How naughty we are to disagree with Lord Deben

To be as polite as we possibly can be about this, it’s nonsense:

“The problem at the moment is that people just see this as an unending situation of increasing bills, and then you get some people who are foolish enough to say that because gas is so expensive, we ought to have more gas. As if the gas we produce ourselves is going to be any different from the world price of gas. It doesn’t change any of the arguments about fracking, or anything else, actually.”

It’s nonsense because it’s irrelevant.

That there is no world price of gas is one thing. That US price is considerably different from the German, for example. For gas costs money to transport therefore the price is - as Ricardo pointed out more than two centuries ago - equal across geography only after taking transport costs into account. Plus there’s an entire absence of the ability to transport enough gas to equalise the varied local prices across the globe. Which is why gas prices differ by geography by more than merely transport costs.

But leave all of that aside. What actually matters is that the British government would like to have more money. The British public would also like the government to have more money as long as it doesn’t come from their wallets. Producing gas domestically is exactly the way to square that circle.

Gas in Britain belongs to the Crown. Therefore domestic production leads to lovely resource rent payments to the Treasury. As we also derive from Ricardo resource rents should be taxed until the pips squeak.

The gas Britain currently imports produces such resource rent taxation to the Treasuries of Holland, Norway, possibly Russia and so on. If we produce domestically then those payments accrue to the Treasury on Horse Guards Road and then get spent on us. Or reduce the amount of some other tax that we have to pay to get whatever it is that we already do get. Britons, us, get richer through domestic production of natural gas.

And that’s why these insistences that fracking won’t change the price of gas are so much nonsense. Because it’s not even the point. What’s really relevant isn’t the amount of money but who gets that cash? If it ends up being us then we’re richer, right?

Even, to the extent that a lower tax bill for a given amount of government is a substitute for a lower heating bill, the domestic production of natural gas reduces the price of natural gas in Britain.