Bishop Hill Now why didn't I think of that?
Aug 14, 2013 Energy: gas Tim Worstall has been pondering the argument over how much fracking Lancashire will affect gas prices, and in particular the Greenpeace argument that it will only bring them down by a few percentage points.
As Tim points out, we've all been missing something here:
Think...about what the basic statement being made here is.
They're actually saying that all gas in Europe, for all European consumers, will be 4% lower as a result of fracking Lancashire. That's 500 million people save 4% of their power bills (yes, the reports do indeed say that electricity will be cheaper as well given the use of gas to generate it).
Let's, very roughly, try to work this out. 500 million people is perhaps 150 million households. A UK duel fuel bill for a household for a year is £1,200 or so I believe. 4% of that is £50. Yes, many estimations in those numbers. But lowering gas prices for all European households thus saves those households some £7,500,000,000 a year. That's real money even when talking about things governmental.
Fracking Lancashire makes the households of Europe £7.5 billion better off.
Per year.
Reader Comments (63)
Creepy - greenie weirdos don't do economics.
I think I posted on the other thread.
Add the value added produced by the fracking industry and you get a larger number again.
Greenpeace should stick to sponsoring pandas.
There's more: this benefit is found if we only frack Lancashire. That's a hell of a gain for a very small area of land. What would happen if we fracked a large portion of the available sites in the UK? 10% off? What about the shale sites across Europe?
2 - 4% might seem like small numbers, and in some ways, so they are, but Lancashire is, relative to Europe, a small place. Seems to be a large impact on that measure.
There is also a massive balance of payments benefit which should not be forgotten.
Why is there such a concern about gas extraction? It is by far the cleanest fossil fuel energy resource available. I could understand a bit more concern if was coal or oil being extracted next door.
OK, This got me thinking about another way to estimate the value of a price fall and it roughly confirm Tim's figures.
According to Eurostat:
Next I was trying to find out what a terajoule of gas cost in the EU. This is one reference that cite German customs from 2012:
So if 17,610 thousand terajoules (17.6 million terajoules) of gas is consumed in the EU in a year at a price of €8,436 per terajoule, then the total value of EU consumption is about €148,473 million.
€148 billion per annum. 4% of this is €6 billion per annum.
Of course this was calculated on a figure for "import prices", not retail prices which would be higher.
I am unclear whether the cost would be actually 4% cheaper than now in monetary terms or elative in terms of the inflationary changes over the period. If it is numerically cheaper than now assuming 2-3% loss of value per annum via inflation then it would be a massive benefit - if not, I still see the logic in the article.
An interesting revelation of the scale of change that fracking Lancashire might induce. Has one considered the possibility that Greenpeace (or should that be “Brownwar”? – many of their actions do not seem particularly green, or even slightly peaceful) may have funding and direction from parties for whom fracking could be financially embarrassing? Oil majors, and others, have invested huge sums in the transporting of gas around the world; suddenly, fracking pops up and threatens the return on such investment. Not to mention Russia (using old connections, perhaps?) seeing the demand for its supplies suddenly drying up. The possible interplay between all the parties involved – directly, indirectly, or by proxy – in this game could be quite fascinating to explore.
Rob Burton
Part of the secret is in the word "fossil". Another part is in the concept of cheap.
You have to remember that the objective (for whatever reason) behind the hard-left-infiltrated environmental movement is to replicate the living standards of the old Soviet Union.
I used to think that the aim was to "unpick" the Industrial Revolution, and I've said so many times, and the pure environmentalist/neo-Malthusian wing still aims to return us to those "blissful" days but I am becoming more convinced by the day that the Trotskyite wing harks back to the Workers' Paradise with all that that implies.
Both groups are control freaks happy to work off each other for the moment. If they ever "win" the resulting internecine warfare will not be pretty.
(The pure environmentalists will lose, of course!)
Here is my personal view of the future of gas.
