You can’t drill a discount into the price of oil

Ninety-two per cent.

That’s the proportion of Britain’s oil production that was exported in 2024. An interesting statistic when you consider how much political energy is currently being devoted to the argument that more North Sea drilling will somehow deliver cheaper energy for British consumers.

There is a perfectly sensible commercial explanation. Much of the crude we extract is poorly suited to our refineries, so we export it and import other grades. International trade doing what international trade does. But it rather complicates the promise of British oil delivering cheap British petrol.

When I was invited onto TRT Global’s Roundtable this week to discuss whether further North Sea drilling would fix Britain’s energy security, this distinction between producing energy and controlling what it costs answers the question.

Britain has been extracting oil and gas from the North Sea for more than half a century. Yet when Russia invaded Ukraine, British families and businesses experienced extraordinary increases in energy prices. Look across the Atlantic. The United States is the world’s largest oil producer, pumping more crude than Saudi Arabia or Russia. American motorists still feel the consequences when international oil prices surge. The explanation is straightforward. Oil is a globally traded commodity. It doesn’t come with a discount because it was extracted beneath your own territorial waters.

Gas is a little different. Domestic production can reduce imports and offers some protection against physical supply disruptions. But British gas prices remain heavily influenced by international markets.

And this is the problem with the political argument.

We are trying to solve a problem of dependence by producing more of the thing we are dependent upon.

A declining asset with excellent political representation

I spent part of my career in investment banking. If someone presented me with a long-term strategy based around an asset whose output had fallen by 75% from its peak, I would probably have a few questions. That is broadly where we find ourselves with the North Sea. According to the regulator’s latest figures, Britain has already extracted around 48 billion barrels of oil and gas equivalent. Remaining proven and probable reserves stand at 2.5 billion barrels.

There are additional discovered resources, some of which may eventually become commercially recoverable. But nobody seriously expects the North Sea to halt its decline. Yet judging by the political attention devoted to individual projects, one might imagine that the next drilling consent will transform Britain’s economic prospects.

Consider Jackdaw. At peak production, the field is expected to increase domestic gas output by around 6%. Since domestic production supplies less than half of Britain’s gas requirements, its contribution to total demand will be considerably smaller.

A useful contribution? Certainly.

A solution to energy insecurity? Hardly.

Then comes the argument about jobs and tax revenues.

The existing North Sea industry makes a genuine economic contribution. It generated £4.3 billion in net tax revenues in 2025/26 and supports highly skilled employment and British businesses. But those figures tell us little about the additional economic benefits of further drilling. That requires examining the lifetime revenues, tax reliefs, investment costs and eventual decommissioning of individual developments.

And the jobs argument deserves particular care. We have somehow reached a point where protecting North Sea workers is routinely presented as requiring continued expansion of oil and gas extraction. Yet the basin has been declining for decades, and employment has declined with it.

Scotland has become a leader in renewable electricity, yet the transition has struggled to produce comparable employment opportunities in the communities losing oil and gas jobs. Much of the equipment is manufactured elsewhere. A wind farm requires substantial labour to construct, but relatively few people to operate. And a new job hundreds of miles away offers limited reassurance to an offshore engineer in Aberdeen.

The answer requires serious industrial policy. Manufacturing, ports, supply chains, engineering, infrastructure and skills. Workers and their communities need to be involved in making those decisions. Their future deserves more ambition than another decade of arguing over the remaining North Sea reserves.

The electrostates are coming

Meanwhile, elsewhere in the world, countries are taking an altogether different approach. They are becoming what has been termed electrostates, economies increasingly built around domestic electricity generation, electrification and the industries that support them.

China is the most striking example.

According to the International Energy Agency, China’s electric vehicle fleet displaced approximately one million barrels of oil demand every day in 2025. A million barrels. Every day. That is oil China would otherwise have needed to consume, much of it imported. And the economic benefits extend far beyond avoided fuel purchases.

