New UK Prime Minister Sunak Faces Major Challenge With Energy Crisis

• Rishi Sunak will be the next prime minister of the UK after Penny Mordaunt and Boris Johnson dropped out of the race.
• Sunak faces a set of unique challenges including a cost-of-living crisis and an energy crisis.
• Sunak, when he was Boris Johnson’s Chancellor of the Exchequer, announced in May a new temporary 25% Energy Profits Levy for oil and gas companies.

Rishi Sunak will be the next prime minister of the UK after former PM Boris Johnson backed out of the race late on Sunday and Penny Mordaunt dropped out of the leadership race to replace Liz Truss on Monday.

Sunak, a former Chancellor of the Exchequer, said on Sunday, “I want to fix our economy, unite our Party and deliver for our country,” as the UK faces an economic and market turmoil, as well as a cost-of-living crisis propelled by soaring energy and food prices.   

Sunak is now winning the leadership race of the Conservative party after Johnson and Mordaunt dropped and is set to replace outgoing PM Truss, who became the shortest-serving PM in British history when she resigned last week. 

Truss had proposed a budget that wreaked havoc in the financial markets and was ill-received by her own party.

Last month, Truss’s government lifted the fracking ban in England, and paved the way for more than 100 new oil and gas licenses in the UK North Sea as the UK focused on its energy security.

In early October, the North Sea Transition Authority (NSTA) – the UK’s oil and gas regulator – launched the 33^rd offshore licensing round, inviting applications for licenses to explore and potentially develop 898 blocks and part-blocks in the North Sea, which may lead to over 100 licenses being awarded.

Sunak, when he was Boris Johnson’s Chancellor of the Exchequer, announced in May a new temporary 25% Energy Profits Levy for oil and gas companies, reflecting their extraordinary profits as oil and gas prices surged.

Sunak becoming the next PM—a third PM for the UK in less than three months after Johnson and Truss—calmed somewhat the equity and bond markets in the UK while the pound initially gained against the U.S. dollar as investors largely see a Sunak government more cautious with spending.  

By Charles Kennedy for Oilprice.com

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