Oil dependency and market failure

Chancellor Alastair Darling offered us these brave words

““If we we don’t reduce our dependence on oil ... we will continue to expose ourselves to the uncertainty of the oil market…..It is important that we reduce our dependency far more quickly than perhaps people thought was necessary.”

It is a shame that the government has wasted over eleven years in producing a credible and coherent energy policy. I was chatting to a guy on the train down to London this morning. He had over twenty-five years experience in the energy industry, much of the latter part of his career was within the nuclear sector working as a senior engineer. He made a rather pertinent point that, once we realise that moving decisively to nuclear is inevitable, we will run into major shortages of the skilled personnel needed to construct the new nuclear power stations. Most of those required have long since retired from the industry and we will be dependent on nuclear engineers from the USA and far east Asia.

Anatole Kaletsky was on good form in the Times today writing about three market failures in the oil industry

1/ The huge gap between the marginal cost of producing oil and the marginal cost of supplying oil substitutes 2/ Monopoly power in the oil business - controlling the supply of oil - “there is nothing efficient about the level of prices set by the market” 3/ The ramping up of oil prices by institutional investors and the incentives to invest in oil exploration rather than much needed investment in non-oil new technologies

The rest of Anatole’s article can be found here