Return of Cheap Energy?

The latest drop in the oil price is further evidence, if it was needed, that the world is awash with plentiful oil and gas and that barring any black swan events, soft hydrocarbons prices are here to stay. Thanks to American shale, weak OPEC control, new production technology, genuinely lower cost renewables and major strides in energy use efficiency the world can look forward to an indefinite period of cheap energy.

This ought to be a matter for optimism. Cheap energy is the key to sustainable development, the defeat of poverty and to social and economic improvement, in rich and poorer countries alike. It is also one of the keys to higher productivity and the replacement of low-wage labour. It should be the goal of every government to embrace low cost and reliable electricity in the interests of its people’s.

Electricity

As shocking example of the very opposite is to be found in UK energy policy where a range of deliberate policies and measures have burdened the British economy with one of the highest energy cost structures in the world.

Low carbon policies have been pursued with scant regard to cost, impact on industrial costs or household welfare, leading to staggering rises in energy bills when world energy should be cheap and plentiful. The final removal of all coal plants from electricity output has been hailed as Britain leading the world in the switch to renewables. In reality, it is leading the world in punishingly high cost energy, with unreliable supply prospects added in. Amid the cheering all cleaner coal technologies, being adopted elsewhere round the world to combine cheap power with low carbon gains, have been forgotten or ignored in the UK.

Will the new UK government, to be elected on June 8th next, change this deportable situation and give the country the more balanced and lower-cost energy supply it needs? Will there be a real shift away from the self-harming, regressive, job-destroying, anti-competitive, costly and environmentally ineffectual policy mix with which the UK has saddled itself over the past decade?

We shall see.