The UK's Looming Energy Crisis: A State of Emergency

United Kingdom continental shelf (UKCS) production of oil and natural gas are forecast to continue their decline from their respective production peaks in 1999 and 2000.

It is of course near impossible to forecast future oil and gas prices, but with international demand for oil and gas continuing to rise against near static supply, the trend of increasing prices seen in recent years seems set to continue.

BERR forecasts consumption of oil and gas to remain relatively flat. This seems a reasonable first order assumption to make. However, in the real world, escalating fuel and domestic energy costs will lead to widespread conservation. The well-off will insulate their homes and buy more fuel efficient cars. The poor will switch off their heating and take the bus. It is near impossible to forecast the scale of energy demand destruction that will take place in the UK.

It is unlikely that the UK will be able to source or pay for this ever rising energy bill on the international markets.

Left to market forces, the problem will be solved by spreading energy poverty throughout the UK population. The wealthy who can afford the small amount of expensive energy on offer will be fine whilst the poor will just have to go without - personal transport, heat, light and power.

By 2013, the UK may well run up a cumulative deficit in oil and gas imports in excess of $500 billion - if we can find countries that will sell us oil and gas on credit. This equates to an energy debt over $8000 for every man, woman and child in 5 short years. This is in addition to the already dreadful debts we have run up as a country importing consumer goods on credit.

We should hopefully by now have reached a point where all stake holders in UK, European and Global energy are able to grasp the simple fact that we are now in the early stages of a full blown global energy crisis. The focus is currently on oil but this will soon turn to concerns over natural gas and coal supplies.

This crisis has been turned into a state of emergency by the indifference of political leaders in the UK (and throughout the world), fluttering in the wind of poorly informed public opinion while they have prevaricated about expanding renewable energy resources and building new nuclear power stations. All warnings of this pending energy crisis have been ignored in favor of pursuing popular policies that created the illusion of prosperity whilst the fundamentals of our nations security and well being have been draining away.

Higher food, fuel, domestic energy and bank interest bills will squeeze the disposable income of many individuals and families. Thus, instead of buying consumer goods and going to Spain on vacation, families will instead spend this money on food and energy.

Here are a few pointers to what I think we can expect in the next 18 months:

• Forever rising energy import bills will pressure Sterling which will continue to fall, pushing up the cost of energy, food and consumer goods even more.
• Public sector workers, no longer able to borrow to supplement income will begin to strike once they discover that 3% wage increases do not come close to covering the rise in the cost of living (the great inflation lie will be found out).
• Unemployment will begin a steady rise as financial services, banks, building sector, airlines, airports, leisure and retail come under severe pressure. They will be joined by public service workers as the government struggles to fund public services with falling tax receipts, spiraling debt and a falling pound. (already happening in Aberdeen with deep cuts in education spending across the city and teacher numbers being slashed).
• I won't go into the spiraling and compounding nature of this on the property market since this is an article about energy.
• The elderly and poor will really struggle this winter to pay their energy and food bills. If the weather is cold, the grid might fail and the vulnerable will begin to die from cold and starvation.

Following that things will begin to get worse as the UK discovers that it is struggling to secure sufficient natural gas at any price, on the liberalised market they helped create. Society becomes more polarised into those who can still afford to drive an SUV, live in comfort and warmth and fill their bellies with prime Aberdeen Angus steak set against a new under class who struggle to feed and heat their families. Welcome to Britain in 2010.