Drilling at Britain’s biggest undeveloped oil field must urgently be approved to avert a looming energy crisis, the UK’s manufacturers’ lobby group has told Ed Miliband.
Make UK, which represents thousands of manufacturers from food producers to steelmakers, said the energy secretary must give the green light to production at Rosebank in the North Sea or risk surging energy costs pushing businesses to the brink.
Commencing operations at Jackdaw, an undeveloped gas field in British waters, should also be a priority, Make UK said.
Stephen Phipson, chief executive of Make UK, said: “Manufacturers are calling for the government to act quickly to progress with the Rosebank and Jackdaw developments to mitigate energy costs and energy security because of the conflict in the Middle East.
“Historically high industrial energy costs are already preventing growth in UK manufacturing.”
‘We must ensure the sector survives’
Oil prices have rocketed to over $100 a barrel since the outbreak of war in Iran, in part thanks to the effective closure of the Strait of Hormuz, a key passageway to the south of Iran through which as much of a fifth of the world’s oil supply usually passes.
Brent crude has since slipped back to around $90 a barrel but remains well above the roughly $70 it was trading at earlier in the year.
The crisis in the Middle East could plunge the UK into a recession in the worst case scenario where oil prices surge higher over the next two months, an analysis has shown.
Manufacturers in the UK already face some of the highest energy costs in the developed world. While many major companies will hedge their energy contracts, insulating them from short-term price spikes, a prolonged rise will eventually filter through to a sharp hike in their operating costs.
Make UK have argued that further price rises could cause many manufacturing businesses to become unviable, accelerating the speed of Britain’s industrial decline.
Phipson said: “The recent developments in the Middle East add huge pressures to the sector and risk accelerating de-industrialisation.
“Whilst manufacturers are leading the way in renewable energy we must ensure the sector survives in the medium term. Ensuring the UK has access to its own energy reserves is now vital.”
Miliband has so far resisted pressure to grant more drilling licences, arguing that more drilling won’t bring down prices because they are set globally. But critics have pointed out that local drilling would result in more tax revenue collected for the exchequer compared to importing oil, which could be used to fund more investment into energy infrastructure.
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