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.