Excellent piece Ed. It is underappreciated how oil and gas wealth supported Thatcher to win three general elections (more so than many of her economic reforms). Though it is instructive that the (Labour) government in the 1970s knew that oil and gas money would transform public finances, even while applying to the IMF - it was just a question of time before revenues began to flow. As you note, Norway took a different path with its sovereign wealth fund, while France built nuclear power stations. Gas-rich Britain built a world-class gas infratructure and used gas in power and central heating. Without that oil and gas wealth in the 1980s, Britain might have followed France but the Howell programme was scaled back by Nigel Lawson.
Ed of course! Energy is what does all the work. Industrialisation is a giant metabolism needing feeding. History? I was in my 40s in the 1980s. Like the balance between capital and labour, the global balance between energy suppliers and users needs to be negotiated.
By 1970 the USA used more petroleum than it could produce and its Lower 48 production was declining. The ME took advantage of the shift in global balance.
France reacted to the 1973 'oil shock' by building nuclear. (It did have privileged access to uranium and a dirigiste mind-set.) Denmark shipped in coal and built CHP units round its coast. UK already had methane to replace coal gas. "The process of converting the entire GB market from town gas to lower-cost natural gas from the North Sea began in 1968 and was largely completed by 1975." Then there was N. Sea oil. When my young neighbour in Scotland went to work on the early rigs they were 'American'. It was all BTUs, none of that metric rubbish.
Thatcher?
You can't divorce her from Reagan and those new economists. She got lucky with the Falklands or she likely would have gone early because of recession caused by a highly unstable exchange rate. Britain de-industrialised fast during the 80s. It was shattering for old industrial areas and employment by the early 90s. (I witnessed it.) A lot of revenue from the N. Sea it seemed propped up the nation as we 'modernised'. Then it was ‘La La Land’ until 2005 and the financial chickens coming home after 2009. It is a different world from now on. Many thanks for all the info and conversations you have developed. Never mind the weather, I agree, buy the new text book. Smile.
Really interesting perspective Ed. You could argue that the North Sea now has an opportunity to benefit from a carbon constrained world. The depleted oil and gas fields can now be used as CO2 storage for the industrial heartland of north west Europe and the potential industries of the future - hydrogen, BECCS, carbon removal, etc.
The UK still is energy-rich: there's enough Bowland shale for 100 percent of our gas consumption for somewhere between 40 and 350 years (generally, the more a field is exploited, the more recoverable reserves are discovered, so it's likely to be closer to the upper bound). We have a long coastline, something hugely advantageous for nuclear power. Sadly we have politicians who are ideologically predisposed toward renewables (aka unreliables), principally offshore wind.
This comes from valuing PPE as a qualification for government and financial engineering including hedge funds over real engineering . No long term thinking except to enrich your cronies . Such as property legislation being in the competence of the Lords and the 1961 MacMillan Land compensation Act .
Always enjoy your writings Ed, thank you. Curious what you make of today’s piece by Alan Kohler, an Oz economics journalist who’s a very shrewd analyst, like yourself. (Kohler is absolutely pro-climate action I should say, despite how this piece may sound at the beginning.) It reminded me of what you say about the scale of transformation needed in energy, in the book and in this piece. A new industrial revolution. Though Kohler is saying here the magnitude of what’s needed is different to the last Industrial Revolution, there will be no win-win here. It’s about heading off catastrophe.
There is an even more extreme tale of two energy economies that share the same geological good fortune, Venezuela and Guyana. This clip of John Sackur at his condescending best BBC'splaining to the President of Guyana about where he is going wrong trying to lead his country out of poverty.
Perhaps the reading that most provoked my interest in "the philosophy of energy (read: oil)" was Nate Hagen's analysis of the Maximum Energy Principle: http://theoildrum.com/node/7147
It is quite simple at a high-level: the cheaper energy is, the greater velocity at which we can quite literally "power" our operations (i.e. GDP). If energy is scarce, things slow down. Everything is about access to energy.
Some good thoughts here. Yes, energy is the life blood of civilization and too many people just assume it will always be available. But devastating brownouts, such as hit Texas 2(?) years ago or France a year or two before that say otherwise.
The German industrial "miracle" was also predicated on cheap, abundant nuclear power - long before the Russian gas was a major factor - which the green party in the current government has killed despite the energy crisis and their supposed concern for the environment and the climate.
I was a young NZer in London in the 1980s. I remember shaking my head and muttering under my breath at the improvidence of the Thatcher government with this amazing windfall. I could also see that the neoliberal revolutionaries in Economics would use this as evidence that privatisation worked. (Pay no attention to the oil rigs over the horizon there.)
As I recall, the Dutch had lengthy public discussions about what to do with their North Sea gas but in the end trod a path closer to the British one than the Norwegian.
Energy is about seventy percent of everything, but there is culture, too. Both political culture and more importantly the more fundamental kind, family structure, marriage customs, number of children, where people tend to live, and so on. Thing look fairly grim in this part of the landscape for the rest of this century.
Very interesting and I think spot on. It will be fascinating to see how our abundant wind resources will affect the economy. With about 30 GW of installed capacity at present we are already seeing days when energy is either free or negatively priced, and with plans for 50 GW of offshore wind alone within 10 years (more than 20 GW more than at present) that will happen more often. Would love to see an analysis of how energy intensive industries that can cope with intermittent power will respond to this and what that does for the industrial geography of the UK.
Excellent piece Ed. It is underappreciated how oil and gas wealth supported Thatcher to win three general elections (more so than many of her economic reforms). Though it is instructive that the (Labour) government in the 1970s knew that oil and gas money would transform public finances, even while applying to the IMF - it was just a question of time before revenues began to flow. As you note, Norway took a different path with its sovereign wealth fund, while France built nuclear power stations. Gas-rich Britain built a world-class gas infratructure and used gas in power and central heating. Without that oil and gas wealth in the 1980s, Britain might have followed France but the Howell programme was scaled back by Nigel Lawson.
