The prime minister has announced an expansion of oil and gas drilling in the North Sea amid ongoing rows in his party over the future of its climate commitments.
Number 10 said hundreds of new oil and gas licences will be granted off the coast of Scotland to “boost British energy independence” and “reduce reliance on hostile states”.
The move puts down a marker between the government and Labour, which has proposed a block on all domestic new oil and gas drilling as part of its strategy to achieve zero-carbon electricity by 2030.
Shadow climate change secretary Ed Miliband accused Rishi Sunak of lurching towards “a culture war on climate” to make up for “13 years of failed Tory energy policy”.
Politics live: PM dodges electioneering question in awkward interview
But Mr Sunak and his ministers have stressed the need to use North Sea fossil fuel resources, especially since the Russian invasion of Ukraine.
The North Sea Transition Authority (NSTA), which is responsible for regulating the oil, gas and carbon storage industries, is currently running the 33rd offshore oil and gas licensing round, and they expect to award more than 100 new licenses in the autumn.
But such moves have prompted alarm from climate campaigners, with the government already facing opposition to any development of Rosebank, 80 miles northwest of Shetland.
The head of Oxfam Scotland, Jamie Livingstone, called the new licensing rounds a “short-sighted and selfish decision by the UK government” which “flies in the face of climate science and common sense”.
He added: “The UN has made clear that we must end our global addiction to fossil fuels, so this decision sends a wrecking ball through the UK’s climate commitments.”
Please use Chrome browser for a more accessible video player
Government needs to pursue net zero targets – Lord Deben
The prime minister has also confirmed locations for two new carbon capture usage and storage clusters ahead of a visit to Aberdeenshire today – where he is expected to announce multi-million pound funding for the schemes.
Carbon capture sees polluting fumes collected to either be used elsewhere or stored underground instead of going into the air, and is seen as an increasingly important tool in achieving net zero.
The Acorn carbon capture project in North East Scotland – a joint venture between Shell and other firms – and the Viking project in the Humber will be “vital to driving forward and investing in clean technologies that we need to realise our net zero target”, Downing Street said.
But while ministers predict the move could support up to 50,000 jobs, the target for the two new sites to be up and running isn’t until 2030.
‘We’re choosing to power up Britain’
Ahead of his visit to Scotland, Mr Sunak said: “We have all witnessed how Putin has manipulated and weaponised energy – disrupting supply and stalling growth in countries around the world.
“Now more than ever, it’s vital that we bolster our energy security and capitalise on that independence to deliver more affordable, clean energy to British homes and businesses.
“Even when we’ve reached net zero in 2050, a quarter of our energy needs will come from oil and gas.
“But there are those who would rather that it come from hostile states than from the supplies we have here at home.
“We’re choosing to power up Britain from Britain and invest in crucial industries such as carbon capture and storage, rather than depend on more carbon-intensive gas imports from overseas – which will support thousands of skilled jobs, unlock further opportunities for green technologies and grow the economy.”
Mr Sunak will meet energy industry leaders during Monday’s trip. Pic: No 10
SNP Westminster leader Stephen Flynn said it was right to be “conscious of energy security” and keeping the large oil and gas workforce in Scotland employed, calling it a “silly position” to end all drilling.
But speaking to Sky News, he did not give his full support to the new licenses, saying Tory plans to “take every single drop” from the North Sea was “a little bit morally bankrupt”.
He added: “We need to be conscious of the fact that every single drop of oil or indeed a molecule of gas that we take out of the North Sea will have a concurrent impact on climate change.”
Mr Flynn called for “robust climate compatibility checkpoints” to be put in place for any new licenses.
Meanwhile, Labour’s Mr Miliband questioned whether the prime minister was the right person to make the decisions over future energy security.
“Every family and business is paying the price, in higher energy bills,” he said. “It is absurd that having left this country so exposed, the Conservative Party is asking the public to believe they can fix it.
“And it’s telling that while Labour focuses on lower bills and good jobs, Rishi Sunak lurches desperately towards a culture war on climate to appease his split party, losing track of what he believes from day to day, depending on which faction he’s met with.
“It’s no way to govern and it’s costing working people.”
Click to subscribe to the Sky News Daily wherever you get your podcasts
A new green dividing line in politics?
The move comes as both main parties continue to argue over their commitment to key net zero policies and environmental promises.
The Conservatives’ narrow victory in the Uxbridge and South Ruislip by-election opened a can of worms within Labour over London Mayor Sadiq Khan’s plan to expand the Ultra Low Emission Zone (ULEZ) to outer boroughs – something Sir Keir Starmer blamed for the loss.
The Labour leader and Mr Khan are continuing to hold discussions over the extension, with Sir Keir calling on his colleague to “reflect” on the impact on voters.
But Mr Khan has stood by the decision on the basis it will improve air quality for five million people in London.
Please use Chrome browser for a more accessible video player
Sadiq Khan: ULEZ decision ‘good news for London’
Meanwhile, MPs on the right of the Conservative Party are appealing to the PM to rethink the government’s net zero commitments in light of the win, with calls for delays to a number of targets – including putting back the ban on the sale of petrol and diesel cars from 2030 to 2035.
