Is shale gas the right answer for the UK Economy?

Shale gas and the ‘potential’ it has to drive a new energy revolution in the UK has once again been dominating the news headlines in recent weeks. The process of ‘fracking’, which is the drilling for gas trapped inside rocks deep in the ground, has been championed by No.10 and the Treasury.

The PR drive has been based on the fact that shale gas will push a big reduction in the amount you and I are paying for our energy. However, the Chancellor of the Exchequer, George Osborne speaking at the Economic Affairs committee, admitted that this actually is probably not going to be the case.

What did George Osborne say about fracking?

For the first time, he admitted that the reduction in energy prices for consumers had been overplayed – instead the reason for the ‘Shale Push’ is actually all do to with economic growth, job creation and perhaps most importantly higher tax receipts.

So bearing in mind there was uproar in the autumn when the ‘Big Six’ energy companies announced their price rises, why is fracking still so high on the Government’s agenda. This is while the role of renewables and energy efficiency, which both have a genuine role to play on lowering peoples bills, have taken a back seat?

In this blog we are going to look at both sides of the fracking coin; the reasons that fracking appears attractive to some, and also the reasons why others feel it should be avoided.

What are the Reasons for Fracking?

Fracking has been good for the American Consumer’s Pocket

Up until now we have looked ‘enviously’ across the pond to the US, which has seen serious energy price decreases take place due to the mass extraction of shale gas.

These price drops, as much as 40% in some areas of the country, are genuinely helping households get out of fuel poverty. In addition, it has also led to 10,000 jobs being created and has helped lessen the US dependence on fuel imports.

Shale gas will bring us energy supply to cope with closing power stations

In the UK, the current peak electrical demand is about 65GW, with the installed capacity at 78GW. However, this installed capacity is due to decrease over the coming years as power plants reach the end of their useful lives and coal power plants shut as a result of an EU directive on emissions.

Gas power plants can be built relatively quickly, and allow us to cope with spikes in electricity demand. This is because they can be fired up pretty quickly, in response to changing conditions of demand, unlike coal and nuclear power stations.  Shale gas could power these new plants and help reduce our demand on importing fuel from Norway and the Middle East. Since the fuel is coming from inside the UK, fracking could also potentially ensure that we never faced the issue of disrupted gas supply, which will become key in preventing energy blackouts in the future.

Shale gas output will bring about a tax windfall and help with our balance of trade

For a number of years the UK has struggled to generate more income as a country than it annually spends on imports. It has commonly been bailed out by inward foreign investment (foreign property investment, etc) and Government deficit spending. This is not sustainable in the long term – however Shale gas has the potential to change this, because once again the UK could become a major exporter of this gas – a bit like when we benefitted from North Sea oil reserves back in the 1980s.

Fracking technology has moved on leaps and bounds

Fracking is the process of pumping highly pressurised liquids and chemicals into the ground, so that oil or gas can be released back up to the surface.

Until relatively recently, fracking would simply not have been technically feasible. However, the vast technological improvements witnessed over the past few years have not only made it possible, but also (at least in the US) economically feasible. It has allowed the exploitation of natural gas from an entirely new source – no longer are we completely reliant on traditional oil wells.

Fracking is safe

The technology proponents distance themselves from the previous techniques used decades ago, which were known to pollute local ground water and cause environmental destruction.

Jobs, Jobs and more Jobs

Fracking is an entirely new industry here in the UK, so with it will come lots of new jobs, which in a recovering economy can only be a good thing.

See page 2 for the cons of fracking