Monday, 18 February 2013


Petrol prices have risen again (locally from 129.9 to 133.9 per litre) but as most of us will have noticed by now when it comes to fuel (energy) prices they mostly tend to go up and stay up over the longer term regardless of occasional short-term drops in price. Despite the recession related blips general longer term trend for hydrocarbon prices in much of the world appears to remain steadily upwards.

Partially this is unavoidable due to increasing demands for more energy (particularly from energy hungry India and China), the growing planetary population and the short term nature of our planet’s hydro carbon fuel reserves. This trend is relatively easy to plot (even in the short term) and the medium and long-term consequences of being dependent upon energy resources that you don't actually control should be pretty self evident to even the dimmest Westminster politician.

That said it’s worth noting that there are basically two types of energy resources primary and secondary. Primary energy is energy that is largely supplied without being transformed e.g. crude oil, natural gas, and coal and secondary energy that requires a transformative (often energy intensive and sometimes polluting) process to refine it before it can be used to produce energy.

As of March 2012 around two thirds of UK primary energy demand was met from domestic production. Coal accounted was barely 4% of final energy consumption by fuel in 2010. Almost all UK oil and gas production came from the seas that surround the UK. Peak oil (for the UK) happened in 1999, and Peak gas production took place back in 2000. Since then the UK has moved from a position of relative self-sufficiency to one of dependency on imported oil and gas.

By 2009, imported gas was around 32% of the total gas used. 58% came from Norway, 25% from liquefied natural gas (LNG) from various different countries, 16% came from the Netherlands, and 2% came via the Belgian interconnector pipeline. The increased reliance on imported oil and gas left the UK far more open to supply risks associated with global supply constraints and price volatility. The UK Government periodically punted plans to reduce the need for oil and gas imports, by pushing primary energy production, and by developing low-carbon alternatives such as electric vehicles, biofuels and fuel efficiency.

The writing is not so much on the wall as on TV, as last Tuesday saw the first airing of a Gazprom advert on UK domestic television advert – they sponsor the European Champions League.  Russia has periodically put the squeeze on gas exports to the Ukraine, (currently some 80 per cent of Russian gas exports to the EU flow through the Ukraine) so the real dangers of relying on imported energy from unreliable sources have been clearly highlighted.

Russia (with full coffers) has ridden out most of the consequences of fluctuating oil prices and appears to have managed to avoid any real consequences of declining cash reserves despite its economy being heavily reliant on oil and gas exports. While some countries subsidise their fuel prices (just how sustainable that is over the medium to longer term is open to debate), in the UK this does not happen, so everybody wins, Government gets more tax revenue, the oil companies get more profit, and us the ordinary punters get consistently fleeced.

As for gas, some states have made efforts to protect themselves against external shocks to their energy needs; France was able to store 122 days of gas and Germany able to store 99 days worth (2009 figures). Here in the UK the almost entirely market driven approach turned out to be entirely inadequate, in the UK had a storage capacity which would have lasted for only 15 days (2009 figures). Some countries discuss the issue of energy independence at the highest level here in the UK such talk is best avoided.

New Labour took the best part of a decade to recognise the need to increase storage capacity and the UK has been playing catch up ever since. One consequence of this lack of storage capacity is that UK had to sell gas during the summer and purchase gas again when it is needed in the winter. The Conservative’s headlong dash to gas in the 1980’s was accompanied by a complete failure in strategic energy planning. The situation has been made worse by the current Government's decision to somewhat half-heartedly look at developing diverse reliable alternative energy sources whilst pursing yet another dash for gas.  

The last New Labour Government and the current Con Dem Government largely ignored repeated warnings that the lack of sustainable energy has set the UK on a path towards higher domestic energy prices and potential power blackouts. Over the next four to six years almost all of our old nuclear reactors, along with nine major coal and oil-fired power stations, will be run down and closed, with nothing ready to replace them.

We are now in the situation where we will become even more dependent upon imported gas from either unstable regions or dubious suppliers. The Con Dem’s solution to was to rush to go Nuclear and to effectively hand the Nuclear industry lock stock and barrel over to French energy companies who are busy paying off large loans to the French government. Anyway that was the plan, although the wheels seem to be coming of that particular wagon.

Now Cameron (and Westminster’s) focus is on Shale Oil/Gas as the great panacea for the UK’s energy problems – the problem is unlike primary energy sources the extraction and preparation of shale oil/gas is energy intense and certainly based on the Canadian experience exceptionally polluting. Even if Europe chooses not to chase Shale then developments elsewhere in the world could mean that as had been said elsewhere we can effectively kiss goodbye to curbing climate chance for ever and bequeath rising sea levels, wild weather and pollution to our descendants.

Even if the environmental and pollution issues could be addressed (and we don’t appear to be anywhere close to doing that at the moment ) there are other significant issues. For one, Shale oil/gas is a finite resource, there is just like oil, coal and gas, there is little chance of extracting 100% of reserves. What we may be talking about extracting something like 40 or 50% of it – which might last around 10 years – the big question is what happens then? While we use the brief window of Shale based energy are we going to develop secure energy supplies for the future or is this merely short term fix?

What successive Westminster Governments (since 1997) should have done was to  work with the devolved governments and the Irish Government to make these islands entirely self sufficient via renewable non market driven energy resources run by not for profit companies. They should have developed a flexible self-sufficient energy development strategy that encourages decentralised microgeneration. This could create jobs, useful skills and bootstrap the economy out of the recession as well as helping consumers by delivering community beneficial energy schemes – significantly successive Westminster governments have chosen not to do this.

Wales needs direction not Carwyn’s platitudes when it comes to the development of safe and secure energy resources. The renewable energy sector can play a key role in creating sustainable green energy jobs for local people, not damage the environment and provide our communities with a long-term viable economic energy future, that’s should be the real future dividend for our communities rather than the shareholders in the City or provide well paid jobs on the board for former Westminster politicians. 

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