Making sense of this crazy world
Well, Gary has picked an eventful week to be away at the Masters!
The ceasefire was fantastic news on a human level and then in terms of prospects for the global economy too. Markets reacted very positively, especially in Asia which is most reliant on oil supplies from the Gulf region.
The end of the week saw cracks emerge though, and, as a result, some of the relief gains were given back, and oil is now within touching distance of $100 a barrel again. What markets always want most is certainty and stability. Clearly, a two-week deal does not offer that, but it is a start. Even though the oil price is lower than at the start of the week, it remains well above its pre-war level, reflecting ongoing uncertainty. We will comment on what may happen next in economic terms in more detail below, though this is no more than a range of possible scenarios.
Energy independence and security have once again been brought into the sunlight, with talk of North Sea assets being expanded. In future, it could be that reliable access to energy is at least as important as the lowest price. The Government appears set on its current course, though we have seen U-turns before!
We will look at the energy independence argument for renewable energy in a little more depth this week too. It is interesting to note that electric vehicles had their best-ever month in March, with the best-selling car in the UK being an EV made in China.
This week’s content:
- Should the UK continue to follow a green energy policy?
- Insecurity by design and by price
- Challenging the wrong narrative
- Why batteries are now a security infrastructure
- Redefining reliability
- A new tax year has dawned
- Where next for markets?
- Conclusion
Should the UK continue to follow a green energy policy?
We are certainly not going to get into the arguments of the ongoing energy transition. There has been a great deal of discussion about the merits of opening more of the North Sea with new licences, though as of now, the Government appears to be sticking to its plans to prioritise green energy.
It is really hard to find balanced and unbiased comment as both sides of the argument sometimes appear entrenched and certain. Many clients we speak to feel that an ongoing combination of the two approaches, at least for now, makes the most sense. With energy supply and price shocks coming quite regularly now, and no realistic prospect of this changing, it is clear that energy security and resilience need to be a top priority. The following are edited, for brevity, comments from the CEO of Gore Street Capital, a leading green energy and private equity company, making part of the Government’s current argument. He wrote:
“Current oil prices are a reminder that energy security, long treated as a background assumption in advanced economies, remains structurally fragile. Global fuel markets are still shaped by geopolitics, physical chokepoints and concentrated supply – risks that sit far outside of the control of domestic policymakers. Recent events underline a second, equally important reality: security of supply and affordability are inseparable from the structure of the energy system itself.”
Insecurity by design and by price
This shock is being driven by physical disruption: constrained shipping routes, damaged infrastructure and heightened geopolitical risk. When prices rise for these reasons, the effects propagate quickly: higher inflation, volatile power prices, pressure on industrial competitiveness and emergency fiscal intervention.
Governments can release strategic reserves or subsidise bills, but these measures treat the symptoms rather than the cause. An energy system dependent on imported fuels, long supply chains and a small number of transit routes is inherently insecure. It is also increasingly expensive.
Fossil fuels are no longer just carbon‑intensive. They have become a persistent source of macroeconomic risk. In the UK and across Europe, electricity prices still rise and fall with global gas markets, even as renewable generation expands. The volatility belongs to the fuel, not to electrification.
Continues…
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