Around half the 320 active North Sea fields are due to cease production by 2030. Yet the UK still relies on domestic production for four fifths of the oil we use and over half the gas.
Hydrocarbons combined account for no less than 75pc of Britain’s energy needs – and will continue to remain vital, even if we do manage to reduce our carbon emissions to net zero by 2050. So either we use our own oil and gas, or pay the higher financial and carbon costs of importing hydrocarbons from overseas.
This argument – this factual reality – is starting to resonate with much of the public, not least in Scotland, where the oil and gas industry remains a major employer. That’s why I think the Tories may soon grasp the nettle and lower the 75pc North Sea windfall tax, while highlighting Labour’s plans to raise it even more.
The centrepiece of Downing Street’s pre-election strategy, though, is to hope the Bank of England lowers its main interest rate from 5.25pc, where it has been since last summer, at least twice before polling day. Yet that may now not happen.
Inflation has fallen sharply from over 11pc in the autumn of 2022 to 4pc in January – and it may fall again when the February figure is published in a few weeks’ time.
But inflation for now is double the Bank of England’s target and there are signs it could rise again this summer.
Attacks by Houthi rebels on commercial shipping heading for the Suez Canal are driving up inflation for imported goods. The oil price has surged 15pc over the last three months, to around $85 a barrel, amid ongoing hostilities between Russia and Ukraine.
The UK’s 10-year gilt yield has meanwhile risen sharply, up 80 basis points to 4.25pc since January. Traders now doubt the Tories’ precious multiple-rate-cut scenario.
Yes, house prices are up, as homebuyers take on bigger mortgages, keeping their fingers crossed much lower borrowing costs are just around the corner.
But they may not be. And, if they’re not, the Tories’ election strategy is toast.
