• How to justify making people poor
  • Are governments stupid or indifferent about energy?
  • How climate policies raise the risk of war

My article about the equation that gives oil and gas a new lease on life created a flood of feedback. We dug into some of it yesterday.

At the end I asked readers a question: given the shortfall of investment in green energy, “How will governments seek to solve the equation R + F = L?”

That is, Renewables plus Fossil Fuels equal Living Standards.

“Will governments increase investments in renewables dramatically, permit vast increases in fossil fuel energy use, or cut living standards?”

It has to be one of the three. Or some combination. That’s the point of the equation. It has to balance.

Here’s how one reader responded to that specific question:

With Labour ahead in the polls we may not have to wait long for an actual answer to your question. They are after all promising to ban domestically produced hydrocarbons this year which means they will either drastically reduce our living standards or vastly increase imports. But then again the latter option will also reduce our living standards by forcing job cuts and slashing investment. Just look at what happened to Germany after being cut-off from cheap energy sources.

Or maybe reality will hit them before they enact this policy of massive domestic, economic and political self-harm. Political ideology like this doesn’t play well with reality.

S.

There has been a lot of reality hitting government policies of late. Just about every mandate is getting rolled back or delayed. But, for now, there has been no overt change of course. And this means a lack of investment in renewables implies one thing:

Seems to me, Nickolai, they’ve opted for cutting living standards. The price of gas and electricity has gone through the roof, with the price of food galloping along, and you don’t want to live under the SNP government (I don’t have a choice) as these idiots are determined NET ZERO sooner rather than later.

They probably believe the evil Tories are also responsible for global warming as will Labour when they get into government.

J.F.

Of course restrictions on living standards could be imposed far more directly:

Hi Nickolai

There will be restrictions on use of energy….an allowance for use of cars, washing machine, tech etc….we will only be able to use them for a certain time or on certain days. Can’t see any other way unless there is a dramatic cut to the population.

Perhaps that was what Covid was really about??!!

Many thanks for all your info

J.P.

I can’t recall where I read about it, but there’s a great deal of wailing and gnashing of teeth amongst a population that can remember how well washing machines and other appliances worked before energy standards were imposed on them. One day there will be a black market in cars that work in the cold and provide their occupants with enough heat, just as there is a black market in powerful old appliances today…

But perhaps governments haven’t got a clue what they’re actually doing in the first place:

In answer to your question Nick, you assume that governments (and would-be governments – think Starmer and comrades!) even understand that there is such a thing as R + F = L?!

I wouldn’t bank on it – politicians are SO out of touch generally and not just here in UK!

Thanks for another very good article!

Kind regards

D.S.

To be honest, I think those in government do understand all this quite well. At an intellectual level, anyway. They just don’t care beyond their terms in office. Short term perception is more important.

So, unless the people of the UK wake up and demand of their politicians a plausible energy future, they won’t be getting one. As H.L. Mencken put it, “Democracy is the theory that the common people know what they want, and deserve to get it good and hard.” And lately, we have been getting it good and hard.

Dear Nick,

The energy market does appear to be a money making racket fully supported by government. Can you expose and make sense of it, as us investors just get hit by the vagaries of interference. 

Best regards, love your writings.

G.J.

You can’t have racketeering without government involvement. And government involvement is what creates the opportunity for racketeering. Prohibition of alcohol is just the most obvious example.

Without political control over energy, it’d be just like other freer markets. Everyone knows that if the government controlled food distribution, we’d starve. And if the controlled the manufacture of computers, you couldn’t read this. But, for some reason, we still accept government involvement in some parts of our economy as though it’s a good idea.

I suppose the argument is that energy markets need government interference in order to secure energy supplies in case of war. And to save the planet from carbon dioxide.

But I rather suspect, like all government policies, both have backfired. They’ve raised the amount of CO2 emissions by holding back nuclear, and raised the risk of war. Germany’s reliance on Russian gas is a good example of that. Former President Trump explicitly warned them how it would end. He was laughed at.

In the end, all of this is what voters should expect to happen when they asked the government to get more involved in energy markets. From the moment cutting emissions became the government’s priority over supplying stable, reliable and cheap power, things were going to go wrong.

But there’s nothing like the consequences of your decisions to make you change your mind. Soon, we’ll reveal what happens next as a result.

Until next time,

Nick Hubble
Editor, Fortune & Freedom