“We’re going all out for shale gas” announced our Prime Minister. Rousing cheers all round. Well maybe in the only other two countries in Europe to embrace this fossil fuel: Poland and, err, Lithuania. But what the heck, it will create jobs we were told. Well yes, spending money doing almost anything creates jobs but that is NOT what this is all about is it? If creating jobs was our objective then we would spend the money on mass transit and home insulation. But we don’t.. well, putting HS2 to one side for a moment. In fact, as the infographic I am publishing with this blog clearly shows, doing almost anything else other than fracking would create more jobs.
The reasons are well explained in the book “Crude World” by Peter Maas. He is a journalist and writer who travelled the world studying the “resource curse”. This is a name given by economists to the counter-intuitive notion that discovering oil, gas or coal under your feet it actually going to destroy your economy. Nations can choose to manage this curse through a variety of devices including a ‘sovereign wealth’ fund. This is how Norway managed its curse so effectively. When Peter Maas went to west Africa he saw countries where the curse was not being managed at all. Oil money crowds out all other investment and kills diversity in an economy. Significantly it can kill your manufacturing sector and destroy agricultural exports.
This might not be a problem if the petroleum industry creates lots of jobs. But it does not. It is a capital intensive industry not labour intensive. When a British Chancellor of the Exchequer talks about wealth generation from shale gas he is not talking about job creation. He is talking about tax receipts for shale gas exports. This might be useful in paying down the odious debt our government ran up to pay off banks, but it will do little to benefit the unemployed. Not directly.
Take for example North Sea Oil. This has been in terminal decline since 1999 and we have been importing gas since about 2002. For all intents and purposes the fossil fuel wealth of the North Sea has gone. What do we have to show for it? Did we squirrel that money away for a rainy day? Well, no. That was not in keeping with the laissez faire economics so in fashion at the time (and today). The tax receipts were used to reduce personal tax burdens. Specifically the tax rates of higher income earners were cut dramatically. This lead to the purchase of property and… since we are a small island… this pumped up the property market. Boom!
In short we have nothing much to show for North Sea oil. It decimated our manufacturing industry because it killed our ability to export. Is it no surprise that the industrial powerhouse of Europe, Germany, has no oil or gas? Of course they have a lot of renewable energy – a matter to which we shall return.
British shale gas will not create a lot of jobs. Nor will it support job creation in other sectors of business. It will do the opposite. There may well be some cash handouts but, as we have seen with the North Sea oil bonanza, we have a good track record of wasting these on short term consumption and bidding up the real estate market. This is the resource curse.
So, will it lead to greater energy security? According to Alan Whitehead MP we don’t even need the gas. We simply “need” the money. So when will the Treasury get all this money for gas exports? 2015? 2016? Next Parliament? The Parliament after that? No. No meaningful production will be available to the European gas market until 2025. But it will reduce gas prices yeah? Well, no. Gas prices are fixed by the wholesale price that is set across the European continent. The situation is different from that in the USA.
You will have noted that so far I not mentioned any actual environmental issues. Despite what the protestors think the risks are containable. Like Nuclear energy – if we throw enough money at it then it might be safe. However the British public are already spooked. The BBC Countryfile program asked its viewers via an online poll whether they would prefer local:
- wind turbines
- neither = drastically reducing their energy use
The poll may hardly be scientific but its results agree with previous surveys. At time of writing 1341 people voted. 86% chose wind turbines for their energy needs. 10% said they would drastically reduce their energy needs in order to have neither options. 49 people out of 1341 chose fracking.
The place for fossil fuels is in the ground. Keep the genie in the bottle. There is no long term economic benefit from fracking. It is being proposed because it perpetuates an extremely old fashioned centralised energy paradigm. It is being perpetuated by a powerful establishment who benefit from the status quo. They will fight to keep YOU out of the loop. In this model of development the resources are controlled by Government. They grant licences to a small number of companies to extract those resources. Those resources go to big energy companies who refine them, ship them or pipe them to the point of use. These resources are then consumed in remote power stations or sold to you directly. Other than having your money in a pension fund, that invests in one of these big companies, YOU are not a stakeholder in this.
I made a statement on Twitter the other day that went thus:
“Fracking is something that will be done to you. Renewables are something you do yourself.”
It earnt a couple of favourable replies from people who felt it framed the nature of this issue very well. Renewables are what we describe as “scalable” and increasingly community funded. Communities and individuals literally “buy-in” to wind & solar energy. Of course there are renewables developments that can be “done to you” likewise I am sure a community could crowd-fund its own fracking site. However the risks of the latter are so high that it will never happen. It is a job for BIG capital. It won’t scale down to the size of your community. Renewables offer the chance of creating an energy internet where we are all stakeholders, all owners, all producers, all consumers, all equal, all capitalists. It is positively libertarian, almost Thatcherite in its vision and it has cut right across traditional political party lines.
The problem is that fossil fuels are the established incumbent. It has all the capital, all the scale, all the advantages. An article in The Economist recently asked: “Why are Renewables so expensive?” It is the wrong question. We must understand why fossil fuels are so cheap. They are incredibly energy dense. Energy is money. Fossil fuels represent lots of money focussed into the hands of a small minority. There is nothing very democratic about our fossil fuel economy; just look at the power the Big 6 energy companies wield over Government.
Renewable energy is highly destabilising to this energy elite. It is turning the world upside down and this can be very disconcerting to the traditional players. Which brings back to the energy transition in Germany. They call it “Energiewende” and it is quite a big deal for them:
“By 2011, more than half of investments in [German] renewables had been made by small investors. The switch to renewables has greatly strengthened small and midsize businesses, and it has empowered local communities and their citizens to generate their own renewable energy. Communities are benefiting from new jobs and increasing tax revenues…”
The big energy players are losing out in this market because it isn’t profitable for them. It is a David and Goliath battle and David is winning. In Germany.
In Britain Goliath is backed by the full force of the State because the predominant dogma in Britain is that big business is efficient. Fossil fuels are profitable hence our ideology equates this with the general welfare of the economy. But the battle is not lost. Tory Council chiefs in Chancellor Osborne’s own constituency have stated that it will remain “fracking free”. Meanwhile in Bucks County Council they leapt into action by voting against a High Speed rail project…? Well, maybe they will get with the plot sooner or later.
In the end this is not a battle between environmentalists and capitalists. This is not an argument about earth tremors, poisoned water or climate change. It is a struggle between two very different visions for Britain. One clean and democratic with your community on control. The other concentrates power amongst a small minority upon whom our communities have no influence.
We have a long battle ahead and it will make HS2 look like a playground tiff.