Natural gas

The dispute between Russia and Ukraine is yet again demonstrating the bleeding obvious that our Government manages to ignore because the big energy companies would rather look the other way.

Our Government, opposition politicians, most pressure groups, commentators, leading businessmen and the rest of Hayek's intellectuals persist in focusing on our electricity supplies when discussing our dependence on Russian gas. Policy is structured around it.

Of the reports you have heard from the countries currently suffering shortages because of Russia's actions, how many have focused on the electricity supply? None, in my case. They all focus on the risk that people will go cold. And rightly so, because gas is far more important to our heat supplies than our electricity supplies.

But the same organisations to whom it is currently obvious that this is a heat problem more than an electricity problem, will go back to focusing on electricity policy as the be-all-and-end-all of energy policy, and even use the latter term to mean the former. They will support draconian yet ineffective interventions in the electricity sector, while tacitly accepting (usually because of the fraudulent concept of "energy poverty") continued inaction on, and even positive underwriting (e.g. through low tax-rates and minimal carbon valuation) of our complete dependence on gas for heating.

The reality is simple. If the Russians turn off the taps, we don't have to worry about the lights going out, we have to worry about people freezing. Can we all wake up to the reality that energy ≠ electricity, please?

If you want to get a clearer picture of the reality of our energy systems, have a look at the insert I put together for our wood-pellet supply business.

Well, to me anyway....

In 2004, Ukraine was the fifth-largest importer of natural gas in the world. Belarus was the tenth-largest. In 2005, Belarus had dropped out of the top-10, not because it had reduced its consumption (net imports had increased), but because some countries, like the Netherlands, had increased their import requirements more dramatically. Ukraine remained fifth, and had increased its imports of gas by nearly 15%. Together, they absorbed nearly 40% of Russia's exports, and nearly 10% of all the exports of gas in the world.

Ukraine has the 25th largest population in the world. Belarus has the 81st.

Ukraine's economy is the 53rd largest in the world, Belarus's is the 69th (according to the IMF).

In terms of GDP per capita (a reasonable measure of relative prosperity), Belarus ranks 110, Ukraine 120.

How do these countries afford to import so much gas? Are they using it productively?

We should be concerned about Russia using its energy resources to apply political leverage. But with regard to the former Soviet Bloc, is it possible that President Putin has a point when he claims that gas to his neighbours is underpriced?