The argument that renewables are needed largely rests on the outdated prediction that the cost of fossil fuel will continue to rise. It is easy to blame gas for high electricity costs but it is the continued desire to meet unachievable carbon reduction targets that is putting electricity costs up. We wouldn’t need so much gas if we weren’t shutting down coal plants. Coal is by far the cheapest source of energy and if we used more coal, gas prices would respond to retain some competitivity. By retaining carbon targets we are forced to make a choice between having more expensive gas or even more expensive nuclear or renewables. The climate change act will come under increasing pressure once consumers start to get hit really hard in the pocket.
How can oil remain at around $100/bbl when the developed world is consuming less oil through efficiency measures brought on by austerity? Once efficiencies have been made they are never unmade. Do we think the undeveloped world will want to remain inefficient forever? – they are quickly coming up the curve. Many observers are now predicting that the world is entering ‘peak demand’ – where fossil fuel will remain in the ground not because of emission targets but because of economics. Fossil fuel may have hit peak cost.
European gas prices are high because security of supply has required buyers to lock-in long term expensive pipeline contracts which are linked to the oil price. A flood of new gas supply routes will provide greater volumes and greater optionality to buy cheap spot gas. i.e. gas is rapidly becoming a global commodity. Record numbers of LNG ships are being built and refrigeration and gasification terminals are sprouting up everywhere. The IEA says that the next 250 years will be the ‘golden era of gas’. In the next 10 years it is likely that transport costs will continue to reduce and a surplus of global gas supply will develop.
The regional gas price differences we currently find in Europe and Asia will tend to narrow towards the lowest cost of supply – the USA. Gas is no longer tracking the oil price, if and when UK starts to produce shale gas the price will track the global gas price with an adjustment for transport and infrastructure.
Here is the view from Deloitte:
• U.S. LNG exports could hasten the transition away from oil price indexation of gas supply contracts.
• Prices are projected to decrease fairly significantly in regions importing U.S. LNG, but only marginally increase in the U.S.
• U.S. LNG exports are projected to narrow the price difference between the U.S. and export markets and hence, the market will likely limit the volume of economically viable U.S. LNG exports.
• U.S. LNG exports could also displace some oil consumption through increased gas-fired electric power generation.
http://www.deloitte.com/assets/Dcom-UnitedStates/Local%20Assets/Documents/Energy_us_er/us_er_GlobalImpactUSLNGExports_AmericanRenaissance_Jan2013.pdf
The UK is already the third largest importer globally after Japan and South Korea, driven by gas on gas competition.
http://www.mayerbrown.com/files/Event/b8052837-af70-41d6-9010-a40a9dc3e55b/Presentation/EventAttachment/53df1896-89eb-4b7b-9156-427e821f0b32/120925-HOU-WEBINAR-Energy-LNG-Series-Global-Slides.pdf
Russian pipeline contract gas prices will inevitably come down to match alternative supply routes. Even Putin now admits this :
What I don't understand is that fracking in the US brought down the price of gas by 75% then why will it only reduce our bills by 4%?
Greenies don't do economics? They don't do science or maths either.
This argument was simply a slieght of hand to try and kill shale gas.
Aug 14, 2013 at 10:06 AM | Unregistered CommenterRob Burton
"Why is there such a concern about gas extraction?"
Mike Jackson pretty much said it, the Watermelons are on the cusp of a great victory. They have persuaded Western governments that burning fossil fuels, the very lifeblood of Western Industrial Civilisation is going to destroy the Earth. Then along comes shale gas, 50% less emissions, cheap and ubiquitous, the Watermelon's worst nightmare. They want to destroy Western Industrial Civilisation, and return us to some fictional golden era, where 8 out of 10 children don't die before their 10th birthday, because by some unknown miracle we will be able to maintain the health, education and welfare of the people by living in yurts and eating vegetables.
What I don't understand is that fracking in the US brought down the price of gas by 75% then why will it only reduce our bills by 4%?
Read the 2008 Climate Change Act, even if we can extract and transport the gas cheaply it will be taxed to keep "renewables" competitive. We have the Milibands to thank for this, but only 5 MPs voted against it, so I guess that collectively our parliamentarians have decided to destroy our economies. Which, by the way, is the plan the environmentalists, who got less than 3% of the popular vote, have for us.
