Without putting too fine a point on it 2022 has been a disaster for pretty much everyone who didn’t run a hedge fund, is a shareholder in an oil and gas or other energy company or works in a bank and is due a bonus.
The year has been dominated by Russia’s outrageous attempt at invading Ukraine. The human cost is bad enough but the economic costs particularly with regard to energy are huge. Even though our country only ever imported around 4% of its gas from Russia the good old international market effect ensured our gas prices went through the roof as did electricity prices of course and even if that electricity was produced by renewables not by burning gas the market dictated and we tacitly accepted – because we’re not French – that it should be sold at the higher price based on the cost of gas.
That the market isn’t working is something the govt now seems to have finally twigged and it says it’s looking at how to fix. I won’t hold my breath.
The govt is now going to hit the oil, gas and renewables companies with a windfall tax. That will maybe help the Chancellor balance his books but I haven’t quite worked out how it will help consumers very much nor am I clear quite how it will lead to higher investment in renewables. Big question: could the uncertainty caused by a windfall tax impact the prospects for the Scotwind programme?
I’m a great admirer of Greta Thunberg the 19 year old Swedish climate campaigner. In particular I like the way in which – to coin one of my mother’s phrases – she calls a spade a bloody shovel. She doesn’t mince her words and when in 2021 she said COP26 was all “blah blah blah” I agreed with her because if you look at the data you learn that since COP 1 in Berlin in 1995 none of the subsequent COPs – and we’re now on number 27 – has actually succeeded in reducing the trend growth in atmospheric CO2 nor had any effect on the change in global temperature.
This year at COP27 over 200 nations agreed to create a “loss and damage” fund which is intended to help compensate “particularly vulnerable nations” for the damage done by climate change events such as the disastrous floods that took place in Pakistan this year.
That’s great politics but it won’t in and of itself reduce the chances of exceeding the 1.5°C limit on the rise of global temperature which is the figure everyone argued for but which we’re now very obviously going to exceed.
And why will it be exceeded? Well it’s obvious and that’s because what didn’t happen at COP27 or previous COPs was an agreement on phasing out fossils fuels and that frankly is as dumb as claiming electrifying N Sea oil and gas production somehow makes burning fossil fuels OK. That’s extreme “Blah blah blah”.
Then there’s the worsening impact of Brexit. Paul Johnson, the Institute for Fiscal Studies told reporters recently it is now abundantly clear that Brexit has badly damaged the UK economy saying “Very clearly Brexit was an economic own goal – economically speaking [Brexit] has been very bad news indeed, and continues to be bad news.”
Former member of the UK monetary policy committee Michael Saunders when asked by Bloomberg if he thought Brexit had damaged The City: “The UK economy as a whole has been permanently damaged by Brexit. It’s reduced potential output, eroded business investment “ and as we now know London has lost its position as Europe’s most valuable stock market to Paris, as Britain’s economic downturn continues to bite.
Business investment has collapsed, exports are in decline, lack of freedom of movement is curtailing growth as the country can’t get the workers at all levels that it needs. Around one third of small companies have given up exporting simply because of the cost of administering the process.
How this helps Scotland develop a meaningful renewables technology manufacturing supply chain I’ve no idea and remember, following the Supreme Court ruling we’re stuck with the UK and all its political nonsense.
The promises we were made about the benefits arising from Brexit have evaporated. I’ve no idea what goes through the heads of the politicians that support it but I hope we can come up with a vaccine for it and soon.
Am I optimistic for 2023? Not remotely. 2022 has been a tough year. Keep your hat on. 2023 will be even tougher with the UK being forecast by the OECD to have the lowest growth bar Russia and the government’s own goals on tax and cost cutting deepening the damage to the energy sector and opening opportunities for our competitors but not for us.