Two separate critical energy issues have now come to the fore. One is the Russian-Ukrainian spat over energy pricing which has exposed UK, and Europe’s, over-dependence on Russian gas supplies. The other is the over-dependence of UK businesses and householders on the pricing policies of large energy suppliers in a privatised and liberalised energy market. Both these key problems, which are likely to cost Britain dear, result from both the Tories and New Labour regarding energy as just another market commodity and not as a crucial protected national asset essential for preserving our national security. That policy needs to change.

The energy security of Britain and most of Europe is now seriously at risk from Russian cutbacks in gas supply in light of the sharpening row with Ukraine over gas pricing. About two-thirds of Europe’s gas imports from Russia, some 140bn cubic metres a year, flows through Ukraine and if Russia cuts off all that supply, as they have now done, UK and European gas security is clearly in serious jeopardy. Obviously this may be resolved fairly quickly in the short term by a Russian-Ukrainian settlement over pricing, but the long-term problem of further disputes and further, perhaps longer, cut-offs remains.
The current row exposes two failures of policy. One is the improvident UK policy of extracting North Sea supplies of oil and gas at virtually maximum capacity, drive by the desire of the energy companies to maximise their short-term profits. A much more moderate rate of depletion would have been far more sensible, or at least the saving of a significant proportion of the profits to transfer to a national energy transformation fund aimed at the rapid promotion of alternative and secure energy supplies from renewable sources.
The second fall-out from the Ukrainian dispute is the failure to secure an alternative gas supply route for Europe out of the Caspian which avoids dependence on Russia. The Nabucco pipeline, conceived in 2002, was designed to do this, weaving gas pipelines between Russia and Iran over a 2,400 mile stretch from the Caspian through Turkey, the Balkans to Austria. It now seems likely that this ambitious, but necessary, objective for European gas security will be blocked by Russia’s Gazprom manoeuvring.
The other highly problematic issue in UK energy policy concerns Britain’s exposure to large private companies, most of them now foreign, which have already shown transparently how far they put self-interest above the public interest and are likely to demonstrate that further and more damagingly in the current context of energy shortages.
First, they have already failed dramatically to pass on to consumers the big cuts in world energy prices over the last 6 months. The price of a litre of unleaded petrol is about 89p, down from a high of £1.20 over the summer, i.e. a 25% fall compared with the 67% fall in the price of a barrel of oil from its high of $147.
Second, they continue flagrantly to exploit the poorest households over the pricing of prepayment meters. The regulator Ofgem believes that firms can save households £500 millions in what it dubs ‘unfair premiums’ if they abolish price differentials that penalise users of perpayment meters and write in fair pricing into their operating licences. So why isn’t that enforced? A clue comes from a comment of a ‘senior Whitehall figure’, reported today that: “We would expect the energy companies to be responsible (!) and not use this dispute as an excuse to hold off on the price reductions they have talked about which customers are expecting in the spring”. For sheer complacency that takes some beating.
And third, now that both Tories and New Labour have allowed foreign-owned utilities like the French EDF and the German E.ON and RWE to buy into and dominate this sector, there must be a real risk in the current context of energy shortages that they will give priority to their continental customers over their British ones. They deny this, but it remains a fact that traders are already exporting gas from Britain to meet shortages in Europe.
All these problems arise from three main factors – the privatisation of energy as just another market commodity, extremely weak regulation (again because the market is thought to know best), and the failure to acknowledge that in a globalised world energy should be regarded as an essential arm of national security and wherever feasible run as a British-controlled asset. Energy should be treated as a strategic asset every bit as important as defence.

Bookmark to: