Drill Baby Drill to Drive Growth and Improve Productivity
Oil and gas extraction is one of our highest productivity industries so it makes sense to restart drilling.
Introduction
The energy crisis driven by the closure of the Strait of Hormuz as a result of the war in Iran has caused much debate about whether we should be drilling in the North Sea to extract more oil and gas. Much of the debate has centred on whether more domestic supply will reduce energy bills and ignored the impact of the hydrocarbon industry on productivity and growth. Last week’s King’s Speech has indicated that Labour will enshrine in law a prohibition on new exploration licenses and a ban on fracking.
Labour’s pre-election promise to cut energy bills by £300 has been watered down to a vague notion of cutting bills from a higher base by £20-40 by 2040.
New laws to ban drilling and fracking amount to energy suicide in the face of an energy crisis because oil and gas extraction is one of the highest productivity. For a Government supposedly focused on growth, it would make much more sense to drill, baby, drill to drive the economy and solve the productivity problem.
The Importance of Energy to Growth
The UK has seen a decline in overall energy consumption and domestic electricity generation as shown in Figure 2, using data from OWID.
The impact of expensive, scarce energy has caused a drag on growth is demonstrated in Figure 3, again using data from OWID. The chart compares the change in per capita energy consumption to the change in GDP per capita over the period 2008 to 2024.
The UK has reduced energy consumption by 2.4% per annum. This is more than Canada, the EU27, Japan and the United States. As a result GDP per capita has virtually stagnated, growing at just 0.4% per annum, lower than the EU27 and all the other G7 countries except Canada. By contrast, world GDP per capita has been growing at close to 2% per year and energy use per person has increased by about 0.5% per annum. Asian countries like South Korea and China have increased energy use even faster and have accordingly grown much faster. The UK’s energy consumption per person is much lower than many other poorer countries such as Belarus, Bulgaria, Kazakhstan, Malaysia, Poland and Turkmenistan. The UK economy will at best stagnate if the current energy austerity policies are maintained.
Solving the Productivity Problem
It is often said that the UK has a productivity problem. However, these analyses often miss the vital role that energy plays in the so-called productivity puzzle. They instead blame low investment, lack of sharing productivity enhancing practices and a lack of joined-up policymaking.
However, analysis of sector and industry-level productivity data from the ONS shows that cheap and abundant energy is a vital ingredient to drive productivity and growth as shown in Figure 4.
The chart analyses the absolute level of productivity and the change in Gross Value Added from 2008, the date of the Climate Change Act to 2024. The x-axis shows the relative growth rate of different industry sectors over the period. The mid-point of 100% represents the whole economy growth rate over the period. The y-axis shows the relative productivity of each sector in 2024 on a log-scale, with the mid-point of 100% representing the whole economy.
The chart is divided into four quadrants. In the white quadrant we can see sectors like wholesale and retail, agriculture, forestry and fishing and transport and storage are all growing more slowly than the whole economy and have below average productivity measured by gross value-added per hour worked.
The yellow quadrant shows low energy sectors like accommodation and food service, health and social care, arts and entertainment are growing faster than the whole economy yet have lower than average productivity.
The green quadrant shows sectors like real estate and information and telecommunications growing faster than the whole economy with above average productivity.
Finally, the red quadrant shows sectors with above average productivity growing more slowly or shrinking in absolute terms compared to the whole economy. The manufacturing sector has grown at two thirds the rate of the whole economy, but the sector’s productivity is 122% of the whole economy. Included in this segment is mining and quarrying that contains oil and gas extraction where GVA has fallen in absolute terms by 7% over the period, yet productivity is 637% of the whole economy average. Energy production is a high-productivity sector in its own right, so it makes sense to grow it as fast as reasonably possible.
The red quadrant also includes energy intensive sectors like oil refining, chemicals and pharmaceuticals, which have much higher productivity, 384% and 292% of the average, respectively. Transport manufacturing, which includes making cars and buses is also a relatively high productivity sector at 141% of the whole economy average. All these sectors have grown more slowly than the whole economy.
Looking in more detail, hours worked are down 9% in mining and quarrying. High taxes on domestic oil and gas producers, coupled with the effective ban on new exploration drilling have led to estimates of 1,000 jobs per month being lost in the oil and gas industry in the North Sea. The economic impact of these job losses is far greater than the headline job losses because this sector creates more than six times the value added per hour worked than the rest of the economy.
