Energy is everything
It’s been a rough couple of days for the US stock market - MAG7 (a combination of the top 7 tech companies) sold off almost $1.7 trillion in stock over the past week. The NASDAQ’s down too, by almost 13% - this is the result of tariffs, something Adam Smith was warning about all the way back in the 1770s. I’ve written about this before, hopefully Pennsylvania Avenue listens. But that’s besides the point.
A stock market an economy does not make. The overall view of the American economy is promising. What America can particularly boast about , unlike its European peers (if I may deign to call them as much), is its domestic sources of energy. Our friend Robert Bryce has highlighted that the United States will DOUBLE, yes reader, double, its liquid natural gas production by 2028. This is astounding to the European mind, who have seen a significant upturn in prices since 2021 as we have no domestic production to rely upon.We can only the price of kilowatt hour of electricity to be 15p - after all in the UK it is almost double at 27p. Take our megawatts per hour (as below), which is the worst in the EU pack. Supply and demand really does exist.
The American economy, despite the tariffs, is still in better shape than ours. Their GDP per capita is higher (as shown below), their productivity sits at 15 points ahead of ours in Purchasing Power Parity terms, and their companies provide more consumer surplus, with spending:consumer ratios being 2.57 to 1.94 for the US and UK, respectively. Unless some catastrophe occurs the US economy has a better baseline to grow than ours. Indeed - they have gladly received magnitudes more foreign direct investment than the UK has, ours have fallen considerably over the last few years.
This all comes down to the availability of cheap energy.
For British businesses, this difference is a killer. The ASI’s recent Business Confidence Survey highlighted that 64% of firms are concerned about energy prices. The UK can no longer forge virgin steel, despite inventing the process almost 300 years ago - all because of government mandates and high taxes on industry. Our shipyards are owned by foreign governments, and our leading heavy manufacturer is owned by the state.
High energy prices are bad for the public too. Brits are colder as heating becomes dearer, with consumers expending more (heavily taxed) income on bills than on consumer goods or in savings / investment which go on to grow the economy. Our politicians are hamstrung by political debates over fuel poverty rather than over questions of flourishing and innovation. Our consumers are poorer - and all because of restrictions on building out energy. Whether that is fracking and oil & gas (in the immediate term) or SMRs and larger-base load projects (in the longer term), energy is what drives growth and flourishing in an economy.
British energy prices are set by the highest cost - that being gas - instead of what is the cheapest unit. That would be renewables (given the size of the subsidies, this is no surprise) instead of nuclear’s artificially high capital costs and hydrocarbons, given our war against them. If we want cheaper energy, we must bring the cost of gas down by producing more of it, unless we seek a total system change to how we price energy and thus wreck capitalisation plans across the energy sector.
Cheap energy is an imperative. It is vital that the UK move towards abundant, then superabundant energy - pursuing the path to parsimonious attack on hydrocarbons will only lead to penury.
Maxwell Marlow
