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Home / In Brief / In Brief: Cambo crunch, Blue wall blues, Economic headwinds, And then all the chairs were facing backward

In Brief: Cambo crunch, Blue wall blues, Economic headwinds, And then all the chairs were facing backward

Cambo crunch

Shell’s decision to pull out of the project to drill the Cambo oil field has ramifications that the establishment media refuses even to acknowledge.  The fact that Big Oil was even prepared to consider opening up Cambo is a measure of how desperate things have become.  The field – which the industry and the media mendaciously refer to as in the North Sea – is below the Northeast Atlantic, directly in the path of the Gulf Stream, and regularly pounded by gale force winds and forty-foot waves.  More to the point, the field is a tiddler by North Sea standards – containing just 170 million barrels of oil equivalent and 53.5 billion cubic feet of gas.  Oil deposits – beneath a seabed more than 1,000 metres below the surface – are in small, unconnected deposits within tortured geological formations.

With oil prices doubling and gas prices rising four-fold in 2021, and with economists predicting $100 per barrel in 2022, the field – which will probably never be drilled – may have briefly appeared viable.  But Shell – like Chevron before them – will want stable oil prices well above the $86 peak reached in October before committing to such a high-risk endeavour.

While “green” groups have welcomed Shell’s decision, with Friends of the Earth Scotland ludicrously claiming it as a victory for “people power,” the reality is that we are now reaching the economic limits of oil extraction.  Put simply, it will cost more money – which is a financial proxy for energy return on energy invested – to get the oil out of the Cambo field than the oil is worth – particularly if the cost of decommissioning is factored in.

There is roughly as much oil – including the source rock – beneath the Earth than humans have extracted during the industrial revolution.  But almost all of what is left is beyond geological and technological reach.  This said, there are still enough supposedly proven reserves to allow us to raise the global temperature by another couple of degrees before we’re done.  The trouble is that these calculations – included in the IPCC’s worst-case scenarios for climate change – ignore the economic – energy – limits on oil extraction.  Much of the oil that is being treated as recoverable is locked up in small and difficult fields like Cambo, which are simply too expensive and too risky to ever be recovered.  This, in turn, means that the entire world economy now depends upon bigger, cheaper, older and depleting oil deposits.  This, in turn, tells us that we will indeed, be transitioning to a “net zero” economy… just not in the way the World Economic Forum and the bright green crowd imagined.

Blue wall blues

Nobody expected Labour to win yesterday’s Old Bexley and Sidcup by-election.  But the collapse in the Tory majority – from 19,000 at the general election to just 4,478 – appears to confirm Labour’s “blue wall” strategy.  This is the view that as the electoral geography of England has shifted in recent years, as shown by the Tory capture of ex-industrial seats in the north, Labour’s best route back to power is by appealing to disgruntled Tory voters in the south.

There are three flaws in Labour’s strategy.  The first, and most obvious, is that there are too few Tory marginals in the south to make up for the loss of red wall seats in the north.  The second flaw is that Labour needs to win back at least some of the red wall seats lost in 2019 – something that will be much harder if their election campaign is targeted at middle-class voters in the south.  These are easy enough to understand, even though there is no evidence that either is going to happen.  The third flaw is more subtle – that Labour must convince enough of the supporters of minor parties like the LibDems and Greens, to tactically switch their votes in Tory seats where Labour is in second place.  The quid pro quo – which Labour has historically been loath to agree – is that Labour supporters must reciprocate by voting for the minor parties in Tory seats where they are in second place.

We are now at the mid-point in the current parliament – so long as the economy doesn’t tank, Johnson – having overturned the Fixed-Term Parliament Act – will likely call an election in May 2023.  This means that most of 2022 will be taken up with informal campaigning and setting out ideas for the next manifestos – ideas of which Keir Starmer’s Labour Party are notably bereft.  And mid-term is usually the point at which the government is least popular and the opposition is best place to get its ideas across.  “We’re not them,” is simply not going to cut it… not least when it turns out that we are just like them.

To win the next election outright would require that Labour would be at least 10 points ahead of the Tories uniformly across England and Wales – since Labour cannot hope to displace the SNP hegemony in Scotland.  Given that even during the recent sleaze revelations, the Tory poll lead mostly held up, most likely the best Labour can hope for is to be the largest party in a hung parliament.  And even this may be wildly optimistic.  According to the analysts at Britain Elects, the Old Bexley and Sidcup result is in line with modelling which would leave the Tories as the largest party in a hung parliament.  That’s before the inevitable pre-election giveaway budget next November, and an orchestrated media barrage of propaganda against “Labour’s coalition of chaos.”

Economic headwinds

Current government optimism over the economy is misplaced.  The reason many of the headline figures look good is because they are year-on-year comparisons with November 2020, when the economy was on life-support, Covid cases, hospitalisations and deaths were at their highest, and the economy was just entering its second lockdown.  Barring the immediate collapse of western civilisation, some bounce-back was inevitable.  Even so, nobody seriously believes the Chancellor’s claim that we can expect growth rates last seen in the 1960s.  Indeed, the big increase in energy and fuel prices suggests an economic future more akin to the stagflation of the 1970s.