There are also additional impacts further downstream in refining and petrochemicals, where hours worked are down 14%. Grangemouth oil refinery closed about a year ago, with the loss of 400 jobs. The oil refining sector produces about four times the GVA per hour worked than the whole economy so again, the economic impact of these job losses is amplified. Grangemouth produced fuels like petrol, diesel and kerosene that now must be imported. This is becoming a critical issue as shortages of fuel are emerging because of the closure of the Strait of Hormuz. Grangemouth also produced essential feedstock for the petrochemicals industry including ethylene, propylene and polymers polyethylene and polypropylene. The chemicals and pharmaceutical industries create about three times the value added per hour worked than the whole economy, but total hours worked is down 2%.
The loss of North Sea oil and gas production has a large economic impact on its own and even more impact further along the value chain, hollowing out industries producing vital building blocks that society depends upon.
Low-energy, low-productivity sectors have been growing faster than the economy as a whole and high-energy, high productivity sectors have been growing more slowly. It is hardly surprising there is a productivity problem. Moreover, these industries tend by their nature to be capital intensive. Expensive energy, high taxes and an onerous regulatory regime has led companies such as Ineos to abandon new investment in the UK. As these companies move abroad Britain also loses out on investment that would lead to further growth.
Conclusions
Energy is the foundation stone of modern economies. The UK has imposed a swathe of legislation that has increased the regulatory burden and made energy scarce and expensive. In addition, new exploration drilling in the North Sea is effectively banned which is leading to job losses in one of our highest productivity industries. There is also a moratorium on fracking that means the UK is missing out on another source of energy and the associated jobs. Jobs and investment are also being lost in vital downstream refining, chemicals and petrochemicals industries producing the vital building blocks of a modern economy.
It should be obvious to all but the most brainwashed zealot that instead of banning new drilling we should be restarting the UK oil and gas industry. More exploration and development will reverse energy austerity, deliver more highly productive well paid jobs, higher growth, improve energy security and begin to solve the dual productivity and investment problems. In other words, drill baby drill.
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Another excellent post David. Well done.
However, in your final analysis where you say 'It should be obvious to all but the most brainwashed zealot that instead of banning new drilling we should be restarting the UK oil and gas industry', whilst I entirely concur, I find myself even deeper in the doldrums regarding any sort of 'good' future for the UK now.
It is obvious to me that our various branches of government (whether at Westminster or devolved parliaments) are still overwhelmingly populated with brainwashed zealots, despite the recent round of elections that have just taken place.
It seems now that no matter who floats up to replace Starmer at the top of the clean, green swamp, nothing is going to change for the better, because there is a clear intention for everyone to 'double-down' and move harder and faster along the destructive route they have had mapped out for the UK for such a long time.
None of it makes any sense whatsoever.
It all makes me feel very sad.
Great post David, exposing the self-harming behaviour of Miliband et al. It fits nicely with my mini-essay comment offering a more political analysis which I hope you can indulge. I've been away on holiday all week but in between outings and occasional showers, I've found time to put together some thoughts on the scourge of the British deep state which works through the compliant politicians of the electorate-disenfranchising Uniparty (like Miliband and Starmer) to advance its own perceived geopolitical interests which almost all go against the interests of the general public.
I've been dismayed that the recent commentary from the MSM has been overwhelmingly about replacing Starmer rather than holding a general election which the local elections showed the country desperately needs. To my mind, electing a different Labour deep state puppet like the Fabian Society-supporting, EU-supporting, WEF-affiliate Andy Burnham will make not the slightest difference to the country's deliberately-engineered and rapidly-progressing slide into economic, industrial and social fabric collapse.
Why is it that so few can see what is really going on politically, or if they can see it, why do they hold back from speaking out about it publicly? Switched-on people like Kathryn Porter fret that Ed Miliband (WEF Young Global Leader 2008, WEF boss Klaus Schwab "We penetrate the cabinets") is a misguided ideologue who is wrecking our energy infrastructure and industrial base, even to the extent of pursuing a scorched-earth sabotaging of our North Sea oil and gas resources.
Kathryn wonders publicly on X if Miliband is a “Chinese asset” but most commentators fail to join the dots or draw the (to me) obvious conclusion that Miliband is a puppet to the demonstrably Malthusian, sado-masochistic, anti-growth British deep state, of which the unelected, unaccountable UN and WEF (and many such others) are affiliates. This deep state cabal has shown clearly that it doesn't care two hoots about any self-inflicted collateral damage resulting from its malign policies, just so long as they prevent any other countries pulling ahead in power and influence.
I believe that the British deep state is paradoxically the greatest threat to the wellbeing of the British people. It has been well exposed over recent months by the USA-focused Promethean Action website which is well worth following. It is a very amorphous organisation with many affiliate tentacles which previously included the USA under the Obama and Biden presidencies but, crucially, no longer does so under the Trump presidency. That is now its fatal weakness because without USA backing, it is a self-harming and geopolitically-impotent spent force. Unfortunately, it is very reluctant to accept this reality.
