Peak Oil - UK's Achilles Heel
Peak oil – UK’s Achilles heel.
The UK economy, over the past 30 years has done remarkable well in riding out some of the worst shifts in world trade caused by the effects of the ‘global market’. A contributing factor in aiding such success has been Oil. Oil contributes some £12bn + p.a. to the UK economy and apart from the probable raise in refined fuel cost; the overall contribution bounty is likely to start reducing as a source of treasury revenue from now on. This is no surprise, no secret and yet it is to be masked by the steady rise in indirect taxation and one that is apposed by the Damocles call by the affluent for lower general taxation.
If peak oil has now been reached for the North Sea extraction, there will be a declining input of revenue into the UK treasury over the foreseeable future; this poses the question, where does the money come from to fill the loss? In some respect this is already being tackled by the government in that it is gradually adopting a shift of taxation from direct taxation to indirect, the so called stealth taxes. To some extent this has opened the way to restructuring the way future taxes will be applied and is the main reason that there is a policy shift, not made explicit, to bring in road pricing as a way of switching the taxation stream that is derived form vehicles duties, a major and substantial revenue input. For example apart from the oil revenue there is the road tax which extracts £4.6bn pa and fuel duty with £17bn+ p.a. a total of some £33bn all of which will be under pressure as oil reduces and becomes more expensive. The result will be at best a slow decline in oil base revenue stream that allows a shift to stealth taxes to take place, at worst a rapid fall in tax take as consumers get prices into reduction and curtail expenditure and use.
One unintended consequence of the increase in indirect taxation is that it is most heavily placed on the un-wealthy. While the wealthy, rich and super rich have seen there exposures to taxation reduce, their wealth has additionally substantially increased and this rise in inequality has occurred under a labour administration!
It had been know for some time that there was shift in wealth from the poor to the rich but nothing effective was done about it and this has now exposed the social weaknesses that has the danger of ossifying into endemic fractured social layers, shown now in the issues of affordable housing, education selectivity, economic job availability, employment and health deferential.
Although indirect taxation is helping to fund the UK revenue stream, the way it has been done and the intention to extend the ‘stealth’ element of it, will be at the expense of the less well off. This clearly cannot be right, is not sustainable and has to change.
For the immediate future, the overall tax take will be a major element in treasury plans and the reduction of oil revenue will be a key consideration in the formation of policy that will be rolled out to impact on all expenditure of government departments. Therefore as well as the need to deliver a strong resilient tax regime, which should be made more fairer, there will be the additional and more important pressure to find a way to afford the import of energy (oil / gas) at a cost that will only get higher. These two pressures of constricted revenue and rising import cost will put the UK into a very financially precarious position.
Without restraining imports or some how boosting exports and changing the way the UK does business, at some stage the tax regime will have to transform and there is no choice but to forgo the dream of lower taxation but revert to a higher taxation base with more attention paid to the inequitable rich, tax evasion and broader selective banding?
Some may remember the very poor economic position that the UK was in up to the 1970 which was suddenly exacerbated with the Suez crises, the 6 day war and oil shock, all prior to the discovery of North Sea oil and gas manna. It was a close run thing that the UK avoided being in the hands of the IMF bank and in hock to the US for a long time, borrowing to help bale the UK out of its misfortunes. A re-run is developing.
The period during the past thirty years were very fortuitous for the UK during which time the windfall of oil income helped disguise the loss of manufacturing exports and softened the balance of payments deficit. It (oil) funded the destruction of manufacturing, paid for high unemployment, rewarded overly accessible and cheap credit expansion and together with privatisation sell off and windfall taxes helped support social & infrastructure cost. Latterly in effect the UK economically has been living on borrowed time and will shortly fall into the trap it has created by chasing the lower taxation dream and the cheaper credit vision that has funded the huge expansion of personal and corporate debt.
Circa 1970 when the oil started to flow into the UK coffers, it offered a chance to re order the structural defects that were a resonance from the 40’s, unfortunately the vision to conserve the opportunity was over ridden by prejudicial political expediency. As is known, the UK oil flow has now peaked from around 1999. At present the UK is in a position of declining revenue stream which has been, for now, mitigated by higher oil price and higher indirect taxation, yet this is only a short term measure. With the increasing lack of export earning capacity from goods or service the future is looking grim for the UK PLC.
