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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Private renter poverty has doubled in a decade - so where's Labour?

The Joseph Rowntree Foundation named housing market failures as driving poverty. 

Labour’s economic policy task is enormous. It must find a coherent argument that addresses Brexit, the “left behinds”, and a nervous business community. But there is one policy area that should be an open goal – private renting. 

The number of private renters in poverty has doubled over the last decade, according to a new report from the Joseph Rowntree Foundation. Those most likely to fall into poverty are working families – there were 2.8m of these people in 2014-15, compared to 1m a decade earlier.

“Failures in the housing market are a significant driver of poverty,” the report noted, after finding more than 70 per cent of private renters in poverty pay at least a third of their income in rent.

This is particularly the case if you consider the knock-on effect - housing benefit. This benefit was frozen by George Osborne, meaning that by 2015 Shelter calculated rates had fallen behind actual rents in nearly 70 per cent of England. For families out of work, of course, housing benefit is also included in the benefit cap. 

Private renter poverty is easily characterised as an inner-city problem – the kind cherished by the “metropolitan elite”. But in fact, across Great Britain as a whole, roughly one in ten children under 19 lives in a family that is privately renting and claiming housing benefit. The highest percentage was in Blackpool, followed by the Essex coastal area of Tendring, followed by London boroughs. Private renting is a trend that affects both the Remain strongholds and the Leave coastal towns.

So far, Labour has been relatively quiet on private renting. During the summer’s leadership campaign, Jeremy Corbyn promised to introduce “rent controls, secure tenancies and a charter of private tenants’ rights” (a promise he repeated as part of a longer speech in November). But this is hardly a blockbuster campaign. 

And the challenges are great. A convincing renting policy must explain how Labour would deal with a reactionary letting market industry (including pensioner voters), whether renting should be a step to buying, or an end in itself, and how new council and social housing would be allocated.

Labour could also, though, tie a rent campaign into other trends - the growing army of self-employed that find it hard to prove their wages to a landlord or mortgage lender, the working families on frozen benefits, and the employers that find their employees priced out of the local area. And pissed-off tenants are not hard to find. 

If Labour doesn’t move soon on an issue that should be its natural home, the government may steal the keys. In the Autumn Statement, Philip Hammond helped himself to Ed Miliband’s 2015 promise to ban letting agent fees. The government has also set up a working group with members of the private renting industry. (Yes, the government may also be selling off social housing under Right to Buy, but if you never had the option of social housing anyway, this may pass you by.)

Fixing the housing market takes imagination and a steeliness to take on entrenched interests. But if Labour does come up with a solution, it could touch the lives of voters, both Leave and Remain. 

 

Julia Rampen is the editor of The Staggers, The New Statesman's online rolling politics blog. She was previously deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.