George Osborne's Big Gamble

George Osborne, the man in charge of the UK's budget, seems to be obsessed with committing the country to an energy policy built around natural gas at the moment.

Last Spring he announced a raft of subsidies, sorry, incentives for gas exploration in the budget, and dropped any requirement for new gas-fired power stations to have carbon capture. Then he bullied the department of energy into building the Energy Bill around gas (completely ignoring advice from the government's own energy and climate change advisory committee) See here.

And now the government has just announced that shale gas 'fracking' can go ahead in this country.

So the way is now clear for Osborne's 'vision' to come true.

But why is Osborne so obsessed with gas? I guess it's because he's seen what the U.S. has done with shale gas in recent years. They've actually managed to cut energy prices whilst world prices have risen. They've managed this trick because they've got so much of the stuff. Now they don't have to buy expensive imports and can even replace coal-fired power stations with cheaper gas-fired ones.

Sounds like a no-brainer really.....except for a few things:

• Whilst shale gas has been proven to be present under Britain, the actual quantities won't be known until we've started extracting across the country. So we could be committing ourselves to gas when there's not enough shale gas available for our needs or even make it cheap enough to be worth the effort. We'd then be forced to rely on expensive imports which, on past performance, just keep getting more expensive. The result is that we not only get bigger gas bills, we'd get bigger electric bills too (because we're committed to using it to generate electric).

• On similar lines, the government's committee on climate change says that, whilst renewable energy may push up the average annual household energy bill by £100, committing the country to gas may push it up by as much as £600. They worked this out based on the government's own research. See here.

• If agreement is ever reached on climate change, chances are part of the solution will involve a carbon tax. Which would mean the price of fossil fuels like gas would increase even if we did have enough of it to make it viable.

• Considering the increasing resistance to the building of on-shore wind farms because they spoil the countryside, there seems little chance of the public accepting fracking on their doorsteps. There would be hundreds, if not thousands, of rigs dotted around the countryside; Pipelines laid everywhere; and villages blighted by support vehicles transporting toxic waste water. These islands are small and comparatively densely populated, there is bound to be considerable conflict.

All in all, Osborne seems to be gambling with the country's energy policy and the rest of the government are just going along with it. If it works (i.e. Britain gets energy security and fuel bills stabilise) he'll be a hero, but the chances are we'll be cursing his name.