High energy prices are the result of the mistakes of our political class

Sharing is Caring!

by Shaun Richards

The story of 2022 has been one of energy price rises and consequent inflation. The subject is in the news in my home country the UK today because of a likely government response via a subsidy to domestic energy consumers. But I wish to begin today by looking at a country which is in a strong relative position due to its domestic resources which is the United States. The issue is hitting it too and as we are approaching the annual summer driving season then this will resonate.

Gas prices in the US hit another record high, rising to an average of $4.69 per gallon. A year ago the average price was $3.11 and two years ago the average price was $1.97. ( @charliebiello)

The situation looks incredibly confused and this is because official policy is in a mess as the quote below highlights.

“And when it comes to the gas prices, we’re going through an incredible transition that is taking place that, God willing, when it’s over, we’ll be stronger and the world will be stronger and less reliant on fossil fuels when this is over,” said Biden. ( Newsweek)

This illustrates the mess here as so many politicians actually want higher energy prices to facilitate the policies they supported only last year at COP26. Voters who are paying the price are likely to be much less keen.

On this road we are seeing that even the US has shortages of fuel with refineries working flat out to try and meet demand. Or if you prefer this is another form of the supply-chain crisis we have been seeing. It is also a reminder that whilst the US is in overall surplus even it has to import certain grades highlighted in a way by the worldwide shortage of diesel. That has been driven by two things. Firstly that Russia was/is a significant supplier of it and presumably because of all the military use of it in Ukraine.

Next comes the issue of something else the US has plenty of as we look at what we call gas.From Bloomberg this morning

Natural gas briefly surged above $9 per million British thermal units in the US for the first time since 2008, extending a breakneck rally as fears of a supply crunch intensified, before paring gains into close.
Stockpiles of the heating and power-plant fuel are below normal for this time of year as exports are booming, and output from shale basins is muted.

It would be a bit rich to criticise the booming LNG exports as my country the UK and indeed Europe has been grateful for them, otherwise the situation here would be even worse. But the shale supply has been affected by a government that came into power intending to restrict fossil fuels headlined by its rejection of an oil pipeline as a headline policy. Although the situation remains a strength as shown below it is also impacting the US.

Henry Hub futures are now trading at roughly a third of the price for the European benchmark, up from about 7% in early March.

The Oil Price

See also  RFK Jr Says He’s Determined to Trigger a ‘Political Earthquake’ With His Presidential Campaign [VIDEO]

This is at US $111 so a Nelson in cricketing terms and both the main benchmarks are at similar levels. It is up around 60% on a year ago and since the negative oil prices of the initial pandemic response the only way has been up. With the shortages Radiohead summed it up.

Don’t leave me high
Don’t leave me dry
Don’t leave me high
Don’t leave me dry

Domestic Energy Prices in Europe

This has been a major stress point in the present crisis and the current headliner will be a surprise to some. France is presently the stress point with prices for tomorrow around 165 Euros per MW hour. There are various reasons for this but a player is that an expected strength has not been all it has been cracked up to be.


Back on the 14th of May Alex Crane put it like this.

French peakload prices, from 7 a.m. to 7 p.m., for first quarter next year jumped above 1,000 euros ($1,037) per megawatt-hour on the European Energy Exchange AG … The French baseload contract for same period is about double the price in Germany or Italy.

We can look at this from the perspective of the UK where this has just happened.

Following on from this auction, market parties who have successfully secured capacity will be able to nominate and flow power commercially on ElecLink from 12:00 (CEST) on 25/05/2022.

There is a new interconnector between the UK and France meaning that the UK is exporting 2.8 GW of power as I type this. This is welcome as once the fire damaged ones are back to capacity we will be able to transfer 4 GW providing a welcome flexibility at a time when inflexible renewables have created a problem. But it is expensive at £1 billion which is a familiar theme and transporting electricity loses some of the power.

We are primarily funded by readers. Please subscribe and donate to support us!

But for our main themes there are two issues. Firstly we has plenty of wind power yesterday with iamkate reporting this.

UK wind power hit a record 15.788 GW at 1:50pm today, supplying 51% of our electricity needs.

Let us park the issue that it never seems to get anywhere the claimed capacity of supporters which is between 25 and 30 GW depending on who you talk to. But we had plenty of power to export and earn £s from. But there is more.

See also  Wanted: Corrupt Stooge for High Political Office. Must Have Pulse

It’s a gas gas gas

The Rolling Stones lyric is appropriate because and perhaps this should be in bold our energy policy got something right!

The UK. It has more LNG capacity than Dunkerque/Zeebrugge/Rotterdam combined ( Ed Conway)

The US LNG exports have mainly come to the UK because we have the ports and terminals for it. So our current gas prices are relatively cheap and we can export it as well as exporting it implicitly via electricity. So there is an irony in that we did not need the recent strong winds. We could export anyway.


With the above you might be wondering about this?

The typical household energy bill is set to rise by about £800 a year in October, the energy regulator warns.

Ofgem boss Jonathan Brearley said the energy price cap, which limits how much providers can raise prices, is expected to increase to £2,800 a year, due to continued volatility in gas prices. ( BBC )

This is clearly yet another failure as they have locked people into higher prices just as for the moment at least they have got much cheaper for the UK.


There are plenty of issues here and an irony as we seem in the UK to be botching an opportunity to have lower gas prices for a while due to our LNG infrastructure. Of course the way that the establishment works there will be no reckoning for those who locked us into high prices just as they were about to get lower. Even worse today we are likely to get a subsidy to pay some of the higher prices! The subsidy will come from taxpayers who are mostly the same people as consumers so should the Bank of England return to QE you could argue we may have some implicit energy QE.

I am not particularly a fan of a windfall tax should it occur as I would rather the money was put into energy infrastructure into areas we have ignored. But as a summary Javier Blas is excellent here.

Six months of UK energy policy


Industry: We want to invest in the North Sea Government: No! Come on guys, it’s COP26


Government: Russia happened. Invest please Industry: In the North Sea? Maybe


Industry: Oil prices are high. We’re investing Government: We noticed: windfall tax

Also if wind power is so “cheap” ( energy secretary Kwasi Kwateng) then surely they mist be making excess profits at the moment and we should put a windfall tax on them too?


Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.