Former Tory leader Sir Iain Duncan Smith – who was among 43 signatories to a letter urging Mr Sunak to look again at the plan – told Sky News the date was “plucked out of nowhere”, adding: “If you want to get them to clean emissions, you’ve got to do it in a way that still keeps our industry going in the UK.”
The prime minister insisted on Sunday the 2030 deadline would remain, but did announce plans for a review of low traffic neighbourhoods (LTNs), saying he was on the side of drivers.
Downing Street has confirmed ministers are scrutinising existing pledges “in light of some of the cost of living challenges”, as the prime minister promised a “proportionate and pragmatic” approach to net zero.
Read more:
Is carbon capture a fossil fuel industry fig leaf or vital for net zero?
What are the Tories’ green policies – and what could be scrapped?
The prime minister is also set to meet industry leaders and workers while in Scotland.
The government pledged that, along with energy authorities, it would “go further than before in announcing continued decisive action to boost the capability of the North Sea industry to transition towards net zero, strengthen the foundations of the UK’s future energy mix and create the next generation of highly skilled green jobs”.
Grant Shapps, the energy security secretary, is also expected to meet figures from the oil and gas, renewable and nuclear industries over the coming week as the Conservatives focus their campaign on the topic.
Mr Shapps said: “In the wake of Putin’s barbaric invasion of Ukraine, our energy security is more important than ever.
“The North Sea is at the heart of our plan to power up Britain from Britain so that tyrants like Putin can never again use energy as a weapon to blackmail us.
“Today’s commitment to power ahead with new oil and gas licences will drive forward our energy independence and our economy for generations.”
Business
Donald Trump has finally blinked – but it’s not the stock markets that have forced him to act
Chalk this one up to the bond vigilantes.
This is the term used periodically to describe investors who push back against what are perceived to be irresponsible fiscal or monetary policies by selling government bonds, in the process pushing up yields, or implied borrowing costs.
Most of the focus on markets in the wake of Donald Trump’s imposition of tariffs on the rest of the world has, in the last week, been about the calamitous stock market reaction.
This was previously something that was assumed to have been taken seriously by Mr Trump.
During his first term in the White House, the president took the strength of US equities – in particular the S&P 500 – as being a barometer of the success, or otherwise, of his administration.
Donald Trump in the Oval Office today. Pic: Reuters
He had, over the last week, brushed off the sour equity market reaction to his tariffs as being akin to “medicine” that had to be taken to rectify what he perceived as harmful trade imbalances around the world.
But, as ever, it is the bond markets that have forced Mr Trump to blink – and, make no mistake, blink is what he has done.
To begin with, following the imposition of his tariffs – which were justified by some cockamamie mathematics and a spurious equation complete with Greek characters – bond prices rose as equities sold off.
That was not unusual: big sell-offs in equities, such as those seen in 1987 and in 2008, tend to be accompanied by rallies in bonds.
Please use Chrome browser for a more accessible video player
What it’s like on the New York stock exchange floor
However, this week has seen something altogether different, with equities continuing to crater and US government bonds following suit.
At the beginning of the week yields on 10-year US Treasury bonds, traditionally seen as the safest of safe haven investments, were at 4.00%.
By early yesterday, they had risen to 4.51%, a huge jump by the standards of most investors. This is important.
The 10-year yield helps determine the interest rate on a whole clutch of financial products important to ordinary Americans, including mortgages, car loans and credit card borrowing.
By pushing up the yield on such a security, the bond investors were doing their stuff. It is not over-egging things to say that this was something akin to what Liz Truss and Kwasi Kwarteng experienced when the latter unveiled his mini-budget in October 2022.
And, as with the aftermath to that event, the violent reaction in bonds was caused by forced selling.
Now part of the selling appears to have been down to investors concluding, probably rightly, that Mr Trump’s tariffs would inject a big dose of inflation into the US economy – and inflation is the enemy of all bond investors.
Part of it appears to be due to the fact the US Treasury had on Tuesday suffered the weakest demand in nearly 18 months for $58bn worth of three-year bonds that it was trying to sell.
But in this particular case, the selling appears to have been primarily due to investors, chiefly hedge funds, unwinding what are known as ‘basis trades’ – in simple terms a strategy used to profit from the difference between a bond priced at, say, $100 and a futures contract for that same bond priced at, say, $105.
In ordinary circumstances, a hedge fund might buy the bond at $100 and sell the futures contract at $105 and make a profit when the two prices converge, in what is normally a relatively risk-free trade.
So risk-free, in fact, that hedge funds will ‘leverage’ – or borrow heavily – themselves to maximise potential returns.
The sudden and violent fall in US Treasuries this week reflected the fact that hedge funds were having to close those trades by selling Treasuries.
More from Sky News:
What a global recession would mean
Is there method to the madness?
