In 1976, the Labour Party government of Harold Wilson created the British National Oil Corporation, BNOC. The Yom Kippur war in 1973 and OPEC’s subsequent oil embargo had caused consternation in the Western world and led to Governments scrambling for oil supply. The UK government requested that BP- majority owned by the state- divert supplies to the UK. BP Chairman, Sir Eric Drake, refused to do so to the surprise of then PM Edward Heath. At the same moment, the UK was coming to terms with the discovery of oil in the North Sea and a political debate began on how best to maximise its utility for British taxpayers and how best to use the resource to ensure the security of supply for the UK at times of future shortage.

Hindsight suggests that BNOC was created with muddled and mutually exclusive objectives. Arguably, ideology trumped commerciality from the outset for, as a state-owned entity, it was expected to act as the agent of the state (advise government, maximise tax receipts and secure supply) while also competing as a free commercial entity in world markets. When the Conservative administration of Margaret Thatcher came to power a different Ideology pertained, and that led to the 1982 part-privatisation of BNOC through the creation of a private company, Britoil, who would own the ” hard asset” side of the business.

While BNOC had attempted to preserve oil prices at their highest possible level for the benefit of the taxpayer, the commercial market had other views and, over the next three years, the state company was often left holding high-priced purchase contracts, from which, for contractual and diplomatic reasons, they could not escape, while their spot market buyers found market priced supplies elsewhere or demanded market parity from BNOC. The ensuing losses became a political embarrassment. Matters came to a final head in the mid 1980’s-some 9 years post inception- when the call by BNOC on the public purse to fund market losses became politically unsustainable.

Last week, Sir Keir Starmer outlined his vision for The Great British Energy Company – GBEC. It has been reported that the idea is to ensure that profits leaking out of the UK to the foreign entities who own much of the UK’s Renewables infrastructure can be captured for the benefit of the British taxpayer. GBEC would, presumably, construct and own energy assets and be responsible for selling the output.

A national strategy to this end would be intended to provide the energy supply security so sought after post-Russia’s invasion of Ukraine (even if natural gas and LNG are to be out with the mandate). Will GBEC seek to maximise the price of their product and therefore value to their shareholder and the taxpayer or, might they rather seek to ameliorate prices for the benefit of the consuming public? Should optimal value to the taxpayer on one hand, or the consumer on the other hand, be relegated to second place in favour of net zero targeting? The question for Sir Keir and his colleagues must be whether GBEC can be set up with clear and appropriate objectives as a public entity that will not result in an unacceptable call on the public purse.

So is the proposed creation of a new state energy company a heroic development? One that will learn from the mistakes of a prior era. One with clearly thought-out objectives. Or will the effort merely open the door to an ideological and political stramash a la BNOC?

A thoughtful approach at a time of political thoughtlessness will have much to recommend it.

Written by Colin Bryce.