Will fracking lead to cheap oil for all? Not necessarily

Ceteris paribus. Always with the ceteris paribus.

FT Alphaville's Kate Mackenzie has an excerpt of a very interesting research note from energy consultant Phil Verleger. The bulk of the note is a look back at the apparent vindication of MIT economist Morris Adelman, who rejected the ideas of "peak oil" at the time when they were most fashionable. Adelman, Verleger writes, accurately surmised that technological advances would mean the total reserves are far less predictable than a narrative of rising prices and increasing scarcity would imply.

But Mackenzie picks out the surprising twist in Verleger's note. While he, like so many others, points to the massive change wrought on the global energy market by the invention of fracking and other techniques for extracting unconventional reserves, he doesn't see that as leading to a predictable fall in prices. While a glut of unconventional oil would be good enough to depress prices, it couldn't simply replace the traditional OPEC countries. And the way they would deal with that squeeze could have strong repercussions:

Periods of low oil prices will undermine existing governments in nations such as Russia, Kuwait, Iraq, Algeria, Nigeria, Iran, United Arab Emirates, and Venezuela. These countries have not used oil revenues to diversify economies and build infrastructure for the post-petroleum future. Instead the monies have gone to fund larger and larger transfer (welfare) payments to mushrooming populations.

Adelman’s vindication will mean these nations must curtail such payments when they are forced to cut sales and production sharply or when prices fall. Political instability will increase as such times.

Supply and demand are complicated things. There's a reason economists love the phrase ceteris paribus – "all else being equal" – and thats because most of the time, they aren't. Fracking will introduce a downward pressure on prices, we know that. But the responses of the multifarious other producers and consumers to that pressure are chaotic and barely predictable. A simple prediction of a world of cheap oil might not be as safe a bet as it seems.

Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Former MP Bob Marshall-Andrews: Why I’m leaving Labour and joining the Lib Dems

A former political ally of Jeremy Corbyn explains why he is leaving Labour after nearly 50 years.

I’m leaving home. It’s a very hard thing to do. All of my natural allegiances have been to Labour, and never had I contemplated leaving the party – not even in the gloomy years, when we were fighting Iraq and the battles over civil liberties. I have always taken the view that it’s far better to stay within it. But it has just gone too far. There has been a total failure to identify the major issues of our age.

The related problems of the environment, globalisation and the migration of impoverished people are almost ignored in favour of the renationalisation of the railways and mantras about the National Health Service. The assertion that Labour could run the NHS better than the Tories may be true, but it is not the battle hymn of a modern republic. It is at best well-meaning, at worst threadbare. I don’t want to spend the rest of my life talking about renationalising the railways while millions of people move across the world because of famine, war and climate change.

The centre left in British politics is in retreat, and the demise of the Labour Party has the grim inevitability of a Shakespearean tragedy. Ironically, history will show that Labour’s fatal flaw lay in its spectacular success.

Labour is, in essence, a party of the 20th century, and in those 100 years it did more to advance the freedom and well-being of working people and the disadvantaged than any other political movement in history. The aspirations of the founding fathers – access to education, health and welfare; equality before the law; collective organisation; universal franchise – have all to a large extent been achieved. The party’s record of racial and religious tolerance has been a beacon in a century of repression. These achievements have been enshrined in the fabric of British society and reproduced across the world.

The success brought deserved, unprecedented power and created political fortresses across the industrial heartlands of Britain. But with power, the party became increasingly moribund and corrupt. The manipulation of the union block vote at party conferences became a national disgrace. The Labour heartlands, particularly Scotland, were treated like rotten boroughs, and were too often represented by union placemen.

Instead of seeking a new radicalism appropriate to the challenges of the age, New Labour sought to ambush the Tories on the management of market capital and to outflank them on law and order: a fool’s errand. It inevitably succumbed to another form of corruption based on hubris and deceit, resulting in attacks on civil liberty, financial disaster and catastrophic war.

The reaction has been to lurch back to the status quo. The extraordinary fall from a massive majority of 179 in 1997 to a political basket case has been blamed on the false dichotomy between Blairism and the old, unionised Labour. Both have contributed to the disaster in equal measure.

I believe desperately in the politics of the 21st century, and Labour is at best paying lip service to it – epitomised in its failure to engage in the Brexit debate, which I was horrified by. The Liberal Democrats are far from perfect, but they have been consistent on Europe, as they were in their opposition to the Iraq War and on civil liberties. They deserve support.

But it’s a serious wrench. I’m leaving friends, and it hurts. Jeremy Corbyn was a political ally of mine on a number of serious issues. We made common cause on Tony Blair’s assaults on civil liberty and the Iraq War, and we went to Gaza together. He has many of the right ideas, but he simply has not moved into addressing the major problems.

To be blunt, I don’t think Corbyn is leadership material, but that is aside from politics. You need skills as a leader, and I don’t think he’s got them, but I was prepared to stick it out to see what happened. It has been a great, gradual disappointment, and Brexit has brought it all to the fore.

Frankly, I was surprised that he announced he was a Remainer, because I know that his natural sympathies have lain with a small cadre within Labour – an old-fashioned cadre that holds that any form of trade bloc among relatively wealthy nations is an abhorrence. It’s not: it’s the way forward. Yet there are people who believe that, and I know he has always been sympathetic to them.

But by signing up and then doing nothing, you sell the pass. Labour was uniquely qualified to confront the deliberate falsehoods trumpeted about the NHS – the absurd claims of massive financial dividends to offset the loss of doctors
and nurses already packing their bags – and it failed. Throughout that campaign, the Labour leadership was invisible, or worse.

At present, there is a huge vacuum on the centre left, represented in substantial part by an angry 48 per cent of the electorate who rejected Brexit and the lies on which it was based. Politics, like nature, abhors a vacuum. There is no sign from Labour that the issue is even to be addressed, let alone actively campaigned on. The Labour leadership has signed up to Brexit and, in doing so, rejected the principles of international co-operation that Europe has fostered for half a century. That is not a place I want to be.

The failure to work with, or even acknowledge, other political parties is doctrinaire lunacy. And it will end very badly, I think. The centre left has an obligation to coalesce, and to renege on that obligation is reneging on responsibility. Not to sit on the same platform as other parties during the Brexit debate is an absurd statement of political purity, which has no place at all in modern politics.

The Liberal Democrats have grasped the political challenges of the 21st century as surely as their predecessors in the Liberal Party failed to comprehend those that faced the world a century ago. For that reason, I will sign up and do my best to lend support in my political dotage. After nearly 50 years as a Labour man, I do so with a heavy heart – but at least with some radical hope for my grandchildren.

Bob Marshall-Andrews was the Labour MP for Medway from 1997 to 2010.

As told to Anoosh Chakelian.

This article first appeared in the 27 April 2017 issue of the New Statesman, Cool Britannia 20 Years On

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