Euan Mearns at Oil Drum: Europe.
From riches to rags
The bar chart up top indicates the cost of importing oil and gas to the UK ballooning to about $200 billion (£100 billion) per annum by 2013 – just 5 years away. This completely dwarfs the riches of North Sea oil and gas production the UK enjoyed up to 2004, which were exported at rock bottom energy prices. The chart is indicative since it is unlikely that this will ever come to pass. It is unlikely that the UK will be able to source or pay for this ever rising energy bill on the international markets.
Left to market forces, the problem will be solved by spreading energy poverty throughout the UK population. The wealthy who can afford the small amount of expensive energy on offer will be fine whilst the poor will just have to go without – personal transport, heat, light and power.
The charts below show the gross cumulative and per capita cumulative surplus / deficit from 1998 which is when the BERR chart begins, which coincides roughly with when the New Labour government (Blair – Brown) came to power. We are currently at the fulcrum of surplus turning to deficit. By 2013, the UK may well run up a cumulative deficit in oil and gas imports in excess of $500 billion – if we can find countries that will sell us oil and gas on credit. This equates to an energy debt over $8000 for every man, woman and child in 5 short years. This is in addition to the already dreadful debts we have run up as a country importing consumer goods on credit (see below).
Greed induced craziness, that will affect the lives of almost every UK citizen – if you are not already struggling, you almost definitely will be soon. We have reported on the food riots in other parts of the world, this report illustrates that if you think ‘it cant happen here’ you are wrong. In fact, the Uk may be one of the most unprepared countries in the world: archaic planning laws make it almost impossible to acquire land that you can live on, obscene land ownership statistics show that very few people have access to land, decades of road building policies and privatisation of public transport has left the UK with probably the most complicated and expensive public transport system, houses without gardens and very little and poor social housing… the list goes on. For decades the UK has replicated USA policies, stripmining the poor, privatising public services, reducing benefits and making it harder and harder to claim, out of town superstores being allowed to undermine local economies, crazy house prices artificially created through planning restrictions….
A state of emergency
We should hopefully by now have reached a point where all stake holders in UK, European and Global energy are able to grasp the simple fact that we are now in the early stages of a full blown global energy crisis. The focus is currently on oil but this will soon turn to concerns over natural gas and coal supplies.
This crisis has been turned into a state of emergency by the indifference of political leaders in the UK (and throughout the world), fluttering in the wind of poorly informed public opinion while they have prevaricated about expanding renewable energy resources and building new nuclear power stations. All warnings of this pending energy crisis have been ignored in favor of pursuing popular policies that created the illusion of prosperity whilst the fundamentals of our nations security and well being have been draining away.
The chart below shows the current state of the UK trade balance. This is the position at the end of the good times North Sea oil and gas have provided. The situation now is about to get a whole lot worse as our energy surplus turns into a crippling deficit with no plan on the horizon of returning the books to balance.
I have not attempted a forecast since some major changes to UK trading status are to be expected. Higher food, fuel, domestic energy and bank interest bills will squeeze the disposable income of many individuals and families. Thus, instead of buying consumer goods and going to Spain on vacation, families will instead spend this money on food and energy. Thus we can expect the deficit in goods and tourism to reduce while the deficit in energy balloons.
The party is over. Life in the UK is getting worse for most people. We can try to continue down the same old path, or we can demand the right to try something new. Passive consumerism is no longer an option. Relying on peasants in other countries to grow our food for us, is no longer an option.
The future
The exchange last week between Mervyn King (Governor of the Bank of England) and Alistair Darling (Chancellor of the Exchequer) suggests that they plan to do nothing about this presuming that the upwards tick in energy and food prices (that began in 2002) will drop out of the annual inflation statistics a year from now. True rabbits caught in the headlights. They have created a perilous situation for the UK economy that they seem not to understand let alone know how to fix.
Here are a few pointers to what I think we can expect in the next 18 months:
Forever rising energy import bills will pressure Sterling which will continue to fall, pushing up the cost of energy, food and consumer goods even more. Public sector workers, no longer able to borrow to supplement income will begin to strike once they discover that 3% wage increases do not come close to covering the rise in the cost of living (the great inflation lie will be found out). Unemployment will begin a steady rise as financial services, banks, building sector, airlines, airports, leisure and retail come under severe pressure. They will be joined by public service workers as the government struggles to fund public services with falling tax receipts, spiraling debt and a falling pound. (already happening in Aberdeen with deep cuts in education spending across the city and teacher numbers being slashed). I won’t go into the spiraling and compounding nature of this on the property market since this is an article about energy. The elderly and poor will really struggle this winter to pay their energy and food bills. If the weather is cold, the grid might fail and the vulnerable will begin to die from cold and starvation. Following that things will begin to get worse as the UK discovers that it is struggling to secure sufficient natural gas at any price, on the liberalised market they helped create. Society becomes more polarised into those who can still afford to drive an SUV, live in comfort and warmth and fill their bellies with prime Aberdeen Angus steak set against a new under class who struggle to feed and heat their families. Welcome to Britain in 2010.
“It’s difficult to get a man to understand something if his salary depends on him not understanding it.” —Upton Sinclair