Aug 14, 2013 at 10:20 AM | Mike Jackson
The reason is simple: they'd rather have everyone equal in poverty - even at the price of the poorest becoming even poorer in absolute terms - than tolerate inequality. It's not that they delude themselves that in such systems the poor will have their lives improved - it's that they don't really care much about that in itself. The reason why they don't tolerate inequality is because as long as there is inequality, they might end up as losers - in fact, they're convinced they will.
The other missed point, is that a growing shale sector puts pressure on the established market to examine their prices, sharpen their pencils or seek new markets. It's also gas they would otherwise have sold themselves and they will face the same quandary world wide as shale deposits are being discovered all over the world.
It's just another form of energy so a world wide reduction of gas prices will ultimately have a knock on effect on oil prices too.
Lancashire alone can do that? I fracking is put to work elsewhere, the world economy will jump forward like an Olympic sprinter off the line.
Geronimo (Aug 14, 2013 at 10:53 AM):
They could be providing their own source of methane – and it could never be described as a “fossil” fuel! (Unless it came from Granny, of course…)
Ah, roll on that dream of lounging about on the green swards, clad in homespun clothing, fruit falling from the trees into our outstretched hands, not a care or worry to concern us…
What is truly worrying is that there probably are people who actually believe that is a possibility (perhaps 3% of the population?).
Re: BrianJay
Their reasons are as follows:
1. The shale is deeper, not as much (the recent geological survey changes this), and has high clay content making fracking more difficult.
2. Regulations, more regulations and even more regulations add to the cost.
3. Relatively few buyers and sellers of gas in Europe. High transaction costs.
4. Infrastructure. Western Europe is relatively inexperienced with land rigs so there currently isn't enough competition to keep the costs down.
5. Licensing only covers small areas so many licenses are required.
The depth of shale mainly affects the costs of the initial set-up and the high clay content is an estimate. The BGS admits that this needs to be re-analysed.
Regulations only ever increase so there is nothing that can be done for this.
As for infrastructure, business is business. If companies can make money providing support services for land based rigs then they will provide them. The more land based rigs there are the more the support costs will decrease.
The licensing is a problem. In Texas they can grant a license to drill wells in 100 square mile area, the license for the Balcombe site covers 0.002 square miles.
The GWPF is reporting that more people support fracking than oppose it (in a poll for the Grauniad).
http://www.thegwpf.org/fracking-shale-gas-attracts-strong-support-uk/
Rob Burton says "They have persuaded Western governments that burning fossil fuels, the very lifeblood of Western Industrial Civilisation is going to destroy the Earth."
If I was a cynic, I might think that in fact they have persuaded western politicians that by following the green agenda they can take more control of the economy, and simultaneously line their own pockets.
Oh wait, I am a cynic.
What I don't understand is that fracking in the US brought down the price of gas by 75% then why will it only reduce our bills by 4%?
Aug 14, 2013 at 10:26 AM | Unregistered CommenterBrianJay
Brian it's because the 4% is for the Lancs field feeding gas and oil to the whole of europe. If they were to allow fracking in Europe the likely price drop would be 75%.
This blog would improve if people didn't bring up the soviet union so often. Not only does it allow observers to dismiss everyone else on the blog it is usually over-simplistic nonsense that is spouted with no reality check whatsoever. It is a plain fact that many people living in the post-soviet world feel they were much better off under soviet rule. So talk about relative standards of living or relative poverty has more to do with textbook junk economics than hard reality. The big problem with free markets is that they always turn out to be mainly free for the criminals and mainly fixed at high prices for the rest of us. Theorists seem to exclude criminality from their equations because the collective good is not served by their actions. Criminals however (and that includes industry fatcats and current bankers) do not give a rats arse for the collective good. They will drive an economy to its knees for their personal gain and that is exactly what happened to post Soviet Russia under Yeltsin thanks to him listening to US-trained economists and their false "invisible hand" doctrine (otherwise known as the Washington consensus) that has never worked anywhere. Like it or not, a dose of state control from Putin brought back some semblance of economic recovery. Though the current massive gap between rich and poor still means the poorest are poorer under capitalism - theory or no theory! And yes Putin is an unacceptable dictator though oddly somehow more acceptable to Monckton than the EU Commisaars believe it or not (his words not mine).
