There are a lot of variables to consider, which makes it difficult to produce evidence of a definite reduction in prices.
Pöyry (the global consulting and engineering firm specialising in the energy sector), carried out a study to see the effects that the production of natural gas from shale could have on energy prices in Europe, including the UK. They modelled three scenarios based on the amount of shale gas that might be produced in the UK and Europe. These scenarios were based on ‘no shale’, ‘some shale’, and ‘shale boom’. The model projected that wholesale prices could be lower by 6% in the ‘some shale’ scenario and 14% in the ‘shale boom’ scenario1. However, they added that “most people now agree that Great Britain would not experience a price reduction similar to that which has been seen in the US over the past few years.”
In a report produced for the Government by Navigant (a global consultancy with considerable knowledge of the energy sector), they said that gas prices could go down if there is a "significant expansion" of shale gas in Europe over the next couple of decades2. Richard Bass, Director of the Energy Practice for Navigant, a global consulting company with expertise in the energy sector, told us that “the potential for prices to fall due to shale gas production will depend on the extent of shale gas production and this is highly uncertain at the current time.”
When comparing the UK’s shale potential to that of the US, a House of Lords inquiry concluded that ‘the impact on the UK’s fuel prices and wider economy would not be as dramatic as in the US because production costs would be higher’. The inquiry reported evidence that there may not be ‘a discernible effect on prices’ as the UK’s prices are largely set by its links to the European market.3 Richard Bass has supported this conclusion, but added that “shale gas in Europe could help to moderate prices and in that context gas prices could reduce somewhat as shale gas production rises.”
The introduction of shale gas into the UK’s energy mix will mean that the country will not have to rely so much on imports of gas from Continental Europe, which may originate in Russia, or from expensive Liquefied Natural Gas (LNG) As a result of this increased liquidity in the market, the price rises, which many commentators forecast, could be arrested, and this could potentially lead to lower prices in the future.
Thank you to everyone who submitted questions similar to the one above. Questions we have received which are similar are shown below:
- Is there any evidence that this will lower prices? Only David Cameron seems to say this si true, and all the economists that it will not. Who is right?
- Will it be cheaper?
- Will my energy bills rise?
- Will it be cheaper than what we pay for now or will the government keep the savings?
- Will it lower bills?
- If industry professionals are saying it won't bring down gas prices, only provides a short term solution and requires stadium volumes of water per well (not pad) (when we have low resources) (including when we have hosepipe bans). Why do we need it?
- Will there be a reduction in energy bills? Or shall we all be paying for this financially and environmentally?
- We need our own gas & oil to reduce our bills. Will they make it so.
- Will it reduce my utility bill?
- Delighted this is happening in Lincolnshire. Will prices be fixed?
- How can it be ensured that the lower prices will be passed on to the consumer?
- Will it reduce UK gas bills?
- Will it cause earthquakes, bear in mind we have already had som. What will they do with water used. Will we get cheaper fuel?
- Will this give me cheaper fuel?
- Will my gas bills be cheaper, now the shale gas has been taken from underneath us
- Is fracking going to happen in my area? Lincolnshire. How much research has been done given the negative impact seen in the USA? How are companies going to limit environmental damage to locations and communities? Will it impact house prices? Will it impact gas bills?
- Will it be any cheaper?
- Will it create cheaper gas prices?