Keir Starmer's populist, Blue Labour has announced another insane, reactionary policy in order to respond to public opinion, in search of cheap votes. As energy prices soar in Britain, and across Europe, due to NATO imperialism's attempts to block and boycott Russian oil and gas exports, Starmer wants to prevent energy distribution companies from covering their much higher costs by higher prices! The result will inevitably be that even more of those energy suppliers will go bust than already have, and an even bigger crisis of energy supply to consumers and businesses.
The media, of course, does not make the distinction between energy producers, such as Gazprom in Russia, or BP, or Centrica, who produce oil and gas from around the world, and only some of it, a very small part of it, in Britain, as against the energy distributors, such as Octopus (formerly Co-op Energy) who simply buy gas and electricity from such suppliers, and then distribute it to consumers and businesses across Britain. It is the former that have benefited from the soaring prices of oil and gas, as NATO has sought to block Russian oil and gas exports, and EU countries have sought to voluntarily cut off their own purchases, by, for example, pulling out of Nordstream 2, and refusing to pay for their imports from Russia in Roubles. The energy suppliers, by contrast have to pay the much higher prices for gas and electricity that the producers are now charging.
Energy suppliers are now facing much, much higher costs themselves, and those costs continue to rise. Last year, we saw, as energy prices originally began to rise, a plethora of small firms, much beloved by the petty-bourgeois, went bust. Those small firms were fly-by-night chancers that had been encouraged to enter the market in the name of free market competition. They undercut the existing larger suppliers, who secured their supplies on longer term contracts in futures markets, by gambling on low spot prices continuing forever. But, in 2021, those low prices came to an end, as global inflation took hold. It was due to excess liquidity in circulation, caused by central banks printing money tokens to finance lockdowns.
It was those lower spot prices that had come about as a result of global energy surplus pushing down global energy prices, that enabled them to undercut the existing larger suppliers whose higher prices to customers were a result of having secured longer-term supplies, but at a slightly higher price. When spot prices rose sharply in 2021 - long before any invasion of Ukraine, or talk of Russia cutting off energy supplies and so on - the fly-by-nighters found that their input costs were now higher than those of the companies that had secured longer-term supplies in the futures market. Normally, they would have taken the hit to their competitiveness, by then raising their own prices. But, the energy price cap prevented that. They could not cover their higher costs, started make large losses, and went bust.
But, it didn't end there. Having gone bust, their customers needed new suppliers. The existing larger suppliers had secured their longer-term supplies on the basis of their existing customer base, knowing, thereby, how much energy they would require over the immediate years ahead. Taking on large numbers of new customers from the failed energy suppliers would seriously disrupt that calculation, meaning they would themselves have to buy additional energy in the spot market at much higher prices, which they could not recover in their own prices due to the price cap. So, they were reluctant to take on such large numbers of additional customers, unless the government, in some way, compensated them for doing so. Its partly in response to that that the price cap had to be raised substantially, and, now, that it is to be raised even more, and more frequently.
But, now Starmer's mad cap, Blue Labour wants to respond to public opinion by actually freezing the price cap at current levels, which would mean that existing suppliers would not be able to recoup their own soaring costs in higher prices, which will mean that even more of them will go bust, throwing the UK energy supply system into total chaos!
To avoid that, the government would have to provide the energy suppliers with huge subsidies to cover their own rising costs, much as is already happening in the EU. But, in the EU, most of the energy supply companies are nationalised, and so governments can easily do that, simply covering the increased costs directly from taxes. But Starmer, despite originally saying he would continue those kinds of policies developed under Corbyn, immediately ran a million miles away from such talk, and, of course, the Tories will not do it either. And far from providing subsidies to energy suppliers, Starmer is responding to public opinion, by instead proposing a windfall tax on their profits. Insane.
Of course, not all energy suppliers are just buyers of energy. Some like British Gas, are part of integrated energy producing and supply companies. In the case of British Gas, Centrica. If governments simply cough up for energy suppliers increased costs, energy producers could take advantage of that by raising their prices even further. Indeed, they probably would do just that. A windfall tax on the profits of energy producers, rather than suppliers might make more sense, but the fact is that most of that energy production takes place outside the UK. A small part occurs in the North Sea, but it is an increasingly small part.