The real issue about fracking resistance comes from the fact that greens seem to imagine growth is a bad thing and they very often admit as much despite the sheer hypocisy of their stance. This angst is built on the fantasy that our current type of industrialisation inevitably leads to a planetary malaise. Growth fuels the malaise and fossil fuels fuel the growth. Hence they must stop the burning of fossil fuels. They imagine that renewables are only held back by the use of fossil fuels and that renewables would be much cheaper in the long term if we just spent enough money on them now. There is even some justification for that idea because solar panels are finally cheap enough to be of some benefit.
Alas everything is a darn sight more complex than overly simplistic logic would would lead us to believe. Wouldn't it be lovely if we could all manage to argue on the basis of actual facts rather than the dogma of outdated and inapplicable economic fallacies? There really is an opportunity for everyone to engage based on the short-term reality check of us needing gas whether we like it or not (even for green initiatives such as the greenpeace CHP plan) combined with a long-term reality check that fossil fuels will have to be replaced by something sometime - thanks to the 3rd world making their way out of poverty via burning fossil fuels.
BrianJay,
As well as the issues TerryS has covered, the US (and Canada?) has only recently undertaken the infrastructure building required to enable them to export their gas. As a result a boom in shale gas that began a few years ago caused a glut that the US market couldn't shift. It was a case of significant oversupply so prices dived. Handily for the gas producers that meant coal began getting displaced from the electricity generation market and natural gas consumption has gone up.
What happens once US export infrastructure is up and running depends on supply and demand. If production cannot keep pace with consumption prices will increase somewhat in the US and ours should fall a little bit through there being an additional gas exporter competing for business serving the European market. If US shale gas production can keep getting higher then prices should remain low in the US and our prices should fall too. Add European shale gas into the market and prices should fall further.
The gas price plummet in the US was also from an unusual peak price. If you discount the peaks the fall is still significant but not quite as big as it appears at first glance. I'm not sure what caused the peaks in price.
US shale gas production has increased from around 1 trillion cubic feet in 2006 (1) to over 9 trillion cubic feet in 2012.(2) That is a massive change and production is still increasing. Caudrilla's estimate for Lancashire has them producing over 400 billion cubic feet by 2021 and 700 billion cubic feet by 2030.
References:
(1) http://www.eia.gov/analysis/studies/usshalegas/ 3rd paragraph.
(2) http://www.eia.gov/energy_in_brief/article/about_shale_gas.cfm Chart on right showing 25tcf gas per day.
Geronimo
Nice to know you agree with me. Every now and again I have to stop and ask myself whether I am talking sense or just suffering from some sort of libertarian paranoia!
The logic behind trying to wind the calendar back whether 60 years or 600 always escapes me and while I prefer the somewhat slower pace of French rural life to Scottish suburban I have never, so far as I can recall, ever suggested that we should attempt to put any sort of total ban on allowing the human race to continue along its present path.
Perfect it may not be but then since Utopia is an impossible dream we are as well making the best of what we have.
Peter B
I don't quite agree with your analysis. I don't think it's an inferiority complex that drives the watermelons. If anything it's a sense that the plebs need to be kept in their place because they are not capable of making the "right" decisions.
To digress for a moment: the communist revolution is a myth. Note that all countries that have attempted one have ended up with what they had before: the Russians exchanged Tsar Nicholas and his secret police for Tsar Josef Stalin and his secret police; the Chinese exchanged their emperors for Mao; the Cubans exchanged Batista for Castro. Even Iran exchanged a secular dictator for a theological one. The words may be different but the language is the same. They're control freaks divinely (or perhaps not) ordained to rule we lesser beings and therefore entitled to use any means at their disposal to get their own way.
As geronimo succinctly put it, they thought that global warming+CO2 was the answer to their prayers until along came their worst nightmare — shale gas! Hardly surprising they are reacting as they are.
JamesG , I wish we could avoid general political name-calling on here too. Every time the terms "Marxist" or "Communist" are applied wildly to someone who most of the world thinks of as pretty much in the centre or, at most, slightly Left then we look like the warmists caricature of us and we lose a bit more support.
