Chris Huhne and his mistakes on fracking

Well, you knew that he wasn’t going to tell it straight, don’t you?

However, there is a little snag with the prime minister’s logic. We have so many pipelines connecting us to the continent that if the price were lower here, some gas trader would buy in Britain and export it. Soon the prices would be virtually the same. For exactly this reason, energy prices were no lower than Germany’s even when we were self-sufficient.

Yes, isn’t that excellent? 500 million people gain access to cheaper energy because we frack here in Britain.

And that is the result of those Poyry reports. Yes, we’re tied into the European gas market. That means an increase in supply from ourselves leads to lower prices right across the EU market. As does any increase in production elsewhere lead to a reduction in the prices we pay.

So much so that the net result of any one EU country going hell for leather for fracking is not that prices halve. No, it’s that prices don’t double, as DECC currently predicts they will. And yes, it is only necessary for one to do so for this result to occur: that’s very clear from those same Poyry reports.

There is a final devastating flaw in Cameron’s argument. Imagine that we are once again afloat on a jet-black sea of fossil fuels: our energy prices may not be lower, but our balance of payments will benefit enormously from lower oil and gas imports; as a result, sterling is likely to become a more attractive currency to buy – a “petro-currency”.

Then we would suffer from what used to be called the Dutch disease. The currency would strengthen, hitting trading businesses. In the 80s, offshoring began in earnest when we sharply increased oil and gas output. In other words, if the prime minister’s fantasy actually happened, the consequences would be the exact opposite of what he supposes.

And that, I’m afraid, is really pretty pathetic. For that’s exactly what happens with any successful export industry. Doesn’t matter whether it’s natural gas or cars or diversity advisers you’re exporting. Run a substantial trade surplus and your currency will rise.

But th3en we knew that Chris Huhne wasn’t going to give it to use straight, didn’t we?

24 thoughts on “Chris Huhne and his mistakes on fracking”

  1. This is what I don’t get about this whole Dutch Disease argument. It basically says that any increase in exports is ruinous. This clearly must be nonsense.

  2. By Hune’s ‘logic’ we should kill off any successful export industry – like finance for example – in case it makes the £ too strong. Which explains a lot.

    It amazes me that MPs can get elected with such a lack of basic thinking skills, but it also explains how he managed to make such a mess of Energy policy. Thanks goodness his character was exposed, otherwise he might still be in charge of something important.

  3. And it won’t be just the UK of course. Poland and Ukraine are sitting on lakes and clouds of the stuff.

    In response to some Ritchie style tax criticism the boss of Total pointed out that his company doesn’t do much business in France, apart from largely unprofitable refining and retailing.

    So we can expect even France to lift its ban. Given you can set your watch by Hollande’s u turns this might be sooner than you think.

  4. You honestly think this is “a mistake” rather than deliberate mendacity?

    I’m not one for giving a politician even a first chance but Huhne has proven, repeatedly, that he is simply not appropriate to be trusted in anything he says, does or even vaguely hints at.

  5. Also, bear in mind that Huhne probably has suffered brain damage from the years of vicious beatings to the head administrated by the pyschopathic Vicky Pryce.

  6. Yeah run a long trade surplus and your currency will rise.That’s the problem with Mercantilism- always has been. Export or die = bollocks.How are you going to export anything if your currency is so expensive that importers can’t afford to convert their weaK currencies into it to buy our stuff? One answer: buy stuff off them ,they’ll have some real money then.Brilliant.
    The Germans get away with it because they manage the Euro which has no convertability problems in Europe.

  7. The Laughing Cavalier

    Huhne fails to mention that Britain tis not the only European nation to be sitting on vast reserves of shale gas and oil. He also neglects to consider the benefits of political and price stability that we and other Western nations will gain from not being vulnerable to blackmail by Putin and his cronies.

  8. Every mendacious lefty wanker in the country should be forced at gunpoint to sign a paper stating “I am happy for energy prices to rise substantially and generate misery for millions”.

    If they aren’t willing to, shut the fuck up.

  9. So Much For Subtlety

    Ian B – “So, don’t be a mercantilist.”

    Hey, I am willing to do my bit. If Cameron allows fracking to go ahead I am prepared to promise to take whatever large-ish share of the revenue he gets off his hands, go to Pattaya and spend it like a drunken sailor after ten months at sea.

    It will keep the pound down, enrich a very small subsection of the locals and provide no end of fun for me. A win-win really.

    And to keep the Gay Lobby on side I would even promise to take some of the dosh to a Lady Boy show and tuck some of the lower denomination notes, strategically placed, in the usual places. Now I can hardly be more broad minded than that.

  10. The article is a farrago of shite. The real question is : how does a fucking ex-jailbird keep being given space in a national newspaper to expound his tripe?.

  11. And of course the entire British economy gains the money we get from successful exporting, so actually being able to export 10s of billions worth of gas with, we are assured, not saturating the market and reducing prices, is a rather good thing.