Ed of course! Energy is what does all the work. Industrialisation is a giant metabolism needing feeding. History? I was in my 40s in the 1980s. Like the balance between capital and labour, the global balance between energy suppliers and users needs to be negotiated.
By 1970 the USA used more petroleum than it could produce and its Lower 48 production was declining. The ME took advantage of the shift in global balance.
France reacted to the 1973 'oil shock' by building nuclear. (It did have privileged access to uranium and a dirigiste mind-set.) Denmark shipped in coal and built CHP units round its coast. UK already had methane to replace coal gas. "The process of converting the entire GB market from town gas to lower-cost natural gas from the North Sea began in 1968 and was largely completed by 1975." Then there was N. Sea oil. When my young neighbour in Scotland went to work on the early rigs they were 'American'. It was all BTUs, none of that metric rubbish.
Thatcher?
You can't divorce her from Reagan and those new economists. She got lucky with the Falklands or she likely would have gone early because of recession caused by a highly unstable exchange rate. Britain de-industrialised fast during the 80s. It was shattering for old industrial areas and employment by the early 90s. (I witnessed it.) A lot of revenue from the N. Sea it seemed propped up the nation as we 'modernised'. Then it was ‘La La Land’ until 2005 and the financial chickens coming home after 2009. It is a different world from now on. Many thanks for all the info and conversations you have developed. Never mind the weather, I agree, buy the new text book. Smile.
Really interesting perspective Ed. You could argue that the North Sea now has an opportunity to benefit from a carbon constrained world. The depleted oil and gas fields can now be used as CO2 storage for the industrial heartland of north west Europe and the potential industries of the future - hydrogen, BECCS, carbon removal, etc.
The UK still is energy-rich: there's enough Bowland shale for 100 percent of our gas consumption for somewhere between 40 and 350 years (generally, the more a field is exploited, the more recoverable reserves are discovered, so it's likely to be closer to the upper bound). We have a long coastline, something hugely advantageous for nuclear power. Sadly we have politicians who are ideologically predisposed toward renewables (aka unreliables), principally offshore wind.
This comes from valuing PPE as a qualification for government and financial engineering including hedge funds over real engineering . No long term thinking except to enrich your cronies . Such as property legislation being in the competence of the Lords and the 1961 MacMillan Land compensation Act .
Great piece as always Ed! I was intrigued by your comment at the end.
> For a long time, Britain was an energy superpower. Who knows, it could be again in the future…
Does this allude to something you've referred to elsewhere?
Always enjoy your writings Ed, thank you. Curious what you make of today’s piece by Alan Kohler, an Oz economics journalist who’s a very shrewd analyst, like yourself. (Kohler is absolutely pro-climate action I should say, despite how this piece may sound at the beginning.) It reminded me of what you say about the scale of transformation needed in energy, in the book and in this piece. A new industrial revolution. Though Kohler is saying here the magnitude of what’s needed is different to the last Industrial Revolution, there will be no win-win here. It’s about heading off catastrophe.
https://www.thenewdaily.com.au/finance/2024/04/15/alan-kohler-climate-change-lie#google_vignette
There is an even more extreme tale of two energy economies that share the same geological good fortune, Venezuela and Guyana. This clip of John Sackur at his condescending best BBC'splaining to the President of Guyana about where he is going wrong trying to lead his country out of poverty.
https://www.bbc.co.uk/programmes/p0hrnsss
The UK is following EU into the energy abyss. I would like to worry about Europe, but I just washed my hair,
Perhaps the reading that most provoked my interest in "the philosophy of energy (read: oil)" was Nate Hagen's analysis of the Maximum Energy Principle: http://theoildrum.com/node/7147
It is quite simple at a high-level: the cheaper energy is, the greater velocity at which we can quite literally "power" our operations (i.e. GDP). If energy is scarce, things slow down. Everything is about access to energy.
Is there a correlation between the decline of oil revenues from c.2010 and the general UK economic performance?
Some good thoughts here. Yes, energy is the life blood of civilization and too many people just assume it will always be available. But devastating brownouts, such as hit Texas 2(?) years ago or France a year or two before that say otherwise.
Nate Hagens (The Great Simplification) was when I first came across this concept the energy and economy are pretty much one and the same.
The German industrial "miracle" was also predicated on cheap, abundant nuclear power - long before the Russian gas was a major factor - which the green party in the current government has killed despite the energy crisis and their supposed concern for the environment and the climate.
I was a young NZer in London in the 1980s. I remember shaking my head and muttering under my breath at the improvidence of the Thatcher government with this amazing windfall. I could also see that the neoliberal revolutionaries in Economics would use this as evidence that privatisation worked. (Pay no attention to the oil rigs over the horizon there.)
As I recall, the Dutch had lengthy public discussions about what to do with their North Sea gas but in the end trod a path closer to the British one than the Norwegian.
Energy is about seventy percent of everything, but there is culture, too. Both political culture and more importantly the more fundamental kind, family structure, marriage customs, number of children, where people tend to live, and so on. Thing look fairly grim in this part of the landscape for the rest of this century.
Very interesting and I think spot on. It will be fascinating to see how our abundant wind resources will affect the economy. With about 30 GW of installed capacity at present we are already seeing days when energy is either free or negatively priced, and with plans for 50 GW of offshore wind alone within 10 years (more than 20 GW more than at present) that will happen more often. Would love to see an analysis of how energy intensive industries that can cope with intermittent power will respond to this and what that does for the industrial geography of the UK.