Monday, January 07, 2008

Alistair Darling spins on Energy

The bad news of higher energy prices was a major news item last week.

We had energy firms blaming the spot price and energy watch saying that in effect the energy firms should destroy share holder value by selling gas and electricity for less than they cost.

Now in typical New Labour fashion Alistair Darling is trying to spin his way out of responsibility for rising inflation by "writing a letter to Ofgem". Now this will have little effect - but it gives something to report on the news. It helps to shift some blame in the public's mind - which he can then useful and cynically use latter when question as to why inflation has taken off.

The underlying problem is that UK domestic gas production has fallen to a level than imports are now critical. This was foreseeable 10 years ago - in fact you could have read it in the Ten year forecasts that Transco produce. We have failed to build anywhere near the necessary gas storage infrastructure. Germany and France have months of storage capacity we have days. Hence you have to take what ever the spot price is.

The government has also failed to ensure that our European partners, to whom they wish to sign the sovereignty of our nation over to, have created a similarly liberalised energy market. Hence the UK is the useful idiot who can have its prices ramped up every winter to subsidise everyone else.

In short this was all foreseeable and by not doing so the Labour government is entirely responsible, not the energy trading companies.

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