“North Sea gas didn’t significantly move UK prices – so we can’t expect UK shale production alone to have any effect,” Mr Davey said, pointing out that Britain is just one part of the wider European gas market.
He said it was “far from clear that UK shale gas production could ever replicate the price effects seen in the US”, where the shale gas boom has seen prices plummet.
The comments stand in stark contrast to those of David Cameron, who wrote in the Telegraph last month that “fracking has real potential to drive energy bills down”
But lying in a very political manner.
We’ve actually had two reports from Poyry into the effects of shale on prices.
It’s true that we don’t expect Cuadrilla’s announcement of Lancashire shale to change European gas prices very much. It’s also true that we don’t expect European shale to reduce European or UK gas prices from where they are.
But we do very much expect shale to affect prices and that’s why I’m happy to declare that Davey is lying here.
For what the two reports actually say is this. Currently the gas price is around 40 p a therm. If there is no widespread European fracking then this price will rise to 80 p a therm. If there is a decent amount of fracking (and the assumption used is essentially that the Polish fields become productive) then the price will not rise to 80p It will stay at 40 p.
This is a substantial effect on price as you can see: it halves the price from where it would otherwise be. It doesn’t halve it from where it is now, but it does halve it from where it would be.
The other report into Lancashire is about only one small part of Cuadrilla’s find. It’s not the original discovery, nor is it the current gargantuan claim. It is, rather, about an interim announcement that Cuadrilla made of the level of recoverable gas. And this will lead to a 2-4% reduction in the European price of gas all on its own. A reduction from what it would otherwise be of course, not a reduction from current prices.
So while it’s possible to support each of the individual pints that Davey is making he’s actually lying through his teeth. For the impression everyone comes away with is that producing vast quantities of shale gas won’t alter the price: a completely absurd suggestion. Of course it will alter it from what it would otherwise be. And in fact, we’ve all got the report that tells us: it’ll halve it.
As to why Davey is lying in this manner that’s simple enough. As soon as you look at all those calculations about solar and wind etc they all fall over as soon as you assume that gas isn’t going to rise in price. So no one must ever be allowed to make that assumption.