Friday 1st August 2008
Use Energy windfall to help the poorest
The rise of energy costs in the long term is inevitable so long as that energy is based on a resource like oil which is running out. However in recent months the wholesale price of oil has risen far in excess of the normal rise due to rising demand and oil shortages. Oil is being treated by market speculators like any other commodity such as gold so because of issues like political problems in oil producing countries and the weak dollar. This has pushed the price of oil up to artificially high levels. This has in turn created a real profit bubble for the oil companies, as the their production costs have not increased greatly, yet the price they can sell their product has increased.
In due course all economic market bubbles do what all normal bubbles do, they burst. So does that mean that the government should do nothing but wait for the thing to go pop? Well the bubble in the oil price is not a real one based on normal market principles of supply and demand, but the profits of the oil companies are real. These windfall profits should be taxed and money used to reduce fuel poverty in this country. This should be by improving insulation and renewable energy use in households really suffering great fuel poverty. The government should not simply wait for the oil bubble to burst, they should use opportunity it has created to provide one off capital investments in the housing stock is this country.
There are even signs that government ministers are thinking of having a windfall tax on the oil companies. The question is will they use the money wisely ?
Commenting on the news that ministers are considering imposing a windfall tax on energy companies, Liberal Democrat Leader, Nick Clegg said:
"When the winter comes, price rises will hit the elderly and the vulnerable hardest. The Government cannot sit idly by and allow them to suffer. Ministers should be clawing back the money from the energy companies' £9bn European windfall to help protect struggling households from the effects of fuel poverty. This huge amount of unearned income should be used to insulate homes and make sure that households are paying less for their energy bills. Energy companies have a responsibility to protect their most vulnerable customers, and ministers must ensure that they deliver on this."