Experts say claims drilling in North Sea will reduce UK energy bills are ‘sheer fantasy’
Claims that drilling in the North Sea would significantly cut households’ energy bills have been dismissed as “pure fantasy” by experts as new analysis highlights the much greater potential of renewable energy.
Research from the University of Oxford Smith School shows that a UK running entirely on clean energy and using technologies such as electric heat pumps for home heating could save households up to £441 a year on their bills.
In stark contrast, maximizing oil and gas extraction from the North Sea would save only between £16 and £82 per household per year.
Crucially, this modest benefit will only occur if tax revenues collected from fossil fuel companies are redistributed directly to families to offset energy costs.
Analysts warn that, given that oil and gas prices are determined by unstable international markets, the government will provide “no discernible benefit” to consumers unless it earmarks these tax revenues specifically to lower household bills.
Co-author and chair of policy engagement at the Smith School of Business and the Environment, Dr. Anupama Sen said: “The idea that drying the North Sea will make the UK safer or save significant money on household bills is completely fanciful.
“We show that whatever the remaining lifespan of North Sea oil and gas, a ‘baby drilling’ approach to extraction will cost households more money than continuing our path to clean energy.”
The analysis comes as energy markets are rattled by rising energy prices as a result of the US-Israeli war against Iran, which has closed the Strait of Hormuz, a key shipping route for oil and gas supplies.
Energy costs are likely to jump at the next price cap, especially in the latest blow to low-income households affected by the Covid-19 pandemic and Russia’s invasion of Ukraine, which has led to high and volatile prices.
The UK Government’s response to the latest rise in fossil fuel prices has been to redouble the push for clean energy, while hinting at measures to ease the pressure on households, such as canceling planned fuel tax increases later this year.
It has announced that it will introduce plug-in solar panels that people can place on balconies and outdoors for the first time in the UK, and will highlight the latest auction for contracts to supply electricity at fixed prices from renewable sources such as solar farms and offshore wind.
But there are calls from the Conservatives and Reform UK to increase oil and gas supplies from the North Sea and reduce bills by removing measures to help the UK transition to a “net zero” clean economy, such as new renewables and heat pump subsidies.
US President Donald Trump has also weighed in on the debate, repeatedly criticizing wind energy and urging the British Government to focus on drilling in the North Sea despite it being a dwindling oil and gas basin.
The analysis found that £82 could be saved on the average bill if the remaining oil and gas resources in the North Sea were fully exploited and a “realistic” tax revenue redistributed directly to households.
If the government scraps a windfall tax on the profits of North Sea oil and gas companies, with the remaining taxes transferred to households, this annual savings will drop to just £16.
But if all households in the UK switched to renewable energy, bills could drop by between £105 and £441, depending on the extent of electrification and how bills are designed.
The analysis said the savings were based on energy prices in January, before the US and Israel launched an attack on Iran, when oil and gas prices were lower than they are now, so they were “cautious” estimates of the benefit of renewables.
While North Sea oil and gas are a finite resource, they recur when the system changes.
If electricity is dominated by renewable sources, they will set the price of electricity (unlike today’s world, where gas is mostly determined), and dual-fuel bills will drop by £105.
But if households use electricity, for example by replacing gas boilers with heat pumps, they could save £330 a year on their bills, and if electricity bills were rebalanced so that policy costs are included in overall taxation, this would save around £441 a year.
Co-author Cassandra Etter-Wenzel said: “Achieving this requires upfront investment, particularly in heat pumps and insulation, and therefore depends on effective subsidy and financing mechanisms, especially for low-income households.”
Dr Sen added: “Heat pumps are particularly important for reducing bills because they are much more efficient than gas boilers,” producing around three units of heat for every unit of electricity they use, compared to less than one unit of heat per unit of gas in boilers.
