Monthly Archives: February 2014

A cold wind of economic reality is blowing in from the North Sea. The days in which offshore oil and gas production could provide easy revenue to support public spending are over. Development of the area’s remaining reserves will only thrive if the tax regime is completely rewritten, with the tax take drastically reduced. Politicians in London and Edinburgh should accept this reality rather than pretending that we still living in the glory days of the 1980s. Read more >>

The energy business is unstable. Investors and consumers are unhappy. Returns are too low and slow to arrive. Prices seem too high, especially in Europe. Market structures are under political scrutiny. A sector which has been producer led for as long as anyone can remember is ripe for change. One element of that will be forced by the geography of energy demand – most of the growth is now in Asia. But there will be other significant changes – not least when someone harnesses new technology to produce a completely new offer for consumers. Read more >>

On Wednesday the cabinets of the France and Germany will hold a joint meeting in Paris. The occasion is highly symbolic – both in the way in which normal state-to-state relationships have replaced war in Europe, and in the continued commitment of the neighbours to maintain their alliance whatever their short-term political and personal differences. But the discussion this week could also produce substantive results.

President François Hollande, to the surprise of French business as well as his German visitors, has proposed that the two countries should work to achieve deep co-operation on energy policy. He compares this to the Airbus project which in his words “saved us from becoming a branch plant of the US economy”. The initial reaction to the idea in Berlin has been lukewarm. There is a general fear that Mr Hollande will do everything possible to get Germany to fund French debts. One German told me last week that Mr Hollande should “get on his scooter and stick to what he does best”.

That is a very shortsighted view. Energy policy is going wrong because we are accustomed to thinking within narrow national lines. Each individual country has to achieve whatever is the target of the moment – a 30 per cent cut in emissions; a 20 per cent share for renewables and so on. This is a suboptimal approach. Individual countries can achieve their targets but the costs of working in an atomistic way can be enormous. One of the greatest advances of a complex society is that different people do different things. We do not all grow or kill our own food every day. The case is best spelt out in Robert Wright’s brilliant book NonzeroRead more >>

Forget the evidence, feel the populism. That seems to be the motto of the UK secretary of state for energy, who has written to regulators suggesting that British Gas and perhaps other gas suppliers should be broken up because their profits are too high. There is nothing like picking on an enemy no one loves. With their refusal to be completely transparent on costs and pricing, the utilities have made themselves sitting ducks.

Never mind that there has been no competition inquiry (rejected by the Government despite support from EDF, who rightly argued that one was needed to clear the air). Never mind that the figures quoted by Mr Davey have been in the public domain for months, without triggering action by Ofgem. Never mind that Ofgem is a highly professional public body that knows what it is doing. And most of all, never mind the consequences. Read more >>

Globalisation is incomplete. Markets are open, but in most sectors corporate ownership is still dominated by companies from one side of the Atlantic or the other. This is becoming anachronistic and is set to change.

Nowhere is this more true than in the oil and gas business, where the international market is dominated by what used to be called the Seven Sisters. The formation has changed. Mobil, Amoco and Gulf have gone but the group remains recognisably similar to what existed 80 years ago and still led by BP, Shell, Exxon, Total and Chevron. The only state company that has been truly successful and which can seriously be added to the list is Statoil. The rest of the state companies remain very much creatures of the nation state in which they were established. Read more >>