What we think
Catastrophic energy bill hike – a crisis made by capitalism
Working-class families face a perfect storm. After two lost decades of living standards, stagnating wages, privatisation and cuts, and benefits slashed, now inflation is heading for 7%.
The situation will be made much worse by national insurance hikes and last autumn’s Universal Credit cut – and now topped by a 54% rise in energy bills.
All of this, especially the bill rises, will hit those on the lowest incomes hardest. Regulator Ofgem has said that the annual cap will now be set at £1,971, an increase of £693.
For customers with prepayment meters the price cap will go up by £708 to £2,017. The number of families in fuel poverty, forced to underheat or undereat or both, will rise to six million!
Fear that the resulting anger will find expression in a challenge to their right to rule has forced the Tories to come up with some measures.
To say they are inadequate is inadequate! They are a £200 grant – to be paid back, including by future customers who didn’t receive it, via our energy bills over the next five years – and a £150 rebate for those paying council tax in the lowest bands.
The Tories combine these crumbs with claims that the situation is beyond their control.
Is it? What is causing the catastrophic rise in energy bills? In a new poll by the Energy and Climate Intelligence Unit think tank, the second highest number of respondents thought that the price hike was down to measures by the Putin regime in Russia. The third most popular reason cited was increasing global demand.
Tory politicians are happy to promote these misleading arguments – that forces beyond our shores are to blame and therefore there is nothing they can do to mitigate the energy price rises. But like almost everything Tory MPs say, it is a lie.
About half of Britain’s gas supply is domestic and about a third comes from Norway, with the rest mostly imported as Liquefied Natural Gas (LNG) from other countries.
Russian exports account for about 3% of British gas usage – and, while no doubt Putin and the Gazprom bosses are flexing their muscles, there is no evidence of gas orders being withheld.
However, the way gas use is organised in Britain, on a ‘just-in-time model’, does mean that price fluctuations in the wholesale market can have a drastic impact. Oil production was slowed during lockdown and inevitably the reopening of society has created pressures on reduced supplies.
For sure the fluctuations have been dramatic: gas prices increased ninefold in the year up to Christmas and are now five times higher than they were in January 2020. In the first lockdown the price of oil was $40 a barrel and now it’s threatening to go over $100.
But what causes the price fluctuations? Is it a naturally occurring phenomenon beyond the reach of government measures?
The top response given in the poll on what people think lies behind rising bills points to the heart of the matter – energy company profiteering.
Capitalist profit system
As with all the problems working-class people face, the energy price hikes derive from the us-and-them capitalist system in which we live.
For ‘us’ that means plummeting living standards: What does it mean for ‘them’?
The surge in global gas markets through the final months of 2021, combined with an oil price rally to seven-year highs, mean BP and Shell are expected to make £40 billion in profit this year. It’s reported that Shell will buy back $8.5 billion of stock by the end of June, showing the money sloshing around.
In fact, Shell and BP have funnelled £147 billion to shareholders via dividends and share buybacks over the last decade. The BP chief executive, Bernard Looney, said in December that the energy crisis had transformed the company into a “cash machine”!
The bosses of the Big Six energy providers are some of the highest earners in Britain. The biggest energy companies made over £3billion in profit in 2020. The most recent Companies House accounts available for E.ON UK, SSE, EDF Energy, Scottish Power, and Centrica show their profits totalled nearly £100 per second.
Energy production and distribution are not based on the needs of the overwhelming majority of the population and the environment, but on the profits of the extraction corporations and energy providers.
That is expressed most sharply in the way the working-class and poor people who live in the major energy producing nations cannot afford oil and gas – in Africa, the Middle East, and beyond. This is the result of the energy ‘market’ – energy for profit and not for need. The market system does not work for any of ‘us’ – workers in any part of the world – just for ‘them’.
One factor in the gas and oil price rise is speculation. Expectations that the price of oil will be higher in the future motivate investment funds, and as demand for futures contracts increases, so does their price, which also moves the current oil price. The EU and its component individual capitalist governments have spent decades opening up the gas market to greater competition and fewer price controls.
European regulators deregulated the gas sector and encouraged expanded investments in natural gas pipelines and LNG import facilities. Speculation is basically the act of purchasing something today with the anticipation of selling it at a higher price at a later date – more profiteering. Natural gas contracts for 2023, 2024 and 2025 are currently trading between 50% and 100% higher than their average over the past decade.
It isn’t even that the oil producers don’t ever intervene in the market. For example, the OPEC-plus oil producing governments and ‘allies’ agreed during the pandemic to slow oil production – not for the environment but to stop the price falling to zero in a period of low demand. What this shows is that we do need planning – but in the hands of the working class, for the needs of humanity and the environment not the phenomenally rich, fossil-owning few.
Another factor is historically low levels of investment in energy production, storage and distribution. The energy firms argue that their future isn’t clear, given moves to renewables, and therefore investment isn’t profitable. What is abundantly clear is that the privately owned and controlled energy market cannot be trusted with the necessary investment in green alternatives.
To take the urgent measures needed requires nationalisation. Calls for a windfall tax on these profits are increasing. However, that would still leave the ownership and running of energy in the hands of the energy companies – and for living standards and the environment that means only continued disaster. No wonder a majority support nationalisation of the energy companies.
As the support for this demand grows, the defenders of capitalism will bring forward all sorts of arguments against it.
For example, they will claim that nationalisation would not actually be in workers’ interests, given workers’ pensions are invested in energy companies.
But that can be answered by the workers’ movement bringing forward a programme that reflects both the interests of those who need the end of private ownership of energy and those who need decent pensions – compensation can be paid to investors on the basis of proven need. Democratic, accountable and representative committees of workers could oversee this.
This is part of the necessary development by the working class of a programme based on the maximum unity of the working class in struggle around a programme for socialism. This would include a programme of nationalisation of the major planks of the economy, under democratic working-class control and management.
But even public ownership of large sections of the British economy, in the hostile climate of a capitalist world economy, would only be a first step towards breaking the power of the multinational corporations. International solidarity and international planning are also necessary.
However, if there was a general election tomorrow we would end up with a government opposed to nationalisation. That’s because none of the establishment parties – the Tories or Starmer’s Labour – support this necessary policy. We need a party that does.
The fight against the energy rip-off and environmental catastrophe is part and parcel of the struggle to build a new mass workers’ party that represents our interests with a socialist programme.