UK must learn lessons from this crisis – starting with energy policy
Has the US brought Iran to heel? Or has Iran discovered it has the upper hand? These are urgent questions and the world waits with bated breath for clear answers.
Trump claims Iran approached the US, seeking a deal to end the war, and while the Iranians deny this it seems likely that contact has taken place – whether directly or through intermediaries.
However, it is also entirely possible that Trump has simply grown nervous about the costs of the campaign (tens of billions of dollars), the threat to global markets and trade, rocketing inflation and painful prices at the pump. In other words, he’s looking for an off ramp.
Even if the two sides (though don’t forget about Israel) declare some kind of truce in the coming days, the global economy will not snap back into place.
The region’s energy infrastructure has suffered significant damage, not least in Qatar, and while economists debate whether ‘demand destruction’ is setting in (whereby economic activity is degraded to such an extent that the crisis develops a dangerously long tail) there is another area where the consequences have been made painfully clear: the vulnerability of the UK’s energy system.
If you doubt how exposed our economy is, consider that 24 days of conflict in the Middle East has seen our economic growth forecasts cut in half. KPMG thinks we’ll clock up a growth rate of 0.7 this year. Analysts at Oxford Economics are less optimistic, penciling in a rate of 0.4 per cent.
Inflation will rise. Monetary policy has been upended. The government will spend money it doesn’t have in trying to ease the burden on households. Welfare spending will rise.
Time to recognise reality
There are many lessons the UK must take from this crisis, but energy policy must be top of the list. Ed Miliband’s job title, Secretary of State for Energy Security and Net Zero, has become an oxymoron.
His messianic pursuit of the latter has undermined the former. He is increasingly isolated, as calls to exploit North Sea oil and gas come from the bosses of Centrica and Octopus Energy as well as RenewableUK, the trade body for green energy, all of whom recognise that for as long as we need oil and gas it makes economic and strategic sense to get it here rather than ship it in from what is now the most volatile region in the world.
The government needs to recognise reality, but Ed Miliband stands in the way.