Consciousness of Sheep
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As the British political class packs up for the long summer recess, the “three e’s” crises (economy, energy and environment) seem to have stabilised. GDP rose in the last quarter (although within the margin of error) while official unemployment rose only slightly. Inflation remained at three percent. So that, even though the growth fairy has again failed to put in an appearance, at the top there is little sense of crisis or panic. Indeed, the arrival of our seventh prime minister in a decade has generated a mood of optimism.
Adding to what might, alternatively, be called a mood of complacency has been the biggest fall in fuel prices in quarter of a century. While diesel prices seemed to be headed for £2.00 per litre back in April, they have fallen back closer to their January 2026 levels today. And while the April headlines were about widespread flight disruption and people having their holidays cancelled at short notice for lack of jet fuel, the only concern in July is whether we’d be better off holidaying at home during the biggest heatwave since records began. Even the green lobby could cheer the record volume of electricity being generated by UK solar panels during weeks of uninterrupted sunshine either side of the solstice.
So long as one limits one’s thinking to the immediate here and now (as the political class is wont to do these days) all looks well in the best of all possible worlds. For those of us inclined to peer at the trends shaping our short-term future though, we are currently living through what looks a lot like the calm before a very big series of storms. The most obvious of these is the insanely low price of diesel fuel at the pumps, which is due to a two-to-three-week time lag before prices catch up to global supply. Thus, prices at the pump today reflect global optimism in June. In large part this was the result of states around the world running down refinery and strategic reserves in the hope that global production would bounce back before the slurping sound of tanks running dry reverberates around the planet. In part it was a brief respite brought about by the ill-fated and now defunct memorandum of understanding between the USA and Iran which appeared to promise the reopening of the Strait of Hormuz. Also – somewhat surprisingly – China had dramatically lowered its oil imports, taking pressure off world demand.
Nevertheless, the European political class’s decision to target Russian refining capacity has provoked a diesel export ban which has added to the global shortage of diesel fuel from the Persian Gulf. The world is now running a deficit of more than a million barrels of diesel a day with no obvious respite in sight, so that near-term price rises are inevitable.
Nor is this solely about domestic pump prices. Affluent European states have (until now) been able to secure higher priced oil products at the expense of less wealthy states… states, that is, that are relied upon to provide cheap produce to those same European states. In April, I wrote about the UK’s reliance on Kenyan farmers to provide a large part of the tea we consume. The (not really) good news is that the price of Kenyan tea has been falling in recent weeks. At face value, this is due to buyers refusing to pay the tea levy imposed by the Kenyan government in the face of widespread civil unrest (itself partly fuelled by oil shortages). But the more worrying cause is that warehouses in Mombasa are full of tea and other perishable foods normally bound for the UK/European market. This is because the price of shipping those goods has risen dramatically as a result of Trump’s conflict in the Middle East. Insurers have effectively blocked the usual route through the Red Sea and Suez Canal, forcing ships to take the longer and more expensive route around the Cape of Good Hope. And for many perishable foods, the 45-day voyage is simply too long and so, air freight at 40 times the price ($0.10 versus $4.00 per kg) is the only option. As with fuel supplies, operators within the supply chain have been absorbing the additional prices in the hope of a resolution. But with the US-Iran war heating up and with the conflict with Russia escalating, it is only a matter of time before those costs have to be passed on to consumers… consumers, that is, who lack the money to pay.
For a UK economy which has bet the house on non-renewable renewable energy-harvesting technologies (NRREHTs) imported from China, these looming external crises are likely to be compounded by a big electricity crunch at home later in the year. Because, while much was made of the few days last month when all of the UK’s electricity came from NRREHTs and nuclear, far less has been said about events on 23 June, when the system operator NESO seriously underestimated demand and allegedly put public relations management ahead of the safe running of the grid. The fact that – unlike August 2019 – generators continued to operate does not remove the growing risk of a system failure.
With European gas storage at half that required to prepare for winter demand (and with the very real risk of Russia banning LNG exports following the diesel ban) the UK may be unable to provide the gas backup to meet the regular ‘dunkelflaute’ events caused by cold, high pressure air settling over the British Isles in winter… the absence of wind and sunlight making widespread blackouts inevitable even as parts of the UK may struggle through lack of ‘black start’ capacity.
This, of course, feeds into the broader environmental crisis because the UK’s political class claims that its energy policy is setting an example for the rest of the world. The rest of the world though, is uninterested. And thus far there has been no replacement of fossil fuels with NRREHTs on a global scale. Instead, NRREHTs are being added to the global energy mix as everyone outside the European political class seeks to produce more energy as a prerequisite to improving living standards. Meanwhile, the UK enjoys the highest industrial electricity prices, fuelling its deindustrialisation and turning into more of a cautionary tale to be avoided rather than an example to follow.
Crucially, nothing has been done to address the changing climate. Indeed, the antics of the political class jetting to conferences and chopping down rainforests while telling the little people to shiver in the dark has done a great deal to promote the belief that the whole climate thing is a scam. The reality is that it was never in the gift of government to reverse the impact of three centuries of industrialisation and that, instead of throwing all of the remaining resources at NRREHTs at least some investment in mitigation would have been sensible – not least because there is no evidence that the wider world was ever going to do more than provide warm words. So that, at this point it would be good if the climate scientists and activists could shut the f**k up and let the physicists and engineers tell us what options are really available to us.
When I wrote The Consciousness of Sheep I argued that humanity would eventually be overtaken by the three crises – economic, energetic and environmental – but that these, although interrelated, would unfold on different timescales. At the time, we were already well into an economic crisis which was most obviously marked by the 2008 crash and the sovereign debt crises which followed. Crucially, this marked a break with the post-World War Two trend in which the economy rapidly bounced back from a downturn. The proximate cause was a change in the money system, with international banks less prepared to extend dollar-denominated loans, thereby starving the global economy of dollars. The underlying reason for this though, was a shift in the energy cost of energy as the world moved from the cheap and easy conventional oil of the Middle East, Continental USA and Caucasus to increasingly expensive and difficult offshore deposits, bitumen sands and hydraulically fractured shale deposits. As more expensive energy feeds into lower profits, banks stop lending, money dries up and all but a few tech godzillionaires at the top get poorer.
It is this global energy situation which has driven the US state to embark on its proxy war on Russia and its ill-considered hot war with Iran – both being attempts to control what remains of planet earth’s viable oil reserves (the desire to occupy Greenland also being to provide a means to control any recoverable oil in the Arctic and to interdict any Russian oil tankers sailing around the arctic coast to China). But far from improving the situation, the fallout from America’s wars has accelerated the energy crisis in a manner that threatens to seriously undermine global supply chains and thus the global economy as a whole.
Europe in general and the UK in particular is poorly placed to withstand even the mildest of the shocks that are coming. Having voluntarily deindustrialised, having made ourselves dependent on imported energy, and only able to produce around half of the food we need, even something as relatively trivial as a run on the pound would result in a national breakdown. But with crucial energy shortages looming and with the out of season food we have come to rely on rotting in African warehouses, the depression which followed the First World War is going to look like a golden age of prosperity.
But at least our new government can make the most of the unprecedented summer temperatures before the proverbial hits the fan.
As you made it to the end…
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