For the third winter in a row we have lots of weather, instead of the warmer climate forecast by many. Last week when I got up early to see how the roads were being treated, it was minus 8 degrees in what by now should be mild Berkshire. Yesterday morning I woke to another covering of snow concealing the ice and compact snow beneath.
Given our vulnerability to weather even in an era of global warming, energy prices matter a lot to us as we have to turn up the heating and huddle indoors to keep warm. We also need to recognise just how big a cost energy is to anyone in manufacturing business. As the UK government wishes to have an industry led economic recovery, it needs to pay attention to this large bill.
In order to write this piece I researched relative UK energy costs from the copious official figures put out by the UK government. Their Digest of UK Energy Statistics may not become a best seller, but it is a very professional compendium of price and volume information about our energy use, with international comparisons.
The comparisons are also very revealing. They compare our energy prices with the USA and Canada, and with every European country in great detail, but fail to include our big industrial competitors and suppliers in China, India and Brazil. It just shows how Euro centric the establishment remains, and how inward looking Europe is, at a time when the exciting industrial and economic action is happening a couple of continents away.
The comparative picture is far from rosy. If we start with diesel, the lifeblood of transport, the UK diesel pump price after tax is the highest of EU 27, and far higher than the USA and Canada. Interestingly, the pretax price is the fifth cheapest in the EU, so the private sector is performing quite well, only to see very high taxes turn it negative. Unleaded petrol is the fourth cheapest in the EU pre tax, but is also the dearest post tax.
When it comes to electricity for industry, the UK at 8p per KW hour is in the pack of EU countries, but double the level paid by US businesses. Gas is relatively cheap in the UK by EU standards, but the industrial charge of 1.7p per KW hour is still 40% higher than the US charge of 1.2p. The Climate change levy imposes an extra 1-6% on gas bills, and an extra 2-5% on electricity bills here. If we were allowed to see the Chinese figures, they would also reveal how uncompetitive we are in this area.
When the UK government was setting the carbon price for its policies I was consulted. My advice was to set a carbon price of zero until the rest of the world caught up with this way of doing business. High energy prices here do not stop the fuel being burned, they just divert the burning to cheaper countries who are not imposing these levies, taking industrial activity and jobs away from us. The Treasury, I read, did try to get the price down in its arguments with Mr Huhne. It is now working with the Business department on offsets or subsidies to the energy price for large process industry, understanding that all we can really do here in the Uk with our energy prices is decide how much is burned here by industry, rather than helping control the world’s burn.
The UK has a great advantage in the energy field. We have large new resources of shale gas available, some untapped conventional gas and oil resources, plenty of coal, and the possibility of more hydro and nuclear. I am all in favour of strict control over pollution, and encouragement of maximum energy efficiency. I am also very conscious that we are now paying a price for very dear energy. People on low incomes are suffering in their homes. More industry is going elsewhere to burn its fuel. The government needs to accelerate its programme for new energy sources, and to keep in mind the need to get prices back into a competitive range. While they are doing it, could they start looking at how far adrift we are from our true competitors in Asia and Latin America, as the EU slips beneath the gathering storm waves of the Euro.