The British Energy Crisis – No End In Sight

  • The more Britain supports America in trying to wean Europe off Russian energy, the deeper it will sink into a deadly pit of its own excavation.
  • It is time for the West to make peace with Russia.
  • Venu Gopal NarayananFriday, October 7, 2022 4:45 pm IST
    Prime Minister of United Kingdom, Liz Truss
    Prime Minister of United Kingdom, Liz Truss

    Economically, the island nation is reeling from high inflation, brought on, ironically, by its active, over-exuberant participation in forcing Russia’s hand on Ukraine. A nation of shopkeepers is having to eat crow, as going concerns – large and small – are forced to shut down because they simply can’t afford to pay their electricity bills.

    Socially, its inner cities (a characteristically British euphemism for poor urban districts beset with social strife) are becoming no-go areas within which insular, Muslim cultural separatism has taken strong root – with a nasty, violent anti-Hindu bent in places.

    Electorally, instability is the new normal. It has had three general elections in the past seven years, and is on its fourth Prime Minister in six years – with a distinct possibility of more of both to follow soon.

    Politically, the Labour Party has reduced itself to a sorry rump, through a combination of neo-Marxian ‘wokeness’, and a fatal dependency on the Muslim minority vote.

    The other main party, the Conservatives, has proved that it just cannot form a government capable of tackling the nation’s myriad problems. If it has survived in office, it is largely because voters prefer their bungling to the spectre of Labour’s hard-Left socialism.

    Geopolitically, Britain’s seat at the high table is firmly tied to the doddering fortunes of America. If it still commands a presence, it is only because Anglo-Saxon unipolarity is still the dominant global military-economic-political force.

    But multipolarity is coming, and with it, both dissonance in the trans-Atlantic alliance, and Britain’s gradual, increasing irrelevance in world affairs.

    Financially, the Pound is in the sink again. So much so, that the Bank of England, their RBI, had to hastily intervene to prevent a meltdown in their pensions sector, caused by a roaring crisis in government debt markets.

    Britain’s new Finance Minister, Kwasi Kwarteng, was nearly drawn and ‘Kwartered’ along with his equally-new boss, Prime Minister Liz Truss, for their hurriedly-withdrawn plan to selectively cut taxes while increase borrowings heavily.

    And militarily, dreams of empire flashed alluringly before the British Army’s eyes once more, when the Ukrainians made minor, temporary gains in one sector of a long front line against the Russians.

    But the bald truth is that the British would struggle to deploy little more than a brigade beyond their shores, and their state-of-the-art F-35 fighter jets would not be fully operable till at least 2025.

    How did it get to this?

    The root cause is a mixture of galloping energy costs, structural deficiencies in the British energy sector, and a debilitating disruption of hydrocarbon supplies (ironically caused after they instigated a proxy conflict in Ukraine).

    First, Britain imports half of the gas it consumes for heating and electricity generation. Three-quarters of this gas comes from Norway. The problem is that gas prices have shot up by around four times since early 2021 (that is a staggering 400 per cent increase).

    Norway registered a four-fold increase in gas revenues this year, compared to 2021. But gas production only went up by 5 per cent. As a result, the British are having to suffer back-breaking inflation even as the Norwegians happily make hay while the sun shines.

    Second, Britain imports around 10 per cent of the electricity it consumes. Half of this is from France, a quarter from Belgium, and a sixth from Holland. These prices have now gone through the roof in Europe thanks to the conflict it currently fuels.

    Therefore, the costs of both domestically generated energy and imported electricity are presently at crushing levels.

    Britain is now hostage to foreign circumstances and caprice, because, as a chart below shows, their gas reserves in the North Sea have been largely depleted. Plus, the cost of extracting the remaining gas will only become increasingly unprofitable with each passing day.

    Britain- Natural Gas Production and Consumption
    Britain- Natural Gas Production and Consumption

    Third, is oil. As a chart below shows, Britain enjoyed two glorious decades of self-sufficiency, thanks to the bonanza they discovered in the North Sea. It insulated them from geopolitical vagaries and turbulence in the Middle East.

    It also allowed Margaret Thatcher to implement her ‘Thatcherism’ – a successful, decade-long effort to build a true, vibrant, free-market economy.

    Britain-Crude Oil Production and Consumption
    Britain-Crude Oil Production and Consumption

    However, those days are long past. Britain is now an importer of crude oil, currently at ‘killer’ rates, and suddenly shackled in the chains of subsidies, deficits, and the dole.

    Under the present circumstances, Liz Truss will have to appear more socialist than a socialist if she wants to keep her job.

    The bigger problem compounding Britain’s (and Europe’s) present crisis is America’s inability to replace Russia as a principal supplier of oil and gas.

    This was President Joe Biden’s great gamble of late 2021– to recommence the production of domestic hydrocarbons at a blistering rate, get America’s economy revving, regain control of the global oil price, and become a major exporter of oil and gas.

    Unfortunately, that has not happened because American oilmen are wary of making such large investments; they know that they would never be able to compete with Russia and the Middle East, if the latter cut prices to retain their considerable share of the global market.

    So, does Britain have an exit strategy out of this infernal mess?

    No, it doesn’t, and it won’t, for as long as it continues to be led down the garden path by America, geo-strategically, and towards expensive renewable energy by the green lobby.

    Look at Britain’s energy mix:

    Britain- Energy Mix 2020
    Britain- Energy Mix 2020

    The ideal way out would have been nuclear energy, but they have built only one nuclear power plant in the past few decades (Hinkley Point C, still under construction), and their sizeable investments in renewable energy, especially wind power, came a cropper last year because of record poor winds.

    That should have woken them up, but it evidently hasn’t.

    Today, renewables constitute over 40 per cent of Britain’s energy needs. That figure is on the rise. And, as the wayward winds have shown, this excessive dependency on such a fickle energy source could have cataclysmic consequences.

    Now, Britain may still retain some prominence and leverage in world affairs by virtue of London being the financial capital of the world, their seat on the United Nations Security Council, and their technological edge in some areas.

    But their ongoing crisis shows that these advantages are of no help in reducing inflation, or in securing cheap, steady supplies of energy.

    Thus, the more Britain supports America in trying to wean Europe off Russian energy, by senselessly perpetuating a self-defeating proxy conflict through their pliant surrogate in Ukraine, the deeper it will sink into a deadly pit of its own excavation.

    As Prime Minister Narendra Modi rightly said recently, this is not a time for conflict. In conclusion, then, it would do Britain, Europe, and the world a great deal of good if they heeded his words.

    It is time for the West to make peace with Russia.

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