Amid the inky gloom that shrouded George Osborne when he delivered a wintry autumn statement of more cuts and further tax rises, there was a dreamy gleam in the eye of the chancellor. Like a Spanish conquistador setting out for Latin America, he thinks he can find a source of fabulous riches. This El Dorado is not made of bullion, but it sounds as good as gold when you hear him and other enthusiasts talk about this magic stuff. It is natural gas in underground shales. For believers, and there are now many of them in the Tory party, shale gas is going to provide Britain with a remarkable bonanza of cheap energy.

Before we go any further, we really need a shorthand phrase to describe them. The process of extraction is called hydraulic fracturing, also known as fracking. Believers in shale gas have a tendency to rave about it as if they are using a mind-bending substance. So I suggest we call them frack-heads.

The chancellor is the biggest frack-head in the cabinet. Under his influence, the prime minister has turned into a frack-head too. Another important frack-head is the environment secretary, Owen Paterson. The energy secretary, the Lib Dem's Ed Davey, is not a frack-head, but his sensible scepticism about shale gas is increasingly overwhelmed by the zealots at the very top of the government.

The frack-heads think that the "gas strategy" published on the same day will ultimately prove to be much more significant for Britain's future prosperity than anything in the mini-budget. So they were cheered when the chancellor paved the way for drilling by trailing tax breaks to incentivise the exploration of shale gas and announced a new regulatory outfit, the Office for Unconventional (Shale) Gas, dubbed Ofshag. The belief that a glittering bounty is waiting to be released from those shales is at the heart of a "dash for gas", which envisages up to 30 new gas-fired power stations being built over the next 20 years.

It is easy to see why they get so excited by the thought that there are bountiful quantities of gas just waiting to be tapped under our feet. In the United States, shale gas has been transformative, triggering an energy revolution that has made America virtually self-sufficient in gas and cut prices to about a third of what they are in Britain. At a time when that politicians' favourite "the squeezed middle" are being hit by ever-ballooning bills from power companies, anything that seems to promise cheaper energy is bound to be extremely enticing.

Frack-heads talk feverishly about the reservoirs of shale gas being the equivalent of Britain's share of the original North Sea oil reserves. If that were to prove true, this would indeed provide a rich source of energy for Britain and a big boost to tax revenues for the Treasury. Some Tories even believe that shale gas could do for David Cameron what the black stuff did for Margaret Thatcher. The shale deposits under Lancashire alone, so they claim, could power the country for more than half a century. When they get really carried away, they reimagine Blackpool as the "Dallas of the North" with kiss-me-quick hats swapped for stetsons. Climate-change deniers are prominent among the frack-heads. Yet it also seems to offer something to greens because shale gas emits half as much carbon dioxide as coal.

Well, it is only human to dream and the temptation to fantasise about miraculous treasures is all the greater if you are a politician looking for relief from many more bleak years of austerity. The trouble with their dream is that it is very risky for Britain.

The way they talk, you might be misled into thinking that shale gas could be drilled today and start flowing tomorrow. The truth is that no one has a clue whether it can be exploited at all, no one will be sure for quite some time to come and, even if it can be profitably tapped, there are very hot arguments about whether it can be done safely. An experimental well operated by the shale gas company Cuadrilla in Lancashire has been suspended since June last year after two mini-earthquakes. The moratorium is expected to be lifted shortly, but the jury remains out on the risks to the environment and human health. The increasingly energetic opposition protest that the process pollutes the water table with toxic and carcinogenic chemicals. This is an issue even in a country as large and relatively empty as the United States. It will be even more so in a country as densely populated as Britain. In France, which is thought to have the second largest potential for shale gas in Europe, the National Assembly has responded to public alarm by banning the drilling of shales. As we report today, concern about the potential hazards of fracking is prompting the European Parliament to try to put the brakes on.

Even if it can be shown to be broadly safe – or at least as safe as any other form of energy exploitation – there will always be occupational hazards to drilling, which include blowouts, explosions and above-ground methane releases. We will see whether Conservative MPs are quite so enthusiastic for shale gas when they have to explain that to their constituents. We will also see how shire Tories take to the prospect of their pretty patches being invaded by huge convoys of juggernauts and disfigured by gas wells. Intensive drilling is incredibly disruptive. In the US, each typical well requires about 1,000 truckloads of equipment and materials. Texans are used to living with that and have long been accustomed to seeing well heads across their landscape. For Britons, this would be an alien experience. Almost all of our current oil and gas platforms are out at sea, far from public view. We cannot know precisely how public opinion would react to parts of Britain beginning to resemble Texas, but we can make an educated guess from how much some people hate the sight of an object as harmless as a wind turbine.

Then there is the huge hole at the heart of the frack-heads' dream. No one even knows yet how much shale gas can be profitably extracted. Estimates of the exploitable reserves vary wildly. In fact, no one can be sure whether it will be viable to get any of it at all out of the ground. Firms are only going to invest in shale gas if they will make some money out of it. That means they will want to be certain that the cost of extraction doesn't make shale gas uncompetitive against alternative forms of gas and other energy sources. Colin Smith, head of energy research at VTB Capital, tells me that there have been some 50 experimental wells across Europe to date. None – not a single one – appears to have flowed at a rate that would make them commercially viable. So while the frack-heads fantasise about a bonanza, the reality is that not so much as one cubic metre of shale gas has been profitably extracted anywhere in Europe.

The explanation is geology. Shales in Europe are generally thinner and deeper, and therefore much more expensive to tap, than those that have been successfully exploited in the United States. And Britain looks likely to be one of the less promising prospects in Europe because its shales are typically among the thinnest.

You might say that, having taken all the known facts into consideration, the sensible approach is to be sceptical about shale gas while carefully exploring the possibilities in case it proves to have more potential than is currently apparent. That is broadly the position that has been taken by Mr Davey and his department. But they appear to be losing the battle with the shale sect at the top of government who are investing so much hope – and want to throw in taxpayers' money too – in pursuit of fracking.

The risks of this "dash for gas" are multiple. It locks Britain into a continued reliance on an expensive, polluting fossil fuel. Money spent on gas diverts investment from renewables, which is especially bonkers when the green energy sector is one of the few parts of the British economy that is currently displaying good growth. It makes it less likely that we will meet our targets for reducing carbon emissions. Should shale gas truly turn out to be viable, there would be dividends. But if, which seems much more likely at the moment, the claims made for it prove to be false, then Britain is going to be even more exposed to future price shocks and blackmail by foreign suppliers. We are already hazardously dependent on imports from Russia and the Middle East. Much of our gas comes through the Straits of Hormuz from Qatari platforms just outside Iran's territorial waters. I don't know about you, but that doesn't make me feel terribly secure. Nor do I sleep easier at night when I think about Vladimir Putin's finger hovering over our national light switch.

To take so many risks with our nation's future on the basis of such a flimsy dream is – how can I put this politely? – fracking crazy.