6th August 2026
Will rising oil prices push Britain into recession? And if they do, will the Bank of England make the situation even worse?
In this video, I examine the extraordinary profits recently reported by the world’s largest oil companies following the conflict involving Iran.
While households and businesses face higher fuel costs, oil companies are making windfall gains.
I argue that these profits reveal something important about today’s inflation: it is being driven by pricing power and economic extraction, and not by excessive demand in the UK economy.
If that diagnosis is correct, then raising interest rates is the wrong response. Higher interest rates cannot reduce internationally determined oil prices. They cannot stop companies using market power to increase profits. What they can do is reduce spending elsewhere in the economy, weaken businesses already under pressure, increase unemployment and make recession more likely.
Using the insights of Modern Monetary Theory (MMT), I explain why Britain needs a different response. Instead of raising interest rates, we should support jobs and demand by cutting rates while taxing excess profits from soaring energy prices.
If we misunderstand the causes of inflation, we risk making the economic damage far worse than it needs to be.
00:00 Oil Company Profits Surge
00:49 Why War Is Driving Inflation
01:49 The Bank of England’s Mistake
02:52 Economic Extraction, Not Growth
04:01 Why Households Spend Less Elsewhere
05:04 The Growing Risk of Recession
06:07 Why Higher Interest Rates Won’t Work
07:10 An MMT Alternative
08:06 Windfall Taxes on Oil Companies
08:47 A Politics of Care vs Extraction