Bad for the UK, Good for the US

April 4, 2013
The UK’s energy woes will benefit the US as a provider of low-cost energy

The UK just suffered its coldest March in 50 years.  I was there with my family, and yes, it was cold!  It was mentioned in one of my meetings there that the UK has about 48 hours of stored gas and there are warnings that electric generating capacity is falling.  My research has shown that this is indeed true, and it is only because of an emergency delivery from Qatar, that they have 48 hours of gas.  Higher energy costs are expected.

Despite these problems, there is a reluctance to engage in high-pressure extraction of natural gas (fracking).  The reluctance seems to stem from environmentalists, special interest groups and an entrenched regulatory environment. 

The British concern over CO2 emissions and their hopes in green energy are not going to help them with looming shortages and higher costs.  The environmental movement does not like coal, which is in abundance in the UK. 

Instead, the nation has a large dependence on foreign gas, which puts them at a competitive disadvantage.  Meanwhile, India is planning to build over 400 new coal-fired power plants that will add more CO2 to the atmosphere every week than Britain emits in a year.  That is a cost advantage that India can use for years to come. 

The big winner in the natural gas issue is the United States.  British firms, and others, will look at the US as a stable source of low-cost energy, and they will come to our shores in increasing numbers.  This will create capital spending, job creation, and consumer spending – all good news for our economy.

The major unknown is whether the current or future administration will over regulate the industry and thus drive costs higher.  I will be discussing this in greater detail in the April edition of the ITR Advisor.

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