China has simultaneously built a dominant position in electric vehicles, batteries and solar manufacturing. Its investments in energy security have become investments in industrial competitiveness. There are legitimate concerns about Chinese subsidies, manufacturing concentration and its continuing reliance on coal. But the scale of the transformation is undeniable.

Norway offers another comparison. One of the world’s major oil and gas exporters has also electrified much of its domestic transport system, supported by overwhelmingly renewable electricity.

And closer to Britain, Spain has demonstrated what expanding renewables can do to electricity prices. Research by Ember found that Spain’s growing wind and solar capacity helped reduce the influence of expensive gas generation, contributing to wholesale electricity prices 32% below the EU average in the first half of 2025.

Of course, wholesale electricity prices are only part of household bills, and the Spanish experience (for good and bad) also demonstrates the importance of investing in grids and system flexibility. Nevertheless, something economically significant is happening.

Countries are building energy systems that progressively reduce their exposure to internationally traded fuels. Some are also capturing the manufacturing, technology and export opportunities created by that transformation. Britain has extraordinary renewable resources and engineering expertise. We should be asking how much of this industrial opportunity we intend to capture.

Instead, we seem particularly preoccupied with how much longer we can extract hydrocarbons from an ageing basin.

The cost of doing nothing is already on the bill

There is another argument that regularly appears in discussions about the energy transition. What about ordinary families? Isn’t all this investment in clean energy making life more expensive? It’s the right question.

Building new generation, electricity networks and storage costs money. So does improving the energy efficiency of homes and electrifying heating and transport. And anyone who works in renewable energy development, as I have for more than a decade, knows how difficult actually delivering that infrastructure can be. Planning, grid connections, finance, equipment and construction all introduce real costs and delays.

We need to address those problems, particularly ensuring that the economic benefits ultimately reach consumers.

But I find the debate about affordability strangely incomplete. We’re already paying for climate change. We pay when droughts and floods damage agricultural production thousands of miles away and the consequences appear in supermarket prices.

We pay when homes flood, infrastructure fails and insurers reassess the risks they are prepared to carry. We pay when extreme heat places growing pressure on buildings, transport systems and public services designed for a cooler climate. Climate change is already making life more expensive, even if we rarely see those costs itemised as such.

I wrote recently about water bankruptcy and the growing economic risks associated with degrading natural systems. The same principle applies here. We have become rather good at measuring the cost of changing our behaviour while considerably less enthusiastic about accounting for the consequences of continuing as before.

And then there is the opportunity cost.

A wind turbine, once constructed, can generate electricity for decades without continually purchasing fuel on international markets. It still requires financing, maintenance and support from a reliable electricity system. But the economics of that fuel independence are powerful.

Electric vehicles can displace oil demand. Heat pumps and better insulated buildings can reduce dependence on gas. Domestic renewable generation can reduce the influence of international fuel prices on electricity costs. Each successful investment changes the underlying exposure of our economy.

These are the building blocks of lasting energy security and a just transition.

The next crisis is already waiting

There will be another international energy crisis. We cannot know whether it will begin with conflict in the Middle East, another invasion, a shipping disruption or an event nobody has yet anticipated. But we can be reasonably confident that an economy heavily dependent on internationally traded oil and gas will feel the consequences.

The next crisis will find Britain with more or less gas-dependent heating, more or fewer electric vehicles, better or worse electricity infrastructure and a greater or smaller share of domestic generation that requires no imported fuel. Those are choices we can influence today.

I have nothing against the responsible management of existing North Sea resources. Individual projects should stand or fall on their economics, environmental impacts and actual contribution to the country.

But there is something rather absurd about treating further extraction from a declining resource as the centrepiece of an energy security debate while countries elsewhere are investing at extraordinary scale in reducing their need for that resource altogether. Britain has spent more than 50 years drilling for energy security.

Perhaps the next 50 should be spent building it.

Because the best protection against the next international energy crisis is to need less of the fuel whose price we cannot control.

These arguments formed the basis of my contribution to TRT Global’s Roundtable discussion on whether further North Sea drilling can improve Britain’s energy security.

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