“Drill, baby, drill" was a slogan popularised during the 2008 US presidential campaign and later revived by Donald Trump, advocating for increased domestic oil and gas drilling to boost energy independence and potentially lower prices. Perhaps it should also be adopted by UK Energy Secretary Ed Miliband who in something of a volte-face has announced significant changes to oil drilling regulations.
Having previously imposed stringent environmental criteria to limit new oil and gas exploration in the North Sea, he has changed the rules on Britain’s greenhouse gas emissions, paving the way for the construction of giant oil fields, and the possibility that some of the stalled fossil fuel projects in British waters can be restarted. These include both Jackdaw and Rosebank, the two largest undeveloped reserves left in UK waters and previously blocked after environmentalists successfully challenged their oil and gas production licences.
With the announced funding commitment to Sizewell C, and Great British Energy being handed the £2.5bn bill for the development of small modular nuclear reactors, perhaps the government is finally taking the UK’s lack of energy independence seriously, although it will likely still take years to see the effects.
With events in the Middle East developing at pace, the oil price will remain in focus. Having now risen by over 25% since the beginning of May, it is still only back to levels seen at the start of the year. Any prolonged increase in energy costs for businesses could be unhelpful, and with the Bank of England fearful of further periods of elevated inflation, the added pressure from a spike in the oil price could yet potentially curtail its ability to lower interest rates over the coming months. For now however, markets still expect the next cut in UK rates to come on 7th August.
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