Let's defeat the warmists first folks, then we can have the luxury of disagreeing about everything else!
The additional positive but difficult-to-quantify benefit is Energy Security. And this is perhaps the major benefit.
No longer could the UK be 'held-to-ransome' by the Russians, or the Ukrainians. Or the EU (Germans, Dutch, Poles, Danes) should we want to 'renegotiate' our position.
http://en.wikipedia.org/wiki/File:Major_russian_gas_pipelines_to_europe.png
In addition, via the existing Bacton - Zeebrugge Interconnector, we can massively increase our exports. This may not reduce consumer prices much in the UK, but generates a massive amount of tax-revenue for our chancellor to waste on other projects.
http://www.interconnector.com/
Good point, Joe Public:
Which raises the perennial question: why does every chancellor (or equivalent) now think that they and their government know better how to spend our money than we do?
It is a standard environmentalist argument. The proposed drilling will only provide a small amount of additional energy, and is therefore not worth developing. Better to spend a LOT more on intermittent sources, and MOVE FORWARD into the past.
They said this about the Alaska pipeline, about drilling, the Keystone XL pipeline, etc. They say it about every real source of energy, beause their goal is NOT to produce more energy, but to produce LESS, at a higher price. After all, their energy is morally pure and free of guilt, and is therefore of a much higher quality.
JamesG. Most technical problems can be solved: look at technical progress in the last 300 years.Most technical problems turn out to be political ones. The technical progress to make the N sea oil fields be developed was of a similar magnitude to that accomplished by NASA putting men on the Moon and returning them safely. There are often several solutions to problem, in this case ,a need for cheap energy: the real problem are the political influences .
New hydraulic fracturing technology is opening up gas supplies in the most unlikely places. Gas is gushing in an unstoppable geezer of supply. Prices cannot possibly stay high.
Vast Gas Reserves Offshore Greece. August 12th, 2013
Andrew knows Tim's blog is incorrect.
It was debunked before it was published, here -
http://www.greenpeace.org.uk/newsdesk/energy/fact-check/will-fracking-lower-bills
And Andrew has already read that debunking (if you haven't, the key part is Poyry's email reply, which confirms that it is worldwide shale production which could lower prices by 2-4%, and not Lancashire on it's own).
If Lancashire's shale was to be burnt in the UK exclusively, 2-4% reductions would be plausible. But anyone who thinks Lancashire has enough shale on it's own to lower global gas prices (or european prices, although Poyry's model is global, another error by Tim) probably shouldn't be commenting on energy issues.
No slur on Andrew - he knows full well this is impossible. Not sure why he republished a blog he knew was nonsense, unless you guys just have a more sophisticated sense of humour than I do.
If Europe does not frack, their whole petrochemical industry (the part that can get its feed stock from gas instead of oil which is most of it) will end up moving to the US or Canada.
And a big much of the industries that consume plastics from those new US factories will also move to the US.
The job loss will be in the millions.
And the first country in Europe that facks may win the race to divert some of those job losses.
@ gubulgaria
1. Look at the Interconnector map, the link to which I posted above.
2. Consider the distances from Nadym, Yamal (also famous for its old tree rings), and Shtokman fields.
3. Imagine the transmission costs of shipping gas from there to the markets of western Europe, and hey, even Lancashire.
4. Use your skill and judgement to estimate the difference is costs between buying in a commodity from Siberia, compared with letting it rise out of the ground from below you.
@Bruce is correct but it is not just petrochemical jobs. The US are already pulling manufacturing jobs back from China due to the impact of cheap energy. USA immigration officials are going to have their job cut out holding back the tidal wave of green card applicants. That’s unless the countries holding vast gas resources elsewhere – China, Mexico, Europe, South Africa, Argentina, Australia, Qatar – pull their finger out.
Charlie
You may be right. Though nuclear power would never have just come about without massive government subsidy. Nuclear fusion certainly won't. Now some may say that perhaps we'd be better off without nuclear power. We'll see.
But I suspect we need some kind of government plan for something as important as energy and like it or not it has to involve environmentalists. France planned ahead properly and now they are not so worried about running out of energy as the UK is.
