The on-going and fast-moving crisis in Ukraine has huge ramifications, not only for the long-suffering people of the Ukraine, but also for European economies and energy prices. Gas price futures have already spiked by 10% or so over fears for future developments. Meantime the Russian stock market, and the rouble, have taken a hit. The economic impact may well be considerable.
Perhaps Russia will succeed in occupying and pacifying the Ukraine, which will be a huge embarrassment to the West. No one in Europe or America seriously thinks we should fight a new Crimean War. Economic Sanctions against Russia would be hugely damaging to both Russia and the West, and are probably not practical. Both Russia and the EU benefit enormously from the trade in Russian gas. Russia supplies around 30% of Europe’s gas demand, with some half of that coming through Ukraine. The UK gets little Russian gas directly, but any loss of gas to the EU as a whole would clearly impact on our supplies from elsewhere.
Fortunately we’ve had a warmish winter, and it’s nearly Spring, so immediate pressure on supplies is not too severe. Several European countries (though not the UK) have built new gas storage, in large part to anticipate supply problems and reduce the immediacy of their dependence on Russia.
If the situation deteriorates, and a shooting war commences, the impact could be very serious indeed, both for prices and for security of supply. In the UK, we have created a situation where over the next decade or so, gas is the only generating capacity we can build in the time-scale to keep the lights on. We’re locked-in, at a time when one of Europe’s major gas suppliers seems to be on the brink of war.
This sudden crisis perfectly illustrates the problems that arise from over-dependence on expensive and politically unstable sources for our energy. I understand that some UKIP members have reservations over our support for shale gas in the UK – people can’t help but be alarmed by the sort of mendacious propaganda being put out by green lobby groups (many funded by the European Commission with our money). If you share these concerns, please see the movie “Fracknation” with rebuts the Greenies’ case point-by-point.
But shale gas can do more than bring jobs and prosperity. More than bringing balance of payments benefits and tax income for the Treasury to help support schools and hospitals. More than offering the prospect of lower energy prices. It can keep the lights on, and the wheels of industry turning. It can offer peace of mind and security of supply. And with a conflagration threatened in the Ukraine, that is a vital consideration.