Presiding over another economic crisis is, of course, the one thing which could topple Britain’s Tory government.  It was the failure to tackle inflation in the 1970s which put paid to the governments of Jim Callaghan.  John Major’s government never recovered from Black Wednesday in 1992, and Gordon Brown was a dead man walking in the aftermath of the 2008 crash.  Electorates will tolerate much, and generally prefer the devil they know.  But hit them in their pockets and they turn on you.

Energy price rises are now baked in.  Businesses are being hit already.  However, the energy price cap means that households won’t feel the full effect until April 2022.  Fuel prices have also remained high despite the oil price falling by £16 from its October peak. Although the recent wholesale price drop may only be temporary, as it seems to be in response to an anticipated Covid lockdown which may not happen if the latest variant continues to be as mild as first reports suggest. 

Food prices are also rising, and housing costs show no sign of slowing.  Meanwhile, jobs in travel and hospitality are once again threatened as a coronaphobic population once again avoids crowded spaces.  High Street retail may also take another stride toward oblivion if the latest variant causes enough people to do their Christmas shopping online and, indeed, if rising prices translate into fewer purchases.

All in all then, the economy is in a far worse state than the headline figures suggest.  Seven months from now, when year-on-year figures will be comparing the flood of post-vaccine optimism of July 2021 with an increasingly stagflationary July 2022, things may look considerably worse.  And by then a raft of new national and local taxes will have been added to our economic woes. 

While we can easily imagine Tory strategists planning a giveaway budget in November 2022, followed by an early election in May – or possibly March – 2023, a series of economic shocks in the first half of 2022 – which might include the Bank of England raising interest rates and triggering a wave of business failures – could well put Johnson in a similar position to Brown and Major before him.  In which case, the current government is likely to limp on until December 2024, even as the economy crashes down around its ears.

The bigger political question is whether a Labour Party which is seeking to resurrect the neoliberalism of its late 1990s heyday, will be capable of constructing an economic narrative in which Labour appear as our economic saviours.  Without a serious re-examination of its economic assumptions, this is doubtful.  Throughout the pandemic, Labour policy has been to agree with everything the government has done while claiming that they should have done more of it, and they should have done it faster and better.  Contrast that with their canonised former leader in the mid-1990s, who had already set out his mythical “third way” alternative to “18 years of Tory misrule.”  As the Major government melted down, Blair’s opposition were widely seen as a government in waiting.  Today’s Labour opposition is barely seen at all.

A deckchair moment

I’m not sure that anyone ever did try to rearrange the deckchairs on the Titanic.  Rather, like the former members of Keir Starmer’s previous shadow cabinet, they simply drifted off into the cold dark void without anyone noticing their passing.  This might, perhaps, be good news insofar as Starmer’s latest attempt at deckchair arranging at least means that Labour’s sinking ship will go down with some recognisable faces on board.

Love them or hate them, at least Yvette Cooper and David Lammy are recognisable to people who don’t obsess about party politics.  There is though, more to the reshuffle than recognisable faces.  The demotion of Lisa Nandy and the marginalisation of Deputy Leader, Angela Rayner points to the Blairite’s final victory over the Corbyn wing of the Party.  Unfortunately, this will do nothing to improve Labour’s electoral fortunes – which even after a month of Tory sleaze and cock-ups have struggled to break even – since those elements of neoliberalism embraced by Starmer’s wing of the party – free markets, private-public partnerships, less eligibility for welfare and social care, etc.. – are far less popular than the interventionist, non-neoliberal economic policies developed by John McDonnell under Corbyn’s leadership.

Indeed, on paper at least, the Tory approach – intervention on economic matters but conservative on social issues – is what delivered the 80-seat majority two years ago and continues to bolster Tory fortunes today.  Whether the Tories will actually deliver either social conservatism or levelling up is a moot point.  And their seeming inability to avoid scandals may yet deprive them of their majority next time around.  But none of this aids a Labour party which is both objectively and politically a party of precisely the white, metropolitan, middle-class neoliberalism that the electorate has rejected in large numbers across the whole of the UK since the post-2008 depression began.

What Labour Party insiders fail to consider while bitterly fighting each other, is the likelihood that neither wing of the Party has a winning electoral formula anymore.  Indeed, the dramatic change in Britain’s class structure since the 1970s – which is largely responsible for Labour’s loss of the “red wall” seats in 2019 – turns both the social neoliberalism of the Corbyn wing and the economic neoliberalism of the Blairites into electoral millstones.

In the same way the Labour Party of the early 1980s piled up votes in heavily industrial working-class seats while losing badly, the defeated 2019 Labour Party piled up unnecessary votes in metropolitan middle-class constituencies; and for much the same reason – these are the seats where their respective memberships were.  And no doubt Starmer’s re-neoliberalised Labour Party will score some big wins in a few of the Tories’ so-called “blue wall” seats in the London commuter belt next time around.  But there are not enough of these seats to provide Labour with a majority or even to allow them to emerge as the largest party.

As you made it to the end…

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