However I share your view about over-zealous regulators doing more harm than good. Alas under-zealous regulation can be equally harmful; it what was at the root of the financial crisis.
Lancashire alone can do that? I fracking is put to work elsewhere, the world economy will jump forward like an Olympic sprinter off the line.
Aug 14, 2013 at 11:22 AM | Unregistered CommenterBrute
======================================================================
Lancashire? It can do anything - it is, after all, the home of the Industrial Revolution and hence, the progenitor of the modern world.
@joe public
Tim's blog is based on Poyry's report, which Tim has misunderstood, largely because it is misleadingly worded.
Neither Tim nor Poyry are claiming that Lancashire's gas will be burnt in the UK only. If it was, then it would probably lower UK gas prices, but it won't be.
It will be sold on the global market.
Poyry explain that the 2-4% (not 4%, as Tim claims) reduction is based on global shale production, not Lancashire alone, in an email at the end of this blog - http://www.greenpeace.org.uk/newsdesk/energy/fact-check/will-fracking-lower-bills
You may think they're wrong, but it's their figures Tim is trying to use, and they don't mean what he thinks they mean.
What's more concerning is that Andrew already knows this.
@JamesG: French nuclear power cannot cope with global warming. see here
Also no one is allowed to know what the real cost of the French indulgence into nuclear power has been – it is a state secret!
This is interesting:
Before anyone believes gubulgaria on this. Here is the actual Poyry report.
http://www.poyry.com/sites/default/files/imce/files/shale_gas_point_of_view_small.pdf
"How will
Lancashire shale
gas impact the
GB energy
market?"
Lancashire, not EU or world fracking.
"In our analysis we have assumed a baseline
case in which no Lancashire shale gas is
produced and have compared this to a case
which uses the production profile provided by
Cuadrilla."
"Our analysis shows that production of
Lancashire shale gas begins to have an impact
on GB gas prices from 2021"
"From 2021, gas prices are between 2% and
4% lower if Lancashire shale gas production
proceeds as projected"
"Overall gas import dependence is 58% under
the Lancashire shale scenario compared
with 79% under the ‘No shale’ scenario in
2030."
"The difference made to the wholesale
electricity price as a result of Lancashire
shale gas production is of a similar magnitude
to that seen in the gas price, a reduction
between 2% and 4% over the period to 2035"
"However, the carbon
intensity of the power market is slightly lower
at some times under the Lancashire Shale
Production case"
"However, the move to
significant levels of Lancashire shale gas
does not make the future position any worse
and could improve the position through its
reduction in imports."
"ConClusion
This study found that shale gas production in lancashire, to the extent projected by
Cuadrilla, is likely to result in: "
This is not a report about the effects of pan-European nor even global fracking for shale gas. This is a very specific report about the production from that one, Cuadrilla explored, part of the Bowland Shale in Lancashire.
Greenpeace are lying [snip]
Apologies for the swearing [snip]
Covered the North America possible UK/Europe gas price dynamics in a post on a previous thread. Simple, and transitory. Won't happen in Europe, and will self correct in another year or two in the US. Drill rigs have already shifted to tight oil, decline curves now just have to play out.
@ gubulgaria Aug 14, 2013 at 4:00 PM
In my posts of 1:45 & 3:38 I make no reference to Tim's blog or Poyry's report.
I simply suggest that logic be applied to (1) Security of Supply and (2) Gas transmission costs - which is the major cost in getting gas to your boiler.
Please advise the value Poyry's report included for Security of Supply being entirely in UK control, so that the risk of 3rd (& 4th & 5th) party interruption is eliminated entirely?
@Tim Worstall
Greenpeace -
"I wrote a story linking to your Lancashire shale study in which i said the 2-4% figure was derived by putting your Lancashire shale assumptions into your European model - so that was a figure of the price impacts of European shale gas as a whole, including Lancashire. The change was that Lancashire was producing far more than you forecast in your review for Ofgem.