Joining the dots to the influence of the deep state is really very easy. Just ask the obvious question of how Uniparty-supported unilateral UK Net Zero (I don’t trust the lukewarm epiphany of the Tories) leading to inevitable energy penury and deindustrialisation could possibly serve any useful purpose when global CO2 emissions continue to rise year on year and the UK share is less than 1%.
Over the years, several leading lights of the UN IPCC have let the cat out of the bag by admitting that the climate change scare is nothing to do with climate but is really about paving the way for the imposition of authoritarian one-world governance. This has long been obvious to anyone (such as myself) able to undertake modest investigative research: https://metatron.substack.com/p/debunking-the-climate-change-hoax.
The Conservative Party imposed self-harming, deindustrialising Net Zero without any electoral mandate in 2019 (as well as signing Britain up to the UN’s Global Compact for Migration). Boris Johnson was a climate sceptic while Mayor of London but he changed his tune completely when he became prime minister ("follow the money") to ludicrously promote the UK as "the Saudi Arabia of wind power". He also launched the infamous "Boriswave" of mass immigration of cultural aliens.
The deep state showed its evil true colours in 2020 through its Covid plandemic of economically-ruinous lockdowns, vaccine mandates and "safe and effective" (not) jabs. Deep state-privy prime minister Boris Johnson knew this was all a charade but got himself caught out by disregarding the official Covid rules in the "cakegate" incident (which the corrupt MSM spins quite differently).
The deep state provoked the proxy war against Russia in Ukraine when it became obvious that its Covid plandemic had floundered. Hopes were raised early on that a peace agreement would be reached in Minsk but Boris Johnson was sent in on behalf of Nato to scupper the deal. Here we are four years and hundreds of thousands of deaths later, with President Trump trying his utmost to end this pointless war while the UK and Europeans are intent on continuing it - to what bitter end?
The USA conflict against Iran has been pointedly opposed by the British deep state and its affiliates. The conflict is ostensibly to destroy the Iranian nuclear weapon programme but also (unspokenly) to neuter the influence of the British deep state in the Middle East and beyond.
Few seem to realise (or admit publicly) that President Trump is tossing the deep state's globalisation agenda into the waste bin of history. He is attempting to restructure global politics to a more benign model of cooperation between sovereign nations, away from the malign British deep state model of subterfuge and the zero sum "Great Game" of stoking conflicts and forever wars between rival countries so that they hold each other back, as exposed by Promethean Action here: https://www.prometheanaction.com/promethean-overviews-trump-brings-hard-truth-to-china-the-old-world-order-is-over/.
Isn't it odd that the King's Speech of a few days ago made no mention of the UN's dystopian Agenda 2030. This agenda is fundamental to so many of the unmandated globalist policies (the 17 so-called "Sustainable Development Goals"), especially Net Zero and the uncontrolled mass immigration of cultural aliens, yet is so electorally toxic that they don't dare even mention it by name!
It is surely obvious that the British deep state and its supporting cast of "has-beens" in the EU and Commonwealth countries which have self-harmed themselves to economic, energy and geopolitical irrelevance through their madcap policy decisions of recent decades are intent on trying to impose this Agenda 2030 tyranny on us in just a few short years from now. Promethean Action exposes the desperate machinations of these has-been losers here: https://www.prometheanaction.com/the-midweek-update-carneys-new-war-on-trump-soross-icc-architect-takes-canada-may-6-2026/.
These headbangers are stuck on a suicidal Net Zero/Agenda 2030 treadmill they are unable or unwilling to get off, hoist on the petard of their years of lying to the public on almost every important policy issue. Somehow they need to be stopped. They are being helpfully sidelined by their nemesis President Trump who has repeatedly shown his concern for the people of Europe and the UK (but not our deep state-compliant politicians) by warning that they need to free themselves from their national Net Zero and mass immigration policies if they want to avoid "civilisational suicide".
Alex Krainer discusses the unbelievably dystopian “Absolute Zero” policy paper here: https://alexkrainer.substack.com/p/racing-toward-absolute-zero?utm_source=share&utm_medium=android&r=8t7a0.
Lara Logan discusses the dystopian Agenda 2030 here: https://x.com/i/status/2054387671359742108.
At the next general election we, the electorate, need to be in the position to oblige the titular head of the British deep state to proclaim in public instead of the usual platitudes, "My government will scrap Net Zero, Agenda 2030 and all their ramifications".