. Energy prices


The commonly repeated claim – even made by the Prime

Minister88 – that fracking will bring down energy prices in the UK,

as it has done in the USA, has been refuted by Bloomberg89,

Deutsche Bank90, Lord Stern91, DECC92, Ofgem93, International

Energy Agency94, and even Cuadrilla95,96. There are many

reasons. Differences in geology, population density, mineral

rights laws, environmental regulations, and levels of public

opposition will combine to result in higher production costs and

a more protracted approval process than in the US. Perhaps most

importantly, however, the UK is tied into the international market,

where gas is sold to the highest bidder, regardless of its origin.

Any increase in domestic gas production will therefore have little

impact on the UK price97.

The principal driver for rising energy bills is the international cost

of fossil fuels. Improved energy efficiency and development of

renewable energy provides some protection against future rises

in wholesale energy costs, which now account for 47% of

average household bills98 (Figure 4 – note that there are some

rounding errors). Shale gas, conversely, will not reduce wholesale

costs but will tie us into continued reliance on fossil fuels99.