25 November 2021

Freedom fuels – the ethical case for domestic oil and gas

By Andrew Hunt

For those who are keen to persuade us we don’t need fossil fuels anymore, September must have come as a shock. The country faced an unexpected fuel crisis, causing shortages in shops, lengthy queues at petrol pumps and the looming threat of a winter of discontent. 

The truth is, for all the pomp and preaching, we are going to need oil and gas for at least another generation. Currently 73% of the UK’s primary energy comes from oil and gas, with just 6% coming from renewables. Even on the Government’s own fabulously optimistic forecasts, between now and 2050, half the UK’s energy will come from oil and gas.

Unfortunately, crises like these are likely to get worse. We are decimating our oil and gas industry prematurely for no other reason than political spin. 2020 saw the lowest oil and gas investment since 1973, while domestic hydrocarbon output fell 11%; meaning growing dependence on unreliable imports. This is in spite of plentiful domestic reserves.

The Scottish government seems particularly delusional; culminating in Nicola Sturgeon’s suggestion last week that the Cambo oilfield off Shetland should not go ahead (fortunately it is Westminster who gets the final say). This comes from a government whose environmental track record is so horrendous it has been singled out by Greenpeace. Scotland has consistently missed its emissions targets by a country mile. Its recycling record is atrocious, cycling provision is the worst in the UK, and its waterways are in the worst state on record. To top it off, the country has racked up Greek-style quantities of debt, leaving it ill-prepared to fund the expensive process of energy transition. 

Sturgeon’s rhetoric is not just hypocritical but utterly illogical – a bit like claiming if we stopped domestic food production we wouldn’t need to eat. What we need to be doing instead is ramping up domestic oil and gas production to meet our needs during the lengthy transition period. This is vital for our livelihoods and for our democracy.

The Consequences

We have vast energy reserves – If we do not develop them, we will have to import them. That means dependence on Russia, North Africa or the Middle East. None of these regions are stable enough to ensure security of supply. Russia in particular has shown a willingness to weaponise supply at every opportunity. We risk handing tyrants like Mr Putin the ultimate bargaining chip. At the flick off a switch, they can take us back to the 70’s – turning out the lights, shutting our factories and freezing our grandparents. 

We have already had a taste of this with President Macron threatening to shut off the interconnector with France over the fishing dispute. Yet this is nothing compared to Germany’s plight. Germany has aggressively phased out its entire nuclear energy system, which used to provide a third of its electricity. This ill-planned stance, combined with fantasy forecasts for renewables, has led to an all too predictable crisis. Germany now has some of the highest energy costs in the western world, crushing its industrial mittelstand. Ironically, it is now burning vast amounts of coal to keep the lights on. Most troubling is its utter reliance on Russian gas. In spite of the Ukraine situation and Russia’s endless human rights abuses, the heart of Europe has been forced into silence over the Nord Stream 2 pipeline. As Ben Wright observed in the Telegraph; ‘As the UK maps out its own route to net zero, German energy policy provides a salutary reminder of what happens when zealotry trumps pragmatism and perfection becomes the enemy of the good enough.’

This is the just the beginning. Supply shortages will get worse thanks to a decade of underinvestment in fossil fuels; something that is now being exacerbated by political grandstanding.  

This was the theme at the recent Abu Dhabi Energy Conference. Demand for oil and gas has come back strongly. It is already outpacing supply. This is entirely at odds with the rhetoric of Western media and governments with their make-belief renewables targets. Without a surge in investment we are hurtling towards a global energy crunch. Climate politics is handing the likes of Russia and Saudi Arabia all the trump cards as well as our cash.

And let’s not forget the economic impact. You cannot run a functioning economy without access to reasonably priced and reliable power, period. This is made more urgent as we try to wean ourselves off two decades of easy money. The British oil and gas sector supports 200,000 jobs and pays tens of billions to the exchequer.  What is more, the UK’s energy industry is the leader in environmental, employment and safety standards. Imports are not just less reliable but also less ethical. 

In addition, there is a strategic risk in our dash for renewables. China has been quietly buying up the supply chains for renewable infrastructure and electric vehicles. Companies like Tesla and Siemens might seem Western, but their supply chains are now inextricably linked with China. Rare earth metals – essential in renewables – provide the perfect example. Cobalt is a vital ingredient for electric vehicle batteries. China controls over 70% of the world’s supply and is trying to buy up the rest. It has 100% of the cobalt refining capacity (a process that is too environmentally toxic to be done elsewhere). 

The dash for net zero means irreversibly hitching your wagon to China, possibly forever. Australia’s plight demonstrates how aggressively China is willing to weaponise trade for political ends. 

If we are going to become dependent on countries like China and Russia we need to appreciate how much freedom and integrity we will have to give up.  Look at how vested interests have already acquiesced to over two million Uyghur Muslims in Chinese camps, the dismantling of democracy and human rights in Hong Kong, and the threats to Taiwan.

Freedom Fuels

The British government seem to appreciate the need for domestic fossil fuel production. The risk is that they allow short-termist gesture politics to get in the way. We don’t have time. It can take five years to drill an offshore well. The crunch is on. We need to move fast.

The UK already has some of the world’s highest standards for energy extraction. We must avoid the temptation to over-regulate yet another industry out of existence. This includes allowing The City to finance projects without punitive funding costs or conditions – something the Bank of England and the Chancellor have threatened. 

This is politically doable. Environmental dogma appears more of a vote loser than vote winner. Both Johnson’s and Biden’s poll ratings crashed while headlining at COP26.  Other issues, like the cost of living, immigration and government competence matter more.

The key to success lies in the messaging. We need to brand domestic oil and gas as Freedom Fuels. We should finance and market them on the same terms as the most favoured ethical investments.  We should pump the windfall revenues into popular causes like the environment, children or healthcare. We should be clear about the ethical costs and dangers of energy dependency. 

Furthermore, this is a point in history for Britain to lead Europe once again. Our neighbours face the same stark choice. We should push for a new Europe-wide investment regime in the cause of freedom, democracy and prosperity. We must choose freedom fuels. 

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Andrew Hunt is a writer, investor and policy creative. His latest ideas can be found at www.brainfartpolicy.com

Columns are the author's own opinion and do not necessarily reflect the views of CapX.