UK Gas Storage Fiasco Illustrates Folly of Assuming That Markets Can Substitute for Strategic Planning

Headline in the Guardian article covering this, Jan 12th says it all “Plans to Increase Britain’s gas storage capacity left in tatters by credit crunch” What did the economists at Ofgem expect? Only an economist would have any faith in the Market’s ability to replace central planning. Having bemoaned the fact that UK only has 4% storage or 14 days worth of annual consumption, compared to the stupid French’s 24% with their central planning and the technologically backwards German’s at 21%,, the article goes on to quote the people who want the storage EDF, Portland Gas, and Centrica who make the blindingly obvious statement (but not obvious evidently to the economists who designed the hopeless energy market in the UK)  “because we do not know the price of gas in 5 years time, the time it takes to build such a facility it is hard to raise the financing”.

Last week the industry wrote to the government saying it was uneconomic to construct storage at present gas prices.

A related point is that ever since the UK Continental inter connector was built by the same wonderful free market, UK has been exporting its gas cheaply during the summer months, (depleting our gas supplies as fast as possible) and then the French and Germans sell it back to us in the winter at hugely inflated prices.

Why was Ofgem chief executive Alistair Buchanan  awarded a CBE “for public service in the New Year honours list “for presiding over this sort of fiasco?

For a mechanical analogy of why it is stupid to assume that markets can replace central planning, at least in the realm energy supplies and power generation see;

http://tx1.fcomet.com/~claverto/cms/energy-research-forum/showthread.php?t=192

1 Comment

  1. Reply

    Well said? Great information, keep up the great work!

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