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The UK Energy and Climate Change Committee released a report on Friday that warned MP’s not to expect a dramatic fall in domestic gas prices similar to the US, whose shale gas boom saw prices plummet, just because fracking is starting to occur in the UK. “Differences in geology, public attitudes, regulations and technological uncertainties” make it unlikely that the UK will experience its own boom.
This could prove quite a blow to the Chancellor George Osborne, who has been an avid supporter of the UK shale gas industry, offering encouragement through tax breaks, and claiming that shale gas will provide a cheap, secure way of meeting the country’s energy needs in the future.
Tim Yeo, the committee chairman, stated that “it is still too soon to call whether shale gas will provide the silver bullet needed to solve our energy problems. Ministers should be careful, though, not to base energy policy on an assumption that gas prices will fall in future as a result of shale gas production. Rising global demand for gas, particularly from Asia, could limit any potential price reductions.”
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In order to accurately determine the shale estimates in the UK, and therefore have a better idea of the potential of the industry, the report urges the government to encourage exploratory drilling, but warns against basing any long term policy decision on the assumption that reserves will be large, and accessible.
Green campaign groups are angry at the support shown to the growing shale gas industry in the UK, claiming that it will make it impossible for the UK to achieve its carbon targets, and could even attract funding that might otherwise go to alternative energies.
By. Joao Peixe of Oilprice.com
Joao is a writer for Oilprice.com