{"id":497006,"date":"2026-03-26T20:38:08","date_gmt":"2026-03-26T20:38:08","guid":{"rendered":"https:\/\/www.newsbeep.com\/uk\/497006\/"},"modified":"2026-03-26T20:38:08","modified_gmt":"2026-03-26T20:38:08","slug":"how-bad-could-the-energy-price-crisis-get","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/uk\/497006\/","title":{"rendered":"How bad could the energy price crisis get?"},"content":{"rendered":"

The energy price surge caused by war in the Middle East has sent shockwaves through Westminster. It has pushed up inflation and the cost of borrowing, causing panic in the cabinet and the recognition that government intervention could be needed on a vast scale to support the cost of living.<\/p>\n

The Prime Minister told a private audience: \u2018The assumption that the growth of the developed countries can proceed steadily on the basis of cheap energy has been shattered almost overnight.\u2019 He further observed: \u2018The problem is not simply one of inflation. It is the whole structure of the economy.\u2019<\/p>\n

In the Treasury there is something approaching a siege mentality. The Chancellor has \u2018to spend [her] time firefighting\u2019. When considering the realities of the UK\u2019s economic situation, the guardian of the public finances said: \u2018My predecessor left me an economy on the brink of catastrophe; my task was continually obstructed by events outside Britain over which I had no control\u2026 The Chancellor of the Exchequer\u2019s is a lonely job, particularly when he is obliged to disappoint the hopes of his party. Without the support of the prime minister it is impossible.\u2019<\/p>\n

The \u2018he\u2019 is the giveaway. Those were the words of Denis Healey, who inherited a gargantuan financial mess the year after the Opec price shock of 1973 and whose memoir is one of the best by a leading politician. \u2018We\u2019re into Opec 1973 territory now,\u2019 remarks one cabinet minister.<\/p>\n

The Cobra emergency committee met on Monday to make plans to deal with the impact of an energy price shock. The government\u2019s estimate is that if Iran succeeds in keeping the Strait of Hormuz closed \u2013 the bottleneck through which much of the world\u2019s oil flows \u2013 the price of oil will stabilise on a central estimate of $150 a barrel but could go as high as $200. On Wednesday morning, the price of Brent Crude was around $96 a barrel.<\/p>\n

\u2018We\u2019re looking at the economic impact,\u2019 Keir Starmer said. \u2018I am asking for every lever that\u2019s available to the government to deal with the cost of living to be discussed.\u2019 In a statement to the Commons on Tuesday, Reeves made clear she plans an intervention to alleviate the costs of rising energy prices, with the household cap due to rise by \u00a3332 in July.<\/p>\n

Her focus is on not repeating what she sees as the mistakes of the Liz Truss government, which issued an unfunded, untargeted pledge of \u00a360 billion, and of Rishi Sunak at the start of the pandemic, who issued a \u2018whatever it takes\u2019 pledge with regard to furlough support.<\/p>\n

At the start of the Iran war, Reeves set up a board to handle the economic fallout and, at its second meeting, demanded contingency plans which would allow her to target help at the neediest \u2013 an option that was not available to Jeremy Hunt when he inherited Truss\u2019s mess. \u2018We\u2019ve got to learn the lessons of the last crisis, where Andrew Mountbatten-Windsor got more help than most people in Windsor,\u2019 a source says.<\/p>\n

An ally adds: \u2018Rachel is of the mindset that we\u2019ve got to learn from Liz Truss, we\u2019ve got to learn from Covid. She wants to define a response to this crisis which is credible and responsive rather than stumble into a soundbite about doing everything possible. Her instinct is that this is a crisis. Debt is massively high, borrowing is high and the markets are looking at us. It\u2019s not always about spending money.\u2019 That is a line delivered as much at the Labour party as it is voters.<\/p>\n

Labour historians will remember only a few sitting western governments were re-elected after 1973 or Covid<\/p>\n

Reeves reads widely and she is acutely aware of the situation after 1973, which culminated in Healey and James Callaghan traipsing \u2018cap in hand\u2019, as the clich\u00e9 has it, to the IMF in 1976 for a bailout. You wonder if Starmer is as well versed. The Prime Minister once said Harold Wilson was his favourite Labour leader, but he cannot name his favourite book. It is hard to shake the image from the recent update to Gabriel Pogrund and Patrick Maguire\u2019s book of Starmer spending hours reading papers in the Thatcher study in No. 10 only to emerge with nothing to say to his staff.<\/p>\n

In one regard, the situation is worse than in 1973. This time there is a US President who seems to be acting in the interests of his own political standing and financial benefit, rather than as a leader of the western world. A senior civil servant says: \u2018It\u2019s mad how Donald Trump is saying stuff to tweak the oil price.\u2019 In the Cabinet Office there is a genuine belief that the President announced the possibility of a peace deal to drive down oil prices and drive up the stock market to feather his own investments.<\/p>\n

Economically, so far at least, 2026 is nothing like as bad as 1973-76. Inflation is 3 per cent. In the 1970s it peaked at 24 per cent. Then there was mass industrial unrest, a coal strike which compelled Edward Heath to bring in a three-day week to save electricity and warn: \u2018We shall have a harder Christmas than we have known since the war.\u2019<\/p>\n

Britain is also better prepared, since the Cobra secretariat, which has absorbed the old Civil Contingencies Secretariat, has access to the extensive no deal Brexit planning, from 2018 and 2019, to deal with shortages of fuel and the knock-on effects of high transport prices on food and medicines. (\u2018Hurrah! A Brexit benefit at last,\u2019 a Labour aide says.)<\/p>\n

\t\t\t<\/p>\n

\t\"\"
\n\t\t\t\u2018I compulsively fantasise about having sex with attractive women I meet.\u2019<\/p>\n

\t\t\t<\/a><\/p>\n

But Labour historians will remember that only a few sitting western governments were re-elected after 1973 or after Covid. The only time the Blair government trailed in the polls was in late 2000 when soaring petrol prices led to panic buying at the pumps.<\/p>\n

What is most striking about the late 1970s is that while Margaret Thatcher enacted a political revolution to change the country, to slash union power and exploit domestic energy sources in the North Sea, it was the Callaghan government which first spoke the blunt truth to voters that things could not go on as they had been. Most famously, Callaghan told the 1976 Labour party conference: \u2018We used to think that you could spend your way out of a recession\u2026 I tell you in all candour that that option no longer exists.\u2019<\/p>\n

Contrast that with a government that has banned North Sea drilling and retreated into its usual cycle of tax and spend. Reeves\u2019s statement this week suggests she understands all this, but Starmer is a captive of soft-left MPs who show no sign of having learned the lessons of the 1970s.<\/p>\n

\t\t\t\"\"\t<\/p>\n

\t\t\tEvent
\n\t\t\t\t\t\t\tThe Spectator\u2019s Energy Summit 2026<\/p>\n

\t\t\t\t\t
\n\t\t\t\tBOOK NOW\t\t\t\t\t\t\t<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"The energy price surge caused by war in the Middle East has sent shockwaves through Westminster. It has…\n","protected":false},"author":2,"featured_media":497007,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[84,79207,1294,1344,585,632,56,54,55],"class_list":["post-497006","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-denis-healey","tag-economy","tag-energy","tag-iran","tag-middle-east","tag-uk","tag-united-kingdom","tag-unitedkingdom"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/497006","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/comments?post=497006"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/497006\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media\/497007"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media?parent=497006"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/categories?post=497006"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/tags?post=497006"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}