There has been some debate about this so i wanted to verify my facts - could you confirm that this is the case or, if not, correct me promptly"
Poyry -
"Sorry for the late response as I was out of the office at a client meeting yesterday, Your statement on the potential price impact is correct based on our understanding of shale gas potential in the summer of 2012, although it is not just Europe but worldwide. However, we do update this on a quarterly basis, although the changes are not expected to be that different from the numbers previously quoted.
It should also be remembered that shale gas development has benefits in terms of security of supply and in improving the balance of payments in addition to the jobs and taxes to the Government."
You say Greenpeace are 'lying[snip]', but Poyry say Greenpeace are correct.
Why don't you call them and check?
Chairman Al
I really like the idea of the "unstoppable geezer" full of gas- who is he? There are so many candidates- Al Gore, Michael Mann, Ed Davey, Stephan Lewandowsky??
@Messenger ...oops geyser malfunction ;-) ... but take your pick, these geezers are all full of hot air.
""Sorry for the late response as I was out of the office at a client meeting yesterday, Your statement on the potential price impact is correct based on our understanding of shale gas potential in the summer of 2012, although it is not just Europe but worldwide. However, we do update this on a quarterly basis, although the changes are not expected to be that different from the numbers previously quoted.
It should also be remembered that shale gas development has benefits in terms of security of supply and in improving the balance of payments in addition to the jobs and taxes to the Government.""
Err, yes, this is what I'm saying. Poyry has estimated the effect of fracking Lancashire on the European (and global) gas prices, not the effect of global fracking on the price of gas in Lancashire.
The idea that it's the other way around is ludicrous. They're using Lancs providing 21% of total UK consumption: and you want to try and claim that a new supply of 21% will affect price by 2%? Guffaw!
@Tim Worstall
Who mentioned 'the price of gas in Lancashire'?
European shale could reduce european gas prices.
Cuadrilla's figure for Lancs shale made Poyry increase their estimate for the reduction (to European prices) to 2-4%. But that's the new total including Lancs, not the increase from Lancs.
No reason for you to believe me, and the report is very confusingly worded.
But you should check with Poyry.
2-4% is the reduction from European shale, not just Lancs shale.
Rodent wrote
quote
Which raises the perennial question: why does every chancellor (or equivalent) now think that they and their government know better how to spend our money than we do?
unquote
Because they don't realise it belongs to anyone but them.
The heart of Western civilisation, its bedrock, is the right to own private property. Yes, it has to be curtailed in certain circumstances, eg taxes, but the central tenet holds: what is mine is mine and not the State's. Lose understanding of that fact and the door is open to tyranny. Why else do cult leaders abolish property? When the State owns everything, or has the right to appropriate everything, we are helpless.
In Wales they have decided that even dead bodies belong to the State. Oh, yes, with the best of motives: people who need transplants were dying because bodies belonged to the families of the deceased, but the precedent is made. Why stop at dead donors? What about blood donors? What about living tissue donation? What about your bank account? What about your land, your family, your wife, your husband? Once the State realises it has the power to expropriate anything then it finds it easy to step across the line.
'The poor man in his cottage may bid defiance to all the forces of the King,' said Pitt the Elder. Not any more, my lord, not any more.
JF
Excellent,
"Cuadrilla's figure for Lancs shale made Poyry increase their estimate for the reduction (to European prices)"
We are now agreeing at least that we are talking about European prices not just UK ones. So I'm right as you now agree.
And no, all European shale will not change all European prices by 2-4%. Elasticity of supplt etc just doesn't work that way. For the Lord's sake, price elasticity of demand is 0.51.
No-one ever disputed that we were talking about European prices.
What I'm disputing is that Lancs shale will reduce them by 2-4% (or 4%, according to you).
European shale will (or could according to Poyry) reduce European gas prices by 2-4%.
Lancs is part of that, but not all of it. The recent higher estimate for Lancs shale is what caused Poyry to revise their estimate up, but the Lancs estimate increased the figure for the impact from European shale. It isn't a figure for the impact of Lancs shale alone.
It is not true to say that Lancs shale will reduce european gas prices by 4%. Which appears to be the central point of your blog.
If you're sure you're right and I'm wrong, please check with Poyry.
That should be the easy way to clear this up.