UK's Next PM Faces Energy Dilemma: Oil Drilling vs. Renewables Amid Global Shock

U.K. Prime Minister Keir Starmer's likely successor, Andy Burnham, could face an immediate test in office: whether to expand drilling for North Sea oil or double down on renewables, amid a global energy shock.

U.S. President Donald Trump has poured gasoline on the debate, blaming Starmer's resignation this month on his "failed" energy policy.

Trump's intervention comes as the Iran war has disrupted oil flows through the critically important Strait of Hormuz, one of the world's most important oil chokepoints.

The squeeze in physical supply has intensified the U.K.'s energy security and independence debate, following the shock from Russia's war in Ukraine.

Business leaders argue this is why domestic production matters.

But the political divide remains.

U.K. finance minister Rachel Reeves is understood to privately back new drilling.

But Energy Secretary Ed Miliband, who could be in line to replace Reeves as finance minister under a new government, has argued the focus should instead be on clean energy.

Two of the U.K.'s biggest trade unions, Unite the Nation and GMB, are campaigning for drilling, over concerns that preventing it would damage jobs in the sector.

Burnham, who is set to become prime minister in July if he remains unchallenged by Labour Party colleagues, is under pressure to define his position quickly as markets react.

At the center of the debate are the Rosebank and Jackdaw fields in Scottish waters, two major projects that could boost U.K. supply, but test climate goals.

That is driving pressure in Scotland, where First Minister John Swinney told CNBC: "There is a changing balance that's got to be struck."

"We are going to have to utilize oil and gas for some years to come. If there is uncertainty about the security of supply, or security of supply is undermined because of exorbitant cost of the effects of the conflict in Iran, these are material factors that have got to be borne in mind," he told CNBC.

In a move symbolic of the U.K.'s energy transition, the Grangemouth oil refinery — once Scotland's largest — closed in April 2025, with the loss of hundreds of jobs.

Swinney said that the refinery had been "a source of production of jet fuel, so we're now importing jet fuel because of a closure of a refinery."

"We've now got uncertainty over jet fuel because of the conflict in the Middle East, and that will affect the ability of our economy to function," Swinney added.