Cabinet ministers are pressing Sir Keir Starmer to abandon Labour’s opposition to new North Sea drilling, warning that the government is ignoring significant economic benefits as the war in Iran sends energy costs spiralling higher.
Whitehall sources have told The Times that senior figures inside the government are challenging the prime minister’s repeated assertion that additional extraction “won’t take a penny off bills”. While Starmer has maintained that oil and gas are priced on international markets and that domestic production cannot reduce household costs, ministers and industry figures are now arguing that boosting output could strengthen the pound and lower the cost of imported goods across the economy. “People keep saying that it ‘won’t take a penny off’ bills,” one source said. “But if it improves your balance of payments, it helps your currency, potentially letting you get more for your money on all sorts of goods. Even small changes make a difference at scale. It might get us a few more solar panels and batteries for the same price too.” Another added: “There’s a growing feeling that we’ve boxed ourselves in with a line that’s technically true but politically useless. People hear ‘it won’t cut bills’ and assume there’s no economic benefit whatsoever.”
Blair’s call for a reset
The internal pressure comes after Sir Tony Blair launched a major intervention this week, urging the prime minister to tear up key green commitments. In a 5,000‑word essay published by the Tony Blair Institute for Global Change, the former prime minister argued that the war in Iran had exposed the UK’s “structural vulnerability” to global fossil‑fuel shocks and called for a broader “reset” of energy strategy. Speaking to Times Radio, Blair said: “Yes, I am [proposing Starmer tear up Ed Miliband’s net zero targets], and I’ll tell you exactly why… Britain’s emissions are under 1 per cent of global emissions, we can’t solve climate change, and to impose costs on our own businesses and consumers in order to accelerate net zero when the rest of the world is not doing so – I don’t understand the logic behind it, or shutting down our own oil and gas industry in circumstances where, again, I don’t know another country in the world that’s doing that.” The Tony Blair Institute has previously claimed that reviving and expanding the North Sea industry could bolster the UK economy by £165 billion.
The economic case for and against drilling
Proponents of a U‑turn argue that increased domestic production would improve the UK’s balance of payments, strengthening the pound and reducing the cost of imports generally – a benefit they say the government has overlooked by focusing narrowly on household bills. The Offshore Energies UK trade body estimates that the domestic offshore energy industry supports more than 240,000 jobs and contributes £36 billion a year to the economy. It contends that UK‑produced oil and gas have a lower emissions footprint than imported liquefied natural gas and that relying on domestic sources reduces exposure to volatile global markets. A survey by the Aberdeen and Grampian Chamber of Commerce found that 93% of businesses believe the North Sea still has a future if the right economic conditions are created, with confidence undermined by financial instability, planning delays and slow project consenting rather than a lack of opportunity.
Opponents, however, insist that new drilling offers little benefit. Labour’s 2024 manifesto promised “no more new licences to explore new oil fields” on the grounds that such a move would “not take a penny off bills, cannot make us energy secure, and will only accelerate the worsening climate crisis.” Climate experts told The Independent last month that the argument for extraction is a “total red herring”. Dr Anupama Sen of the Oxford Smith School of Enterprise and the Environment said: “Oil and gas are priced on international markets, wherever they’re produced – so the idea that more North Sea extraction will bring down bills is misleading.” Professor Gavin Bridge, a fellow of the Durham Energy Institute and the UK Energy Research Centre, described the North Sea as a “highly mature basin” in long‑term decline. “It has been drilled for over half a century, so available new supply is now very small relative to overall market demand. Squeezing additional output from the North Sea will have a negligible impact on prices or the UK cost of living.” Carbon Brief analysis suggests UK gas production is set to drop by 99% by 2050, with new licences making only a marginal difference.
About 90% of North Sea reserves have already been extracted, according to industry data. Two of the largest remaining fields, Rosebank and Jackdaw, would displace only a small fraction of the UK’s gas imports. Moreover, around 80% of oil produced in UK waters is currently exported, while the UK mainly imports oil for its refineries. The UK Sustainable Investment and Finance Association has warned that further drilling carries risks of “soaring decommissioning costs and asset stranding”, and argues that a shift to a clean economy offers greater long‑term growth and job creation. More than 65 leading UK scientists have urged the government to focus on renewable energy, saying new fields would add to greenhouse gas emissions and undermine international climate targets. Lord Stern of the London School of Economics cautioned that opening new North Sea fields would “send a shock wave around the world” and damage the UK’s climate leadership.
Labour’s manifesto also promised to establish Great British Energy, a publicly owned clean power company with £8.3 billion in capital investment, and an Energy Independence Act designed to make the UK a “clean energy superpower”. The party has pledged not to revoke existing licences but to issue no new exploration licences.
Iran conflict drives up costs
Pressure to rethink the drilling ban has intensified since Iran moved to block the Strait of Hormuz, through which a fifth of the world’s oil and gas is carried. Brent crude prices surged from around $70 a barrel to temporary peaks above $100 a barrel, with Goldman Sachs forecasting that every month the strait remains closed adds $10 to the price of oil by the end of the year. UK wholesale natural gas prices rose by approximately 75% between late February and March 2026. The disruption has directly fed through to household bills: Ofgem announced earlier this month that its price cap will rise by 13% from 1 July, taking the typical annual bill to £1,862 – an increase of £18 a month for the average dual‑fuel household, with gas bills rising 24% and electricity bills 5%. Suppliers have warned that bills could climb further if the conflict continues into winter.
The Department for Energy Security and Net Zero has been contacted for comment.