Currently, Britain benefits, because, historically, many global energy producers have listed their companies on the London Stock Market, and have their Headquarters in London. That is why when the Pound falls, the FTSE 100 rises, because it means the profits of the big oil companies, made overseas, translate into a greater number of Pounds, sent home to London. But, any proposal to introduce even more windfall taxes on those companies is likely to see them simply delist from the London Stock Exchange, and relocate their offices to some other country. Royal Dutch Shell has already considered delisting in London, and listing only in the Netherlands.
One response to that would be to nationalise the energy producers themselves, but given that Starmer's reactionary, Blue Labour has shied away from nationalising energy supply, he most certainly is not going to take on the global ruling class by proposing to nationalise the large energy producers, which are, themselves, in any case, global rather than national companies. You cannot really nationalise a company whose production takes place in some other country. The clue is in the name - nation-alisation.
Take an oil company like BP, its main operations take place in the Middle East, in Russia, Africa, and the Americas. In the 1930's, its operations in Mexico, for example, were nationalised, by the Cardenas government. Moreover, say, you are Mexico, or the US, today, and BP drills for oil in your territory, for example, in the Gulf of Mexico, then, if governments begin introducing windfall taxes on profits, whether BP were nationalised or not, would it not be the US and Mexican governments that would seek to tax the profits of BP, for the oil produced on their territory, not Britain?
Far better than nationalisation, which is the policy of reactionary nationalism, would, in fact, be to simply change company law, placing shareholders in the same position as bondholders, and other creditors of companies, so that they could no longer exercise control over companies, and placing that control where it belongs with the workers and managers of companies, as their collective owners. But, Starmer, let alone the Tories, would never adopt such a position, which, also requires an international socialist movement to fight for it in every country, uniting the workers employed by global capital, in a global class struggle for control over their collective property.
As with lockdowns, and Brexit, Starmer's opportunist, practical politics is driven by a requirement to respond to every event as though it stood on its own, to tail reactionary public opinion, at every new crisis - crises which are often the result of the responses to the last crisis, as with the inflation that has arisen from the money printing introduced along with lockdowns - rather than standing back and seeing the complex of connections between events, and identifying their underlying core, so as to develop policy for the longer-term in response to it. It is the essence of reactive and reactionary populism.
The simple immediate response to the current rising prices of energy is two-fold. Firstly, there is no reason for energy prices to be sky-high. In inflation adjusted terms, costs of production have continued to be reduced. Indeed, even with the current spike in oil prices, its price is lower in real terms than it was in the 1970's. There is more than sufficient supply to meet demand. The reason that prices are high is that a) long before the Ukraine War, global liquidity had been increased massively, by central banks, across the globe, printing vast amounts of money tokens to pay for furlough and other income replacement schemes, introduced in response to the crazy lockdowns. Its that excess liquidity that has caused all prices, including primary product prices to be inflated, and b) NATO has tried to artificially reduce global energy supplies, by trying to block and boycott Russian sales of oil and gas.
To cover, the first cause of higher energy prices, its simply necessary to increase wages and benefits accordingly, in money terms, to reflect the reduced value of money tokens, manifest in inflation. A 20% increase in wages, the Minimum Wage, and Benefits would achieve that overnight. The other alternative, of reducing liquidity to such an extent as to increase the value of money tokens, and so create a deflation of prices, would cause economic disruption. Limiting further increases in liquidity is required, but as workers get higher wages, and governments are led to have to increase pensions and benefits, central banks are likely to continue printing excess money tokens, to stop rising wages and taxes from squeezing company profits.
To remedy the second cause of higher prices is even easier. Its only necessary for NATO to stop trying to block and boycott Russian oil supplies. If Germany opened up supplies from Nordstream 2, and the EU agreed that European companies could pay for Russian gas in Roubles, the current shortages in Europe would end overnight, and prices would tumble, which would cause global energy prices to tumble overnight along with it. But, of course, Starmer and the Tories are not going to push for that either, because their commitment to NATO imperialism is greater than their commitment to the interests of British workers, suffering from the crisis that their policies have wrought. Once again, it is evidence of the fact that for workers - The Main Enemy Is At Home.
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