Those of us of a historical mindset like to think that major events like wars and coronations are signposts in the journeys of nations. In the next few months we are likely to be vindicated.

Inflation is at last falling. But on a day-to-day basis we have moved from the crisis of winter to the economy just bumbling along. Instead of being “neither hot nor cold, but just right”, like Goldilocks’s porridge, we are subsisting on a tepid fare. But if you ask people what they think the year as a whole will look like, their expectations vary wildly from disaster to recovery.

The reality is that much depends on the war in Ukraine and the major counter-offensive expected after Orthodox Easter on Sunday 16th. This is because of the likely impact on food and commodity prices, notably energy.

Natural gas

The failure to invest in sufficient natural gas in recent years has been one of the biggest economic mistakes since the Industrial Revolution. It has left us with higher carbon emissions than would otherwise be the case as dirty coal power stations remain switched on globally. The consumer and industry must contend with high prices. And interest rates and Government borrowing have also been driven higher by the cost of funding support packages. Above all, this policy has left us exposed to the depredations of Vladimir Putin who still sees his energy exports as a critical advantage for him.

Energy prices

As we move into Spring, energy prices have calmed down thanks to abundant liquefied natural gas coming into Europe from the US and from Qatar. But they have not returned to the normal levels of the last decade. At the time of writing, the UK May wholesale gas contract is trading at 100p per British thermal unit. That compares to a peak of 730p in August. But it remains higher than the 40-50p which prevailed before the invasion. In fact, the curve points upwards again – towards 150p – for next winter’s gas contracts, suggesting another spike in prices could come as the cycle of the year turns.

It is not commonly appreciated that Net Zero policies, once put into law, demand the cutting back on investment in oil and gas before renewables are ready. Furthermore, the financial sector has doubled down on this bet. The daftness of this is highlighted by our friends Lambert Energy Advisers in a recent note.

Lower prices and emissions

Lambert calculates that if investment in natural gas production had been kept at the same pace as in 2015, then output would be 10% higher than now, more than sufficient to overwhelm the loss of supply from Russia. Natural gas prices would have averaged half the level they did in 2022. And, critically, because natural gas power stations have half the emissions of coal we have had to rely on in the recent emergency, global emissions would be 3% lower annually.

The UK is one of only six countries to have put its Net Zero commitments into law, thereby forfeiting the opportunity to be flexible retained by the likes of the United States and Germany. High inflation has also hit the cost of building and renewables, such as wind turbines and many installations are now on hold while energy firms and Governments work out what to do.

The truth is that, in the short term, such decisions will make no difference. Ukrainian and Russian forces are both amassing for major Spring offences. The West has poured so much support into Ukraine, it is itself a proxy combatant. Accurate information on relative strengths and deployments are impossible to come by. We cannot know which side is likely to prevail. If the war does go one way or the other, we should expect energy costs to fluctuate wildly as markets discount the likelihood of more Russian supplies becoming available.

On the other side of the world, China is opening up its economy but it is recovering at a weaker pace than expected. Its own energy demands will grow as 2023 unfolds. Beijing is watching what happens in Ukraine very carefully and, in turn, Washington is watching Beijing. If the West and its allies stand firm in the Donbas, it stands to reason that President Xi will think twice about launching a Special Operation of his own across the Taiwan Strait, five thousand miles away.

The Coronation, law and custom

Meanwhile, preparations of a more benign sort are gathering pace for the Coronation of King Charles III on the 6th May in Westminster Abbey. At the centre of this ancient and unique ceremony will be the Coronation Oath, required by the 1698 Act of that name. This was put in place after the Glorious Revolution in order to ensure the British Monarchy was limited by statute and bound to Parliament and, critically, vice versa. According to the Act the Archbishop of Canterbury will ask:

Will You solemnely Promise and Sweare to Governe the People of this Kingdome of
England and the Dominions thereto belonging according to the Statutes in Parlyament
Agreed on and the Laws and Customs of the same?
The King and Queene shall say,
I solemnly Promise soe to doe.
Arch Bishop or Bishop,
Will You to Your power cause Law and Justice in Mercy to be Executed in all Your
King and Queene,
I will.

While we speculate about what may happen on the battlefield on the other side of the Dnipro River, history suggests we should be confident about the strength of our own laws and institutions. Parliamentary democracies which respect the rule of law have shown themselves time and again to be durable, but also flexible enough to change course and adopt new ideas when things go wrong. Indeed, the Korean War was just coming to a close when Queen Elizabeth II was crowned.

Democracies therefore usually prevail over tyrants like Vladimir Putin both at home and abroad. The Coronation will be a reminder that that if we keep our heads we can do so again, whatever mistakes we make along the way.

George Trefgarne is CEO and founder of Boscobel & Partners, an independent communications and political consultancy; specialising in financial communications, strategic advice and analysis.