It seems that very little thought is being injected into the forthcoming demise of the UK economy and that nothing is being done to prepare for the growth in negative trade balance, secretly this is not the case. All government policies will for the next 3 decade attempt to move the state from the central provider of universal consumables to one of direction only, as is the case with PFI now, pushing capital cost onto the private sector (or the public with ‘future’ bonds) and loading repayment and replacement debt onto future generations. With the current need for taxation to fund the economy there will be the superficial necessity to adopt ‘green’ credential and take up comprehensive road pricing as a way of preserving a major taxation stream knowing that public and private transport will have to be maintained for the foreseeable future, to be driven by any form of energy available.
The impending economic crises that the UK will face is not likely to be resolved if the energy source and utilisation issues cannot to be tackled and this means having a form of energy that is not dependants on external factions. From a manufacturing point of view the UK cannot compete on equal terms with the labour content or non social loading cost of goods with ‘developing countries’ so UK effort has to be into the cost, use and application of energy content in manufacturing UK goods and develop productivity infrastructure sustainability. It is the acquisition of independent energy that is the key factor in solving the economic crises and apart from the immediate short term measure of energy conservation, efficiency and non carbon fuel use, it is impetrative that a considerably greater effort is put into new energy production for the future.
What choices are there just know to provide the energy that will be needed?
Although much is being made of green energy it is never going to be a total replacement for the exiting energy consumption or to meet the needs of this country or a world population increase.
In this energy dependant technically orientated world, energy and water are the two crucially motivating factor in all of its major civilisations. With sufficient abundant energy there is the possibility of desalinisation of sea water to fresh, converting water to hydrogen – hydrogen to power. The primary source of energy now is oil, coal, gas, hydro and nuclear but carbon based energy it is not sustainable enough to meet all expanding requirements or to avoid future social fuel poverty.
Oil for now is predominantly the primary energy source, it is a multi product commodity and for the moment there is nothing else to compete with it. Ignoring the issues of environmental pollution caused with the increases in Co2 producing products, ‘green’ energy like wind and wave power are unreliable, bio energy has unknown side issues, and with a fluid carbon base that will not last beyond 50 years, it leaves the only known controllable viable option, nuclear. The issues of the long term biological hazardous nature and damaged caused with the possible accidental or deliberate leakage of radioactivity, or the disposal of nuclear waste is a major concern but it is not one that outweighs the effect of not having nuclear energy. Alternatively in due course perhaps something like efficient fusion power that is being explored could be a contender but it may well be 45 years away even one built on helium 3, mass gravitational deferential or anti matter, are even longer term.
The issue of energy shortfall is one that all counties will have to face and for most the solution will be nuclear. The west does not like the idea of the spread of nuclear technology, for the potential to move towards the production of plutonium and weapons may appear too tempting to some current miss guided states. However the spread is one that is better managed by facilitating the provision of essential energy requirement, than to ignore the equally dire straits that developing countries will also encounter thereby forcing an impact on the west.
To meet the medium term requirement, if nuclear is the best option for the UK, there will be a need to start to build at least 10 power stations now. However what may delay or be dangerous in the process of deciding to increase nuclear energy or not, is the stance by the UK government to have the private sector take responsibility for developing, building and running nuclear power stations. This is a foolhardy gamble. Leaving aside the cost implication there is one element that cannot be overcome and that is the extensive time dimension that will be required over the life and decommission of the nuclear facility. There is no commercial structure in existence that can guarantee their being in existence for 100 years + or is likely to carry the long term financial liability, nor is there any form of corporate legal structure that can lock in any of the extensive responsibility requirements in operating nuclear facilities. The requirement for ‘future proofing’ can only be undertaken by governments and the people it represents and absolutely should not be in the hands of profit extraction corporations.
As there is no other energy source with the flexibility of oil, that is available within the time scale envisage, it will be possible to extent the life of it by using all forms of ‘green’ energy sources as a fill in to buy time while nuclear plant are built. But there is also the pressing need to concentrate more resources towards energy efficiency, micro generation power plants, multiple energy conversion units and also create off shore or island generating wind farms.
It is impossible to underestimate the impending shift in energy utilisation that is required. Within 20 years the economics of the UK will conceivably change to mirror the declining days of the late 60s and to mitigate the harshest effects some corrective measure have to be considered now. This reappraisal may require the revisiting of solution prevalent at that time such as credit controls, import restrictions or quotas. Exchange controls and higher taxation. It may also require some new and unpopular changes like reduced social funding on all expenditure levels, major investment in coal energy production and conservation, fuel oil rationing, and complete immigration moratorium. The UK is entering a need to survive era, and to extract the economy from the heavy need to import energy or be held to economic ransom.