    This follows with absolute certainty from the claim that it will not reduce gas prices and is so obvious, simple and undeniable that none of the state funded anti-fracking campaigners (like the BBC) claim to have noticed it.

  12. The left really have got themselves in to a Gordian Knot over energy.

    On the one hand they complain like mad about energy prices going up without acknowledging its feature of their climate change policies that they have signed up to. Then they brag about the green deal which puts up said prices. Stuck on this one they waive their arms around and blame the energy companies without offering any evidence.

    Next up comes renewable’s. They fill us with scare stories about Gaia boiling over if we continue to burn fossil fuels and its such a threat we have to subsidise wind and solar power to the point that we have the middle class running around bragging about how much they make from feed in tariffs, whilst at the same time the left complains about fuel poverty.

    Then they tell us we need to re-balance the economy and create more manufacturing. When you ask them what manufacturing they propose that isn’t energy intensive they look at you as if you have two heads.

    Now we have fracking. They tell us that it won’t make any difference to the price. When you point out so what, its private companies investing and its about future prices anyway, we get wibble local environmental concerns and protests which out to be the usual suspects running around the country organising protests for their mates to attend and cause a lot of disruption.

    The question is: does all that cognitive dissonance turn their brains to mush or do they need brains of mush to start with?

  13. What I can’t understand is why any newspaper would let someone with “officially accredited liar” stamped across their forehead file copy. You don’t go into restaurants past “Closed by Health Authority Instruction” notices for lunch, do you?

  14. If I was Farmer Giles or a borough councillor I’d be biting Cuadrilla’s arm off.

    The footprint for a fracking site is about as much land as you need to pasture a horse. Add in some disruption for traffic and say a three mile pipe to connect to the grid.

    In return for which you get ten thousand horse power per day going down the pipe, on which you collect a nice royalty. Maybe not enough to send every village child to Eton but enough to mend the church roof, build a village hall and an all weather soccer pitch, etc.

    So the first movers will have their mouths stopped with much gold.

    What happens next?

    Seeing the rewards, and the minor disruption, other communities will be keen to follow but will have a much harder bargain. The gas company is less generous, the government wants the royalties to go to Whitehall, not locally, etc.

    This pattern, I predict will be Europe wide by 2020.

  15. @IB Being a mercantilist ( or not) is not a personal choice.Our economy is predicated on the fallacy: we must export more than we import (which taken to its logical extreme would mean that the country is left entirely denuded of goods) .Nothing the individual can do about it.

  16. Our economy is predicated on the fallacy: we must export more than we import

    Where do you actually live? This is nonsense applied to the UK and has been for over a century.

  17. BIF, my limited understanding is that Farmer Giles gets fuck all from gas on his land – 1) it’s not his gas, so no royalties, 2) the Coalition are considering amending the law of trespass so you can drill under neighbouring land w/o it constituting trespass.

    I agree you might get more out if the law was changed so it was his gas…

  18. Luke
    It’s not farmer Giles’ gas. But it is his land. Think about it. 100 farmers, 99 against fracking. Gas company needs an acre or to for the drill pad. 1 farmer gets a handsome rent. 99 get nothing.
    Now turn it around.
    100 farmers, 99 in favour of fracking. What rent would the gas company pay? About equivalent to pasture for a horse as I said. (A true comparison might be revenue from biofuel maize.)
    Hence the importance of being first mover in this revolution.

  19. the boss of Total pointed out that his company doesn’t do much business in France

    I’d do more myself, but I keep getting dragged into meetings…

    apart from largely unprofitable refining and retailing.

    We have the Lacq gas plant in Aquitaine, which I think was the launch pad for Elf years ago.

  20. So Much For Subtlety

    DBC Reed – “Being a mercantilist ( or not) is not a personal choice.Our economy is predicated on the fallacy: we must export more than we import (which taken to its logical extreme would mean that the country is left entirely denuded of goods) .Nothing the individual can do about it.”

    I wonder when was the last time Britain actually exported more than it imported? Apart from the two world wars. You do know, don’t you, that since the mid-ish-nineteenth century at least Britain has imported more than it has exported? Because of the Invisibles and other services? As well as being a country people like to move money to in order to keep safe and invest?

  21. Being an old geezer I can remember when the BBC News featured a monthly shock horror story about the “Trade Gap”.Harold Wilson reckons he was shoved out of office because of the purchase one month of some American airliners coinciding with defeat in the World Cup.At the time, a few brave souls appeared on TV shows nobody watched like Tonight,saying actually any Trade gap is always filled with UK invisibles like insurance .So you have got your invisibles in a twist: on the wrong side of the IN/Out balance.
    This country is certainly a place where people like to invest : in Hydrogen Bomb proof rentseeking opportunities like off- plan property developments that do nothing for long-term jobs/demand and impoverish the country in the Henry “Progress and Poverty” George manner whereby commercial progress (or money supply increases) lead to property prices and rents rising and hence poverty.Si monumentum requiris circumspice.

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