Ridley: The gas price shock will expose Britain’s catastrophic energy misjudgment

From Matt Ridley, the original Rational Optimist

Since a fifth of the world’s liquefied natural gas has to pass through the Strait of Hormuz, it is no surprise that the price we pay for natural gas has spiked sharply upwards. That’s bad news for people trying to heat their homes, use electricity, start an AI business, make chemicals, find employment or buy almost anything. Energy is the lifeblood of the economy.

Since we import around 60 per cent of the gas we use, and since there is no world price for gas as there is for oil (so we pay roughly three times as much as Americans pay for gas) this is also bad news for the nation and its government. The benefit of higher gas prices goes mostly to foreigners, the cost – and risk of interrupted supply – mostly to us. Ouch.

Now imagine a counterfactual world in which ten years ago we had made it easier to invest in the North Sea and gave a green light to onshore shale gas, overriding hysterical nonsense about the risks of “fracking” promulgated by Friends of the Earth and their allies. England has vast amounts of gas-rich shale, mostly under Lancashire, Lincolnshire and North Yorkshire. How much difference would it have made?

According to an estimate made in 2019 by UK Onshore Oil and Gas, based on the results of actual drilling in northern England, 100 drilling pads could realistically be producing 40 billion cubic metres (bcm) of shale gas a year by the mid 2030s. Britain’s natural gas consumption is around 60 bcm per year and we already produce around 25 bcm each year, mainly from the North Sea.

So if we had got a move on ten years ago we could by now be heading towards being self-sufficient in gas and exporting the surplus to other countries. That would improve the balance of payments by around £8bn a year, save 80 million tonnes of carbon dioxide by 2035, compared with imports of liquefied natural gas, and generate £600m in community benefits and £1.2bn in business rates by 2035.

Think how smug we would be! Paying lower prices – to ourselves – for our own gas, and trousering a fortune from exports. Government revenues and household budgets would both be benefiting. So would economic growth.

Of course, in practice it is unlikely we could have developed the shale industry that fast. But even supposing we were producing a third or a quarter of that quantity of gas onshore by now, the economic impact would be enormous. Add in an increased supply from the North Sea, and in this counterfactual world, our chemical industry would not be dying, we would not be falling behind in AI, heating pensioners’ homes would be substantially cheaper and extra revenues would be pouring into the pockets of both working-class people and chancellors of the exchequer.

Ah, say the naysayers, but there would have been earthquakes and all sorts of other horrors. Yet what is this we find? Environmentalists hymning the praises of fracking just last week. “Magic beneath the surface” said the Guardian headline, of a Cornish project that produced 15 mini-quakes of magnitudes up to 1.5 on the Richter scale, ten times as high as allowed for shale gas (it’s a log scale). You see, the difference is that the Cornish project is about geothermal energy, not gas. The double standard is ridiculous.

Shale gas is environmentally as well as economically the right way to go. Compared with a solar farm of equivalent (though less reliable) output, a shale gas pad is minuscule. Compared with dozens of wind turbines of equivalent (though far more expensive) output, it is low enough to hide behind a hedge – and does not kill birds of prey.

However fast we innovate in energy we will still need to burn gas for decades, as even the net-zero zealots at the Climate Change Committee admit, so we have to get the stuff from somewhere. The carbon footprint of home-produced gas is much lower than that of imported gas. It becomes clearer by the day that the opportunity cost of our decision to ban hydraulic fracturing for shale gas is cripplingly high. It is no comfort to be able to say “I told you so”.