School of Business and Economics


1 Sep 2022

How to reduce gas and energy prices without spending taxpayer money

A gas pipeline in snow with an energy plant in the distance.

As Putin shuts off gas to Europe, Professor Alistair Milne explains how there is a way to circumvent Russian supplies and lower gas prices, but the plan is ambitious and requires European unity.

Gazprom, the Russian state-owned energy giant, has said that the Nord Stream 1 pipeline is to be turned off for three days for repairs. This development is further accentuating the cost of living crisis this winter.

Despite the financial hardship a lot of people find themselves in, politicians in the UK are not discussing the most obvious policy tool to bring energy prices down to more affordable levels: an ambitious administrated program to reduce natural gas consumption in the months ahead, across industry, in public and business services and by wealthier household.

Reducing demand in this way lowers prices, directly protecting households otherwise having to choose between eating and heating and the myriad small businesses threatened by closure.

Why is this obvious response being ignored? The elephant in the room is that, despite Brexit, the UK is still part of a single European gas market. “Europe” is thought a dirty word in UK politics and therefore this key dimension of the crisis gets scant mention in our own domestic debates.

Household fuel bills and the charges for heating restaurants, pubs and hotels all depend on the European price of gas and this in turn depends on the quantity of gas consumed across all of Europe. For a program of lowering prices through reduced demand to be fully effective, it must be adopted across all the countries of wider Europe, both non-EU like the UK and EU members.

The European Commission, all too typically, is also barking up the wrong tree. While promoting reduced gas consumption amongst its members, it has failed to take a European-wide approach and is now spending most of its political capital on the long-term problem of improving pricing arrangements in the European market, at the expense of tackling the pressing problem of the current European energy supply deficit.

This is shooting the messenger, high gas and electricity prices, and ignoring the message, we must reduce our consumption of gas.

An ambitious European-wide program to bring down gas prices can work.

Read the full article to learn how.