4.7.07
© Renot 2007
The UK economy, over the past 30 years has done remarkable well in riding out some of the worst shifts in world trade caused by the effects of the ‘global market’. A contributing factor in aiding such success has been Oil. Oil contributes some £12bn + p.a. to the UK economy and apart from the probable raise in refined fuel cost; the overall contribution bounty is likely to start reducing as a source of treasury revenue from now on. This is no surprise, no secret and yet it is to be masked by the steady rise in indirect taxation and one that is apposed by the Damocles call by the affluent for lower general taxation.
If peak oil has now been reached for the North Sea extraction, there will be a declining input of revenue into the UK treasury over the foreseeable future; this poses the question, where does the money come from to fill the loss? In some respect this is already being tackled by the government in that it is gradually adopting a shift of taxation from direct taxation to indirect, the so called stealth taxes. To some extent this has opened the way to restructuring the way future taxes will be applied and is the main reason that there is a policy shift, not made explicit, to bring in road pricing as a way of switching the taxation stream that is derived form vehicles duties, a major and substantial revenue input. For example apart from the oil revenue there is the road tax which extracts £4.6bn pa and fuel duty with £17bn+ p.a. a total of some £33bn all of which will be under pressure as oil reduces and becomes more expensive. The result will be at best a slow decline in oil base revenue stream that allows a shift to stealth taxes to take place, at worst a rapid fall in tax take as consumers get prices into reduction and curtail expenditure and use.
One unintended consequence of the increase in indirect taxation is that it is most heavily placed on the un-wealthy. While the wealthy, rich and super rich have seen there exposures to taxation reduce, their wealth has additionally substantially increased and this rise in inequality has occurred under a labour administration!
It had been know for some time that there was shift in wealth from the poor to the rich but nothing effective was done about it and this has now exposed the social weaknesses that has the danger of ossifying into endemic fractured social layers, shown now in the issues of affordable housing, education selectivity, economic job availability, employment and health deferential.
Although indirect taxation is helping to fund the UK revenue stream, the way it has been done and the intention to extend the ‘stealth’ element of it, will be at the expense of the less well off. This clearly cannot be right, is not sustainable and has to change.
For the immediate future, the overall tax take will be a major element in treasury plans and the reduction of oil revenue will be a key consideration in the formation of policy that will be rolled out to impact on all expenditure of government departments. Therefore as well as the need to deliver a strong resilient tax regime, which should be made more fairer, there will be the additional and more important pressure to find a way to afford the import of energy (oil / gas) at a cost that will only get higher. These two pressures of constricted revenue and rising import cost will put the UK into a very financially precarious position.
Without restraining imports or some how boosting exports and changing the way the UK does business, at some stage the tax regime will have to transform and there is no choice but to forgo the dream of lower taxation but revert to a higher taxation base with more attention paid to the inequitable rich, tax evasion and broader selective banding?
Some may remember the very poor economic position that the UK was in up to the 1970 which was suddenly exacerbated with the Suez crises, the 6 day war and oil shock, all prior to the discovery of North Sea oil and gas manna. It was a close run thing that the UK avoided being in the hands of the IMF bank and in hock to the US for a long time, borrowing to help bale the UK out of its misfortunes. A re-run is developing.
The period during the past thirty years were very fortuitous for the UK during which time the windfall of oil income helped disguise the loss of manufacturing exports and softened the balance of payments deficit. It (oil) funded the destruction of manufacturing, paid for high unemployment, rewarded overly accessible and cheap credit expansion and together with privatisation sell off and windfall taxes helped support social & infrastructure cost. Latterly in effect the UK economically has been living on borrowed time and will shortly fall into the trap it has created by chasing the lower taxation dream and the cheaper credit vision that has funded the huge expansion of personal and corporate debt.
Circa 1970 when the oil started to flow into the UK coffers, it offered a chance to re order the structural defects that were a resonance from the 40’s, unfortunately the vision to conserve the opportunity was over ridden by prejudicial political expediency. As is known, the UK oil flow has now peaked from around 1999. At present the UK is in a position of declining revenue stream which has been, for now, mitigated by higher oil price and higher indirect taxation, yet this is only a short term measure. With the increasing lack of export earning capacity from goods or service the future is looking grim for the UK PLC.
