The economic fortunes of the UK are intertwined with the price of natural gas. It is an uncomfortable fact that we have all had to wrestle with in recent years. First, Russia’s invasion of Ukraine caused the biggest inflation shock in a generation as the price of natural gas exploded in 2022, sparking a cost of living crisis that shows little sign of abating. Now, the US and Israel’s attack on Iran threatens to heap further economic misery on the country.
As Rachel Reeves arrives in Washington DC for the International Monetary Fund spring meeting, the bad news for the chancellor keeps coming: the IMF downgraded Britain’s growth prospects, with the UK suffering more than any other wealthy nation as a result of the conflict in Iran – driven in part by soaring energy costs once again.
For today’s First Edition, I spoke with Jillian Ambrose, the Guardian’s energy correspondent, about the government’s effort to end Britain’s dependency on natural gas. First, the headlines.
Five big stories
Middle East crisis | The US and Iran have been in indirect talks aimed at extending the two-week ceasefire beyond its expiry on 22 April, as Pakistan’s army chief arrived in Tehran to continue mediation efforts.
Environment | The world’s top 100 oil and gas companies banked more than $30m every hour in unearned profit in the first month of the US-Israeli war in Iran, according to exclusive analysis for the Guardian.
Politics | Rachel Reeves has stepped up her criticism of Donald Trump’s war on Iran, describing it as a “mistake” that has destabilised the global economy and damaged living standards around the world.
Media | The BBC is to cut as many as 2,000 jobs in the biggest downsizing of the public service broadcaster in 15 years. Staff were informed of the cuts, which will affect about 10% of employees, at a meeting on Wednesday.
UK news | Police are seeking two suspects believed to be behind an attempted arson attack on a synagogue in north London. The Met said two people “wearing dark clothing and balaclavas” approached Finchley Reform Synagogue just after midnight on Wednesday.
In depth: ‘The biggest change to the UK economy since the Industrial Revolution’
Britain’s love affair with natural gas is souring. During the North Sea oil and gas boom in the 1970s and 80s, gas boilers and infrastructure were rolled out across the country, providing cheap, reliable energy to warm homes and businesses. Today, despite major efforts to decarbonise, around 85% of homes use a gas boiler, and natural gas produces about 30% of the country’s electricity supply.
Increasingly, the sums no longer add up. Huge jumps in the price of natural gas, a major determinant of energy prices in the UK, have buffeted the economy since Russia’s invasion of Ukraine. This happened once again following the start of the conflict in Iran, although prices have since fallen back. Even so, it remains the most expensive way to generate electricity in the UK. And, in a rapidly heating planet, the fossil fuel has to be largely phased out of the energy supply for the country to meet its climate targets.
The challenge of ending our dependency on natural gas is enormous, says Jillian. By the end of this decade, the government is aiming to generate 100% of energy from clean sources. To reach this, Labour’s manifesto called for onshore wind power to double, solar power to triple, and offshore wind to quadruple by 2030. This will be accompanied by a major push to upgrade the UK’s electricity grid and encourage homes to replace ageing gas boilers with heat pumps.
“I don’t feel like our politicians are having an honest conversation with the public about what this is going to take. It will be the biggest change to the UK economy since the Industrial Revolution,” she says, explaining: “We really are very reliant on natural gas. This obviously has its roots in the UK’s legacy as a major oil and gas producer in the North Sea in decades gone by.”
“It’s easy to forget that, in 1985, the UK was the fifth-biggest oil and gas producer in the world. Now, we have this very mature basin, which is rapidly dwindling,” she says.
***
It’s like trying to argue against gravity
The environment and the economy are not the only factors that the UK has to balance while bringing down our reliance on natural gas, Jillian explains. Around 80% of gas used by the UK comes from the North Sea via British and Norwegian producers, ensuring a steady supply regardless of price. This means that, while Russia has used natural gas supplies to manipulate governments in central and eastern Europe, our own positioning makes the UK far less vulnerable to attempts to undermine our energy security.
“Rhetoric from some green groups can make the North Sea sound like an irrelevance, but it still plays a major role in our energy security, even if it’s dwindling,” she says.
Even if the natural gas comes from our own suppliers, we are still obliged to pay the global price for the resource – and that’s a problem. The price of natural gas shot up following the start of the conflict in Iran, despite there being no disruption to UK supplies, although it has since decreased. Why, I ask feelingnaive, can we not set a lower price for North Sea gas for British consumers?
“For the oil and gas industry, it’s like trying to argue against gravity. It’s such an innate part of how the industry works, so it’s difficult to even imagine what that could look like,” says Jillian. “It would be a radical idea, and perhaps not something that you would want to pioneer in a declining basin like the North Sea.”
***
What would transitioning to renewables look like?
