Thursday, January 08, 2009

Thoughts on the Credit Crunch #2

Recently Gordon Brown announced his own version of the New Deal to revive the economy. Amongst the package of measures totaling £40bn were initiatives to speed up investment in renewables such as wind and wave power. One of the stated objectives is to help secure UK energy supplies.

This is welcome news. However, it may yet be too little, too late, not least with regard to the Russian-Ukraine gas dispute. While the UK gets very little of its gas from Russia, the disruption to European gas supplies has already led to UK gas stocks being diverted to hard pressed European buyers and delayed the possibility of UK gas bills coming down anytime soon. There is a suggestion that the European companies who bought up a large slice of the UK energy generation market, would favour European consumers over their British counterparts if the gas shortages in Europe continued.

Once again this illustrates the fragility of the UK's energy security. A small 'commercial' dispute in a far away country 'of which we know nothing', has shown the vulnerability of the UK to such events.

That said, the dispute between Russia and the Ukraine is too often described as a commercial dispute that has become politicised. This is to misunderstand the situation in Russia, where there is no neat distinction between the commercial and the political. It is barely credible that Gazprom, the Russian gas company at the heart of the dispute, could have turned off the taps without the express say-so of Putin. Indeed, this dispute has all the hallmarks of an ex-imperial power trying to bring an ex-colony to heel. The gas dispute is more the smokescreen for Russia flexing her muscles.

That said, it's a perfect illustration of the need for the UK Govt to seriously and quickly overhaul UK energy policy and embark upon a massive investment programme in renewable energy supplies.
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