned the unacceptable lag between the cost of wholesale gas prices and household energy bills - noting that customers were on average being charged some £74 pound too much for their energy per year.

Oddly enough that pre-election pledge for an independent inquiry into the £25 billion-a-year energy industry which has been subject to lengthy and repeated criticisms surrounding accusations of profiteering on electricity and gas, was quietly dropped by the Com Dem Coalition Government. Heaven forbid that principle get in the way of profit. If a freshly elected Government is not prepared to allow an inquiry into the energy cartel, then there is scant chance of an inquiry into the dubious (and financial rewarding (in cash and kind) relationship that exists between our political parties and the representatives of the energy supply companies who are pretty keen to shower enough goodies around during Party conference season (and beyond).

Anyone awake in the previous New Labour Westminster Government and anyone with half a brain in the current ConDem Government should be working with the devolved administrations in Wales, Scotland and Northern Ireland to develop a hands on energy strategy that will lead to an end to dependency on unstable overseas energy sources and dubious suppliers and lead to energy independence. I mention this because, all of a sudden all is urgency when it comes to speeding the development of all kinds of new (and not so new) forms of low-carbon forms of energy generation.

The writing is on the wall for all to see - you might have thought that Vladimir Putin's decision eighteen months ago to reduce further gas exported into Ukraine, through which 80 per cent of Russian gas exports to the EU flows, would have highlighted the real dangers of relying on imported energy. Especially as Russia has slowly declining cash reserves and its economy is still heavily reliant on its trade in gas – the risk of shortages (which raise prices) as a consequence of Mr Putin's geopolitical games is something we can truly all do without.

While other countries have attempted to protect themselves against external shocks to their energy needs; the UK's market driven approach has been proven to be entirely inadequate. France has storage capacity for 122 days gas and Germany 99. Yet the UK despite an increasingly desperate attempt to play catch up has relatively low storage capacity for gas - it was barely 15 days in April 2009; the old New Labour Government took almost a decade to recognise the need to increase storage capacity. The consequence is that UK has to sell gas during the summer because we cannot store it but UK energy suppliers struggle to purchase gas again when it is needed in the winter.

The problem was made worse by what can best be described as the complicit insanity of the Conservatives headlong dash to gas in the 1980’s has been compounded by a real failure in basic strategic energy planning and made worse by the current Government's perverse decision to half-heartedly look at developing diverse reliable alternative energy sources. The old New Labour Government repeatedly ignored warnings that it was setting the UK on a path towards higher prices and energy blackouts.

Over the next five years almost all of our old nuclear reactors, along with nine major coal and oil-fired power stations, will be closed, with nothing ready to replace them. We are now in the situation where we are now even more dependent upon imported gas from either unstable regions or dubious suppliers and we the customers face unnecessarily expensive bills.

Now the Con Dems have woken up, somewhat belatedly to the problem, but, can anyone trust this Tory dominated Government to put the people's interests before those of a fat profit for their dubious friends in the City? they certainly did not do that the last time they had their hands on our energy resources...

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