We are living through an energy crisis unlike anything since the oil shocks of 1973 and 1979. The average household energy bill is set to reach over £3,500 a year. Businesses are already going bankrupt as they face ruinous costs. And inflation, driven in part by high energy prices, is expected to hit 10 per cent with the threat of more drastic price increases in the new year.
In these circumstances, it is surprising that no leading politician has yet made the case for nationalisation of our energy sector – even though new polling shows half of Tory voters believe energy should be brought back into public ownership. Some have made the argument that nationalisation will bring down energy costs – this may not be the case. Regardless of who owns our energy assets, they will have to buy natural gas at wholesale prices dictated by market conditions. But we are now facing a volatile world. And to ensure our energy security, nationalisation may be the best option we have.
At the moment the proposed solutions to the energy crisis put forward by politicians – such as a cap on energy prices or universal or targeted payments to households – will protect some people from ruin, but they underestimate the scale of the challenge. For starters, fixing or subsidising the price of energy may make shortages worse if households don’t cut back on their energy use, which could even lead to blackouts.
But the market won’t solve the problem on its own either. In an ideal world, a period of sustained high energy prices would lead to a demand-side response as households cut their energy and heating use, begin to give up non-essential expenses, and homeowners and landlords install heat pumps, new windows and so on while some sort of targeted support scheme is introduced.