Alan Duncan: Freezing energy bills would be like trying to stop tides

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Nobody likes paying high electricity and gas bills and for many people in the UK their utility bill is their biggest monthly cost. It’s so easy just to say that you hate oil and energy companies but in my experience they are not always the demons they are made out to be and indeed without their investment and their competition our country would be in a very dark place.

Before I became an MP I was an oil trader and saw over a 20-year period massive changes in the way energy markets work. When I started in the business at the end of the 1970s the whole of the world’s oil marketing was controlled by a few countries and a few companies.

In the 20 years that followed oil traders such as the one I worked for broke up this dominance and in effect created a free market which until then simply did not exist.

What this means is that no single country or company right through the supply chain from finding oil and gas in the first place to selling it to households is able to rig the market. Quite the opposite. If world prices go up then their costs go up too. If world prices fall their costs fall as well.

Ed Miliband as Labour leader has promised to freeze energy bills for 21 months if he were to become Prime Minister.

This is no different from King Canute thinking he had the power to change the ocean’s tides. All that he has done is promise something he cannot deliver in order to try and dupe people into voting for him. His promise is a con trick which no sensible person should fall for.

It is so economically illiterate that within hours of him making his so-called promise energy companies’ share price fell. You might not think that matters but the worse is yet to come. The first effect is that a company is likely to put its prices up before the election for fear that Labour get in.

More significantly, however, if world oil and gas prices fall and he has frozen prices then UK utility companies would be forced to sell at a higher price than they otherwise would. If oil prices rise then companies which generate electricity would face higher costs and, as a result of Ed Miliband’s policy, one of two things would happen. Either the government would have to subsidise utility companies to the extent of the difference between world prices and frozen UK prices - something that would cost billions - or companies would simply stop going about their business and the lights would go out.

Ed Miliband’s policy is as deceitful as it is stupid and I would advise anyone not to fall for it because I can tell you now I have been in Parliament for over 20 years and this is the biggest scam I have ever seen a politician create.