It seems that very little thought is being injected into the forthcoming demise of the UK economy and that nothing is being done to prepare for the growth in negative trade balance, secretly this is not the case. All government policies will for the next 3 decade attempt to move the state from the central provider of universal consumables to one of direction only, as is the case with PFI now, pushing capital cost onto the private sector (or the public with ‘future’ bonds) and loading repayment and replacement debt onto future generations. With the current need for taxation to fund the economy there will be the superficial necessity to adopt ‘green’ credential and take up comprehensive road pricing as a way of preserving a major taxation stream knowing that public and private transport will have to be maintained for the foreseeable future, to be driven by any form of energy available.
The impending economic crises that the UK will face is not likely to be resolved if the energy source and utilisation issues cannot to be tackled and this means having a form of energy that is not dependants on external factions. From a manufacturing point of view the UK cannot compete on equal terms with the labour content or non social loading cost of goods with ‘developing countries’ so UK effort has to be into the cost, use and application of energy content in manufacturing UK goods and develop productivity infrastructure sustainability. It is the acquisition of independent energy that is the key factor in solving the economic crises and apart from the immediate short term measure of energy conservation, efficiency and non carbon fuel use, it is impetrative that a considerably greater effort is put into new energy production for the future.
What choices are there just know to provide the energy that will be needed?
Although much is being made of green energy it is never going to be a total replacement for the exiting energy consumption or to meet the needs of this country or a world population increase.
In this energy dependant technically orientated world, energy and water are the two crucially motivating factor in all of its major civilisations. With sufficient abundant energy there is the possibility of desalinisation of sea water to fresh, converting water to hydrogen – hydrogen to power. The primary source of energy now is oil, coal, gas, hydro and nuclear but carbon based energy it is not sustainable enough to meet all expanding requirements or to avoid future social fuel poverty.
Oil for now is predominantly the primary energy source, it is a multi product commodity and for the moment there is nothing else to compete with it. Ignoring the issues of environmental pollution caused with the increases in Co2 producing products, ‘green’ energy like wind and wave power are unreliable, bio energy has unknown side issues, and with a fluid carbon base that will not last beyond 50 years, it leaves the only known controllable viable option, nuclear. The issues of the long term biological hazardous nature and damaged caused with the possible accidental or deliberate leakage of radioactivity, or the disposal of nuclear waste is a major concern but it is not one that outweighs the effect of not having nuclear energy. Alternatively in due course perhaps something like efficient fusion power that is being explored could be a contender but it may well be 45 years away even one built on helium 3, mass gravitational deferential or anti matter, are even longer term.
The issue of energy shortfall is one that all counties will have to face and for most the solution will be nuclear. The west does not like the idea of the spread of nuclear technology, for the potential to move towards the production of plutonium and weapons may appear too tempting to some current miss guided states. However the spread is one that is better managed by facilitating the provision of essential energy requirement, than to ignore the equally dire straits that developing countries will also encounter thereby forcing an impact on the west.
To meet the medium term requirement, if nuclear is the best option for the UK, there will be a need to start to build at least 10 power stations now. However what may delay or be dangerous in the process of deciding to increase nuclear energy or not, is the stance by the UK government to have the private sector take responsibility for developing, building and running nuclear power stations. This is a foolhardy gamble. Leaving aside the cost implication there is one element that cannot be overcome and that is the extensive time dimension that will be required over the life and decommission of the nuclear facility. There is no commercial structure in existence that can guarantee their being in existence for 100 years + or is likely to carry the long term financial liability, nor is there any form of corporate legal structure that can lock in any of the extensive responsibility requirements in operating nuclear facilities. The requirement for ‘future proofing’ can only be undertaken by governments and the people it represents and absolutely should not be in the hands of profit extraction corporations.
As there is no other energy source with the flexibility of oil, that is available within the time scale envisage, it will be possible to extent the life of it by using all forms of ‘green’ energy sources as a fill in to buy time while nuclear plant are built. But there is also the pressing need to concentrate more resources towards energy efficiency, micro generation power plants, multiple energy conversion units and also create off shore or island generating wind farms.
It is impossible to underestimate the impending shift in energy utilisation that is required. Within 20 years the economics of the UK will conceivably change to mirror the declining days of the late 60s and to mitigate the harshest effects some corrective measure have to be considered now. This reappraisal may require the revisiting of solution prevalent at that time such as credit controls, import restrictions or quotas. Exchange controls and higher taxation. It may also require some new and unpopular changes like reduced social funding on all expenditure levels, major investment in coal energy production and conservation, fuel oil rationing, and complete immigration moratorium. The UK is entering a need to survive era, and to extract the economy from the heavy need to import energy or be held to economic ransom.
4.7.07
© Renot 2007
posted by Renot at 6:57 am
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