Last month’s dispute between the International Energy Agency (IEA) and the Organisation of the Petroleum Exporting Countries (Opec) on the link between oil prices and inflation is a red herring. Yes, Opec is wrong on the short-term substance of whether the price of oil impacts inflation. That’s just simple economics. But more importantly it is also wrong on the long-term argument about the necessity of fossil fuels.
Squabbling over whether the price of oil impacts inflation is a dangerous distraction that we can’t afford. The real issue is the fact that we let it impact us at all. That we let oil fuel our economy and subject ourselves to the whims of foreign dictators while we line their pockets. Transitioning from fossil fuels to renewable energy is both an economic and environmental necessity.
Opec has frequently restricted oil production to control its price (though the organisation denies this). Opec is a cartel that openly manipulates the market price with fear and speculation. The connection between this restriction of supply and inflation is simple. Opec’s restriction of supply drives increases in the price of oil and this increase has an impact on directly linked sectors such as transportation, shipping and agriculture. This in turn carries through to the wider economy.
The real problem is our addiction to fossil fuels. We know how to kick the habit. We have the solutions. We need to end our reliance on price-fixing cartels. We need to stop funding dictatorships and we need to invest in renewables.
The UK can and should be leading the way. We know we can reach net-zero emissions and become energy independent by harnessing our wind, sun, waves and even grass. It’s not complicated, we just need the government to get out of the way of the green transition. We need to end the effective ban on new onshore wind farms, transfer oil and gas subsidies to renewables, ban all new fossil fuel projects, exempt green energy from the climate levy, remove VAT on all green energy and energy efficiency equipment, as well as unfreezing road fuel duty and applying it to aviation fuel.
In line with Labour’s plans for Great British Energy, a nationalised clean energy company, we should have public ownership of our energy so we can have permanently low prices, energy security, green economic growth and money for our hospitals, schools and communities rather than dividends for dictators. This wouldn’t be nationalisation of current supply, but public ownership of the renewable energy and infrastructure that we need to build next. Great British Energy would be investing with clear returns, not spending without a plan. All while holding back the worst of the climate crisis.
Let’s not make the same mistake we made with the North Sea. We sold our natural resources to foreign governments that invested the profits in their economy and public services.
Opec’s statement shows we’re in a battle for a Green Britain and a green world. This is a battle between the old way of doing things and the new. Fossil fuel cartels, companies and the politicians that support them will continue to spread misinformation, but we can’t afford to let them fool us.
Their assertion that maintaining our reliance on fossil fuels will bring us economic growth, prosperity and stability is based on the same fantasy thinking as Trussonomics and Rishi Sunak’s “not zero” strategy.
The economic case for ending fossil fuels has now caught up with climate science and public support. By winning the battle for Green Britain we’ll create a blueprint for how the world can kick its fossil fuel addiction, reduce inflation and ensure energy security. There is another way.