Please use Chrome browser for a more accessible video player
Trump freezes tariffs at 10% – except China
Confronted by a potential hike in borrowing costs for millions of American homeowners, consumers and businesses, the White House has decided to rein back its tariffs, rightly so.
It was immediately rewarded by a spectacular rally in equity markets – the Nasdaq enjoyed its second-best-ever day, and its best since 2001, while the S&P 500 enjoyed its third-best session since World War Two – and by a rally in US Treasuries.
The influential Wall Street investment bank Goldman Sachs immediately trimmed its forecast of the probability of a US recession this year from 65% to 45%.
Of course, Mr Trump will not admit he has blinked, claiming last night some investors had got “a little bit yippy, a little bit afraid”.
And it is perfectly possible that markets face more volatile days ahead: the spectre of Mr Trump’s tariffs being reinstated 90 days from now still looms and a full-blown trade war between the US and China is now raging.
But Mr Trump has blinked. The bond vigilantes have brought him to heel. This president, who by his aggressive use of emergency executive powers had appeared to be more powerful than any of his predecessors, will never seem quite so powerful again.
Is there method to the madness? Donald Trump and his acolytes would have you believe so.
The US president is standing firm among all the market chaos.
Just this weekend, after US stock markets suffered their sharpest falls since the onset of the pandemic, Trump reposted a video on his social media platform Truth Social. This was its title: “Trump is purposefully CRASHING the market.”
Tariffs latest: ‘BE COOL’, Trump says as trade war escalates
The video claimed the president was engineering a flight to US government bonds, also known as treasuries – a safe haven in turbulent times. The video suggested Trump was deliberately throwing the stock market into chaos so investors would take their money out and buy bonds instead.
Why? Because demand for treasuries pushes up the price of the bonds, and that, in turn, lowers the yield on those bonds.
The yield is the interest rate on the debt, so a lower yield pushes down government borrowing costs. That would provide some relief for a government that has $9.2trn of government debt to refinance this year. Consumers also stand to benefit as the US Federal Reserve, the US central bank, would likely follow suit, feeling the pressure to cut interest rates.
A trader works on the floor at the New York Stock Exchange. Pic: Reuters
Trump and his treasury secretary, Scott Bessent, have made it a key policy priority to lower yields. For a while, it looked like the plan was working. As stock markets tumbled in response to Trump’s tariffs agenda, investors ploughed their money into bonds instead.
However, Trump may have spoken too soon. On Monday, the markets had a change of heart and rapidly started selling government bonds. Thirty-year treasury yields hit 4.92% on Wednesday, their biggest three-day jump since 1982. That means government borrowing costs are rising – and not just in the US. The sell-off has spiralled to government bonds worldwide.
Rachel Reeves will be watching anxiously. Yields on Britain’s 30-year government bonds, also known as gilts, hit their highest level since May 1998. They registered a 27 basis point jump to 5.642% today – that’s on track to be the largest one-day move since the aftermath of former prime minister Liz Truss’ “mini-budget” in October 2022.
Please use Chrome browser for a more accessible video player
‘These countries are dying to make a deal’
This is a big deal. It is the sharpest sell-off in the US bond market since the pandemic. Back then, investors also rushed into bonds before dumping them and the motivations, on one level, are similar.
In 2020, investors sold bonds because they had to cover losses elsewhere in their portfolios. When markets fall, as they have done over the past few days, lenders can demand that an investor who has borrowed money stump up more cash against the value of their loan because the collateral against those loans has fallen in value. This is known as a “margin call”. Government bonds are easy to sell as investors “dash for cash”.
There are signs that this may be happening again and central banks, which had to step in last time, are alert.
The Bank of England warned today of the growing risks to financial stability. “A sharp increase in government bond yields could crystallise relatively quickly,” it said.
There are other forces weighing on government bonds. With policy uncertainty unfolding in the US, investors could also be signalling that US debt isn’t the safe haven it once was. That loss of confidence also seems to have hurt the dollar, one of the world’s safest places to park your money. It’s had a turbulent journey but is down 1.15% against a basket of safe haven currencies since Trump announced widespread tariffs on 2 April.
Some are even wondering if China could be behind some of this, dumping US government debt as a revenge tactic to hurt a president who has explicitly said he wants bond yields to come down. The country holds $761bn of US government bonds, second only to Japan. If this is the case, then the US-China trade war could rapidly be evolving into a financial war.
-
Sports2 years ago‘Storybook stuff’: Inside the night Bryce Harper sent the Phillies to the World Series
-
Sports1 year agoStory injured on diving stop, exits Red Sox game
-
Sports1 year agoGame 1 of WS least-watched in recorded history
-
Sports2 years agoMLB Rank 2023: Ranking baseball’s top 100 players
-
Sports4 years ago
Team Europe easily wins 4th straight Laver Cup
-
Environment2 years agoJapan and South Korea have a lot at stake in a free and open South China Sea
-
Environment2 years agoGame-changing Lectric XPedition launched as affordable electric cargo bike
-
Business3 years agoBank of England’s extraordinary response to government policy is almost unthinkable | Ed Conway