Dominic Lawson: Jumpin’ Jack Frack – Let’s Use That Gas
You would think that a bit of good news might come in handy right now and certainly for those whose job it is to keep the country from sliding deeper into insolvency — the government. Just over a week ago The Times reported that “Britain could have enough shale gas to heat every home for 1,500 years, according to new estimates that suggest reserves are 200 times greater than previously believed”.
To be precise, the British Geological Survey is about to increase its official estimate of the amount lying untapped from the previous figure of 5.3 trillion cubic feet to between 1,300 and 1,700 trillion cubic feet. A lot.
Yet the response of Ed Davey, the Liberal Democrat energy and climate change secretary, was to tell the newspaper: “It is not the golden goose. The experts are clear that they do not expect this to have a major impact on the gas price.” Which experts would these be? The ones at his department who had claimed we would be better off going flat out for wind and solar power because gas prices would only rise? And that billions spent by the taxpayer on subsidising renewables were therefore actually a way of saving money?
Does the department really have “experts” who scratch their heads when looking at how the exploitation of similar shale reserves in America has caused that nation’s cost of gas to fall by more than two-thirds and can’t for the life of them work out why a gas glut would cause the price to collapse?
Still, Davey’s response was almost rational compared with that of an energy spokesman for a member of the coalition that governs Northern Ireland, faced with a similar piece of good news. The consulting firm PwC produced a report last week on the shale phenomenon and, looking at the dramatic upward revision of estimates of economically recoverable oil and gas reserves, declared this would have the effect of reducing crude oil prices by as much as $50 a barrel by 2035. In turn, said PwC, this would increase growth and living standards across the world. Well, perhaps not in Saudi Arabia — but that is something we might feel able to cope with.
Within the PwC report, Northern Ireland’s shale gas reserves are given a value of £80bn; but Sinn Fein saw this as a plot by “energy companies to overestimate reserves” and called on the government to continue to invest in “renewable heat generation”. It is understandable that a representative of the most subsidised part of the British Isles should think it natural that taxpayers would continue to underwrite its economy into the indefinite future. Yet it is a common misconception that big oil and gas has a vested interest in suggesting that a rapid development of reserves would be straightforward. If anything, they want governments to think it will be incredibly difficult to develop the stuff and thus offer them more tax breaks. In fact, the sudden gas glut in America has caused BG Group (formerly British Gas) and BP to write their assets down by billions of pounds: their reserves are now worth much less.
Meanwhile, we might like to consider why the United Arab Emirates helped to finance the movie Promised Land, which amounted to an attack on the “fracking” techniques at the heart of the US gas boom. The more conspiratorially minded would not find it hard to link concerns in the Arabian Gulf over America’s decreasing need for Middle Eastern oil and gas to a film that sought to portray as poisonous the enabling industrial process.
It is true that “fracking”, whereby water mixed with sand and chemicals is injected at high pressure into the shale, has caused the odd earth tremor, including one near Blackpool during drilling on the first giant British shale gas find. Yet in America there have been only two minor seismic events attributed to fracking; many more have been traced to geothermal energy and hydroelectric reservoirs.
In this country such tremors were long associated with the coal-mining industry. If that had been ruled out on the so-called precautionary principle by a late-18thcentury version of the green movement, Britain would not have had an industrial revolution and would still be a country dominated by a few landowning aristocrats kept in fine manner by a workforce mostly condemned to lives of tenant farming.
We might describe this as the Prince Charles vision of the good life; this almost fanatical green campaigner welcomes the idea that the economy should subsist largely on wind and solar energy, a shockingly inefficient use of resources of which the subsidised beneficiaries are those owning the largest tracts of land — the energy equivalent of the common agricultural policy.
Yes, I do know that gas is a fossil fuel — the spawn of Satan according to the heir to the throne — but it is much less of an emitter of CO2 than coal, per unit of energy. This is why US carbon emissions have declined by 12% over the past five years of gas-fuelled GDP growth, a far greater decline than has been recorded by any European nation signed up to the now moribund Kyoto treaty.
When you think of what it would mean if China were to make a similar switch from coal to gas — it, too, has recently announced colossal shale gas reserves — you begin to realise how sublimely irrelevant to the global picture is our own government’s intellectually incoherent carbon reduction programme. And yet this is the cause for which it seems prepared to drive up fuel poverty.
Indeed, last week Sir Mervyn King, the outgoing Bank of England governor, warned how rising energy costs were doing more to push up inflation than any monetary expansion on his part: “Prices charged by utilities — to pay for green charges, green policies — are pushing up administered prices in a way that is … self-inflicted in terms of damage done to take-home pay.”
This may seem an attack on the government, but I suspect it was more likely to be an attempt to strengthen George Osborne’s hand in his efforts to force the energy department to pursue the policy that always has been that of any rational British administration: to bring down the cost of energy and to do it, as much as is possible, by the development of the most economically efficient resources lying beneath the nation’s soil.