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A state of emergency

We should hopefully by now have reached a point where all stake holders in UK, European and Global energy are able to grasp the simple fact that we are now in the early stages of a full blown global energy crisis. The focus is currently on oil but this will soon turn to concerns over natural gas and coal supplies.

This crisis has been turned into a state of emergency by the indifference of political leaders in the UK (and throughout the world), fluttering in the wind of poorly informed public opinion while they have prevaricated about expanding renewable energy resources and building new nuclear power stations. All warnings of this pending energy crisis have been ignored in favor of pursuing popular policies that created the illusion of prosperity whilst the fundamentals of our nations security and well being have been draining away.

The future

The exchange last week between Mervyn King (Governor of the Bank of England) and Alistair Darling (Chancellor of the Exchequer) suggests that they plan to do nothing about this presuming that the upwards tick in energy and food prices (that began in 2002) will drop out of the annual inflation statistics a year from now. True rabbits caught in the headlights. They have created a perilous situation for the UK economy that they seem not to understand let alone know how to fix.

Here are a few pointers to what I think we can expect in the next 18 months:

• Forever rising energy import bills will pressure Sterling which will continue to fall, pushing up the cost of energy, food and consumer goods even more.

• Public sector workers, no longer able to borrow to supplement income will begin to strike once they discover that 3% wage increases do not come close to covering the rise in the cost of living (the great inflation lie will be found out).

• Unemployment will begin a steady rise as financial services, banks, building sector, airlines, airports, leisure and retail come under severe pressure. They will be joined by public service workers as the government struggles to fund public services with falling tax receipts, spiraling debt and a falling pound. (already happening in Aberdeen with deep cuts in education spending across the city and teacher numbers being slashed).

• I won't go into the spiraling and compounding nature of this on the property market since this is an article about energy.

• The elderly and poor will really struggle this winter to pay their energy and food bills. If the weather is cold, the grid might fail and the vulnerable will begin to die from cold and starvation.

Following that things will begin to get worse as the UK discovers that it is struggling to secure sufficient natural gas at any price, on the liberalised market they helped create. Society becomes more polarised into those who can still afford to drive an SUV, live in comfort and warmth and fill their bellies with prime Aberdeen Angus steak set against a new under class who struggle to feed and heat their families. Welcome to Britain in 2010.