If the UK transitions away from natural gas by 2030, readers should not expect quick falls in their energy bills – even though green energy is cheaper, Jillian tells me. To make the transition towards renewables, the country also needs to invest in much-needed upgrades to its electricity grid. Ageing infrastructure needs to be replaced regardless of the country’s energy supply, and that does not come cheap.
“We will see the cost of upgrading the grid going up on people’s bills. That’s already one of the biggest growth areas in what we pay,” says Jillian, explaining that there are more difficult choices about how the improvements are funded. The green energy sector would like to see changes to bills that places the financial burden of upgrades on customers, thereby encouraging people to switch to cleaner energy sources such as heat pumps. But such a change risks harming poorer households, who cannot afford the thousands of pounds needed to switch.
Such households would also face not only higher gas prices, she says, adding: “They are also more likely to live in poorly insulated homes, which need more gas to heat, so there’s a disproportionately regressive impact on some of the poorest households in the country. This is one of the many decisions that the government is grappling with.”
***
Becoming an electrostate
Britain is working towards becoming an electro state in the coming decades, says Jillian, one that it defined by its reliance on renewable energy instead of fossil fuels. Whether the government will reach its 2030 target for clean energy is up for debate, but the direction of travel is clear: natural gas is the past, the future is green. Electric cars will replace their fossil fuel-run counterparts, homes will be heated from clean energy produced by a network of domestic renewable energy sources. The leftover energy will be exported to Europe to improve the continent’s energy security, she says.
“The UK’s vision for itself as an electro state is cool, in my nerdy opinion. Energy is an enabler; it’s the lifeblood of the economy. It will make us safer from leaders who want to weaponise energy against us. There’s the potential for homegrown economic success, and ideally lower bills. But it’s going to take some time for us to break the link with gas,” she says.
• For more stories about renewables and the environment, subscribe to Down to Earth, our free weekly newsletter with the latest from the Guardian’s top climate crisis correspondents.
What else we’ve been reading
Our Europe correspondent Jon Henley’s analysis on why Viktor Orbán’s defeat in Hungary doesn’t necessarily signal the end of the far right in Europe is a sobering read. Poppy Noor, newsletters team
Nesrine Malik has a brilliant Long Wave newsletter this week about how the US-Israel war on Iran and its blockades are affecting some of the poorest and most vulnerable economies in the world. Patrick
I loved reading about two new books that try to put into perspective Toni Morrison’s multilayered existence as a writer, editor and thinker. Poppy
Soledad Dominguez reports on the 50-year fight for justice of the Avá-Guarani community, on the Brazil-Paraguay border, who were displaced by an enormous dam. Patrick
The concept of “sandwich dressing” was new to me before reading Jess Cartner Morley’s piece. A clever hack for lazy people that I’ll certainly be trying. Poppy
Sport
Football | Arsenal edged past Sporting to reach the Champions League semi-finals for the second successive season with a 0-0 home draw earning them a 1-0 aggregate victory on Wednesday.
Formula One | Bosses must listen to Max Verstappen’s grievances about the sport’s new regulations and their effects on racing, according to F1 CEO Stefano Domenicali. His intervention comes as key players hold meetings to consider adjusting the rules for the remainder of the season.
Rugby union | Exeter Chiefs have finalised a deal with a wealthy American backer to take control of the club, subject to the approval of their membership. An extraordinary general meeting is to be held where members will be urged to support the move to sell the 155-year-old club.
The front pages
The Guardian leads with “War windfall: big oil makes extra $30m every hour during conflict”. The i has “China flexes its muscles in Gulf – as Trump seeks deal with Iran”, while the FT reports “Tehran deploys Chinese satellite to target US bases across Middle East”.
The Telegraph has “Family tax bills rise £4k under Reeves”. The Times goes with “UK facing summer of shortages on shelves”. The Mirror reports on the governments “crackdown” on social media under the headline “No hiding place”.
Today in Focus
When the ‘Dubai dream’ goes wrong
Journalist Will Coldwell tells the story of how a British businessman was imprisoned in Dubai – and how his family finally got him home.
Cartoon of the day | Ben Jennings
The Upside
A bit of good news to remind you that the world’s not all bad
It’s been roughly 90m years since humans and sperm whales shared an ancestor, so one can’t be faulted in thinking we have little in common with these ocean-dwelling giants. In fact, researchers have discovered that sperm whales also use a kind of alphabet, and the structure of their communication has “close parallels in the phonetics and phonology of human languages, suggesting independent evolution”.
The discovery was made by Project Ceti, which studies sperm whales off the coast of Dominica. “It’s another humbling moment that we’re not the only species with rich, communicative, communal and cultural lives,” said founder David Gruber.
“These whales could be passing information along generation to generation for over 20m years. Humans now are just having the right tools and desire to be able to look at whale voices in this way to see the complexity that has been there all along.”
Sign up here for a weekly roundup of The Upside, sent to you every Sunday
Bored at work?
And finally, the Guardian’s puzzles are here to keep you entertained throughout the day. Until tomorrow.
