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Another round of fuel price shocks shows – yet again – that energy resilience and affordability are best served by reducing reliance on oil and gas.

War in the Gulf and the effective closure of the Strait of Hormuz have been accompanied, with disappointing predictability, by opportunistic calls to drill the North Sea. Arguments about maximising domestic oil and gas production in the context of international market turmoil offer an illusion of controlling flows and influencing prices. While rhetorically powerful, these calls do not survive scrutiny.

Spiking prices appear to favour home production. But the prices UK consumers pay for oil and gas are driven by international markets, regardless of whether it is extracted from the UK Continental Shelf or somewhere else. While oil and gas markets are different in significant ways, their available supply from the UK is small relative to overall market demand. Squeezing additional oil and gas production from the UK may be technically possible, but it will have negligible impact on the UK cost of living.

Stranded fuel tankers in the Gulf appear to suggest a logic of drilling closer to home. But issuing more drilling licences on the UK Continental Shelf will not protect UK consumers.  Bringing in new production takes years, which means that any new oil and gas would arrive long after the crisis has passed. Most UK oil output is directly shipped into international markets – notably Europe and Asia – and operators can sell into international markets as they wish with no requirement to serve UK consumers. The UK’s six oil refineries use mainly imported crude oil from overseas – Norway and the US are major suppliers – with less than a quarter coming from the North Sea. The geographies of gas are different, as the bulk of offshore production is tied to supplying UK demand via pipeline infrastructure. The important point is that this physical gas connection has not insulated UK consumers from price surges as gas produced in the UK is sold at international prices. UKERC research shows demand reduction should be a core focus of UK gas security.

Calls for more licensing are simplistic. The pace of oil and gas extraction is not set by the availability of new licenses, as much of the North Sea is already licensed, including areas with the most significant oil and gas reserves. The legislation governing oil and gas extraction has, for decades, placed a primary obligation on the regulator to maximise the economic recovery of oil and gas. Despite this obligation to promote oil and gas development investors can find more attractive options beyond the UK, so it’s not a done deal that substantial investment would flow if licensing resumed. Abundant evidence shows the UK North Sea is a declining basin, where future oil and gas jobs are primarily in decommissioning rather than exploration. Sanctioning new projects will not reverse this trend given the smaller size of remaining fields, locking in low levels of oil and gas production for years ahead. As these would be relatively small and marginal projects that depend on high prices for their profitability, they would require state support, and increase overall decommissioning costs for the taxpayer.

Climate change can’t be ignored or willed away. Although the carbon-intensity of UK gas is lower than imported LNG, carbon emissions from UK oil and gas production are almost three times as large (per unit extracted) as Norway, the primary source of UK gas imports. And the apparent ‘savings’ of UK gas production over LNG are far less significant once Scope 3 emissions (from gas combustion) are taken into account.

The scientific, moral, social, and economic case for increasing renewables while reducing the extraction and burning of fossil fuels remains, notwithstanding the fracturing of the political consensus on net zero and appeals to ‘pragmatism.’  Fossil fuel projects, like oil and gas fields, have long lives and lock in production, consumption and life-cycle emissions for years to come. The UK’s annual territorial emissions account for less than 1% of the global total, but its potential leverage through leadership and example far exceeds its current contribution to the global carbon flux. In the context of international climate negotiations, action at home is key to initiating more significant collaborative action elsewhere (as the UK demonstrated at COP26 in relation to coal).

Assertions that drilling the North Sea will provide energy resilience and affordability in the face of current fuel price shocks are a delusion. They also actively distract from the regulatory reforms needed to address the end-game dynamics of North Sea oil and gas. Recognising these dynamics should be the foundation for a new regulatory framework offshore. Its priority must be to reduce the UK’s exposure to fossil fuel shocks by retiring the requirement to maximise the economic recovery of oil and gas, and capturing the full economic and social opportunities offered by renewable energy.