Energy crisis

The newly sworn-in President Trump had a busy inaugural day. Between swearing into office and waving a saber around while dancing to “YMCA” at an inaugural ball, he also signed several executive orders and proclamations. After signing his cabinet and other nominations, President Trump’s first order of business was to proclaim that all flags should be flown at full staff for this and all future inauguration days. Following the inaugural parade, President Trump signed a bevy of additional executive documents as thousands of his supporters cheered.

Politics is about priorities: what do we consider to be important? I worry that Britain doesn’t attach enough importance to children and their education. As the first lockdown eased in the summer of 2020, I was unhappy that pubs reopened before schools. I thought that said something about our priorities as a nation An interview by Liz Truss in New York gives me no reason to change that gloomy view. During the interview, atop the Empire State Building, the PM was naturally keen to talk up the benefits of the energy price support package to be set out on Friday. That package, she was keen to say, will cover not just households but also businesses.

Japan is reversing its avowedly anti-nuclear stance, restarting idled plants and looking to develop a new generation of reactors, announced Prime Minister Fumio Kishida on Wednesday. This major policy shift from the world’s third biggest economic power underlines both the seriousness of the global energy crisis and points to the most likely way ahead. This announcement would have seemed unimaginable a decade ago in the wake of the Fukushima nuclear disaster, which saw the plant flooded and led to three separate hydrogen explosions. Then prime minister Naoto ordered those living within a 12-mile radius of the plant to be evacuated as the Fukushima area was designated a contaminated wasteland.

With its new Inflation Reduction Act (IRA), the government is pulling one of those infomercial tricks where they throw in a third bottle of OxiClean ABSOLUTELY FREE! Acting as if the cost of everything hasn’t already been calculated and passed onto the consumer. The IRA, you see, contains a “Methane Emissions Charge” that will impose a $900-a-ton tax on oil and gas producers that will increase to $1,500 after two years. The left is patting itself on the back for their valiant work to cut greenhouse gas emissions drastically by 2030. But here’s the thing: the energy industry is already working hard to cut emissions; it’s in their interest to do so. And when the government fines them for not capturing enough methane, guess who gets to foot the bill?

With the travel-heavy Memorial Day weekend upon us, the fast-rising cost of gasoline is getting a lot of attention. Last week, gasoline rose above $4 a gallon in all fifty states. That’s the first time that has happened. Some are predicting gas could reach $6 a gallon this summer. If that comes to pass, the average American family could see a major impact on their budgets. (It might be noted as well, that the price of home heating oil has nearly doubled this year. If that continues, the economic impact next winter, especially in the northeast, where a high percentage of homes are heated by oil, will be considerable.) The threat of a recession is rising thanks to fuel shortages. Why has the price of gasoline risen so far so fast?

This week the fracking company Cuadrilla announced that it was permanently closing its two shale mines in Lancashire, after the Oil and Gas Authority (OGA) declared that shale gas companies must seal up the wells they had drilled and return the land to nature. It is, on the face of it, a very strange step to take at this time. The wells have not been producing any gas for some years, of course, ever since environmentalists launched their scare campaign against the industry. It was a campaign that was astonishing in its brazenness. Tiny earth tremors recorded near the wells, of a scale that is entirely normal in, say, the mining industry or in geothermal energy developments were rebranded by activists ‘earthquakes’.

The Chancellor is lending £200 this year to anyone who pays an energy bill in their own name. That’s 28 million people at an upfront cost to the government of £5.5 billion. The £5.5 billion will go directly to the companies this year, and will be knocked off bills from October. It will count as public spending. However, we will all have to repay that £200, in five equal annual instalments of £40 from 2023. Or to put it another way, our energy bills will be £40 a year higher than would otherwise have been the case until 2028. In a way, Rishi Sunak has given most of us an interest-free loan of £200. And we’ll only be able to dodge repayments if we stop buying energy in the UK.

One issue more than any other will dominate airtime and influence policy in 2022: energy. Americans are seeing the highest prices at the pump in seven years. Since Biden took office, average gas prices are up by more than $1 a gallon. In November, gas prices in Mono County, California hit more than $6 per gallon, forcing some residents to drive to Nevada (where gas taxes are lower) to buy fuel. The price of natural gas in the US is at its highest in seven years, and up more than 180 percent in the last year alone. In Europe, the situation is even worse. Europe’s gas reserves are at record lows. In Germany, which already had the EU’s highest energy prices, bills are up 30 percent in a year.

Will it turn out to be Boris Johnson’s Jim Callaghan moment? Briefing reporters on his plane to the US on Sunday, the current PM tried to play down the energy crisis, saying:  'It’s like everybody going back to put the kettle on at the end of a TV programme, you’re seeing huge stresses on the world supply systems.'  The gas price spike would be over just as soon as it occurred, he implied, and was caused by nothing more than the global economy rebounding after many months on the Covid couch.