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Home > Blogs > Anthony Harrington > The Oil Crunch – is London the only place that cares?

The Oil Crunch – is London the only place that cares?

Oil debate | The Oil Crunch – is London the only place that cares? Anthony Harrington

After penning the final part of my Peak Oil blog series ('Peak oil and collapse scenarios. Part 3'), I came across a more in-depth audio presentation by the Australian broadcaster, Catalyst, on the theme of the Oil Crunch. I’m adding these excerpts from the broadcast, together with a link to the original, as a rider to Part 3.

The Australian program alerted me to the fact that there is actually a UK Taskforce, called “The UK Industry Taskforce on Peak Oil and Energy Security (ITPEOS)", a group of British companies who are committed to raising awareness about the scale of the threat posed by what they see as the coming Oil Crunch. It is perhaps something of a comment on the success ITPEOS has achieved so far that I have to look to a chance encounter with an Aussie webcast to discover their existence. The group is chaired by Virgin and was put together, at least in part, by Dr Jeremy Leggett, author of Half Gone (a study of Peak Oil). Jeremy Leggett:

"Three years ago a few companies got together in a sort of ad hoc way because we had concerns about the high price of oil, and we decided to do a sort of business risk assessment of the peak oil issue. And going into that exercise the companies that were spread pretty much across British industry were not all of the view that there was definitely a problem, but the thinking was this is a very high consequence issue and there was interest in analysing whether it was a high probability issue as well. I thought it was and one or two of the others did as well. But by the end of the exercise, a year of looking at the risk assessment, we were all of the view that this is a very high-consequence and very high-risk issue, and that we need to respond to it proactively; governments, companies, communities. And that was our message in our first report in 2008, reiterated in our second report in 2010. And we think that this problem is actually as bad, if not worse, than the credit crunch. We say this in the foreword, the chief executives and the chairman of the companies, to our second report because it's going to come down on a world economy that is oil dependent, nay, oil addicted, as a great surprise when oil supply begins to descend, maybe even collapse. This is a huge whistle that we are trying to blow.”

The companies involved in ITPOES, the Peak Oil Task Force, include some big hitters. Not only is the group chaired by Virgin, but it also includes Scottish and Southern, the engineering company ARUP and Stagecoach Group, along with Kingfisher.

"The decline is now pretty terrifying"

In the broadcast, Chris Skrebowski, a Peak Oil consultant, comments:

“The decline is now pretty terrifying. To give you an idea, at the moment the global oil supply is losing the equivalent of the entire North Sea in about 15 months, or the entire production of Iran, which is OPEC's second biggest producer, in about 11 months... It's extremely hard to get your head around, and that shows the enormity of the challenge of even maintaining supply.”

Skrebowski points out that the IEA is now admitting openly that for the global oil supply to keep pace with global demand is going to be more than challenging within a very short time frame. ITPOES thinks the intersection point, where demand overtakes supply, and prices really start to soar, happens in 2014, sooner if world oil useage goes up. The IEA, he points out, has been steadily revising their demand figures up, literally all year in their monthly reports. The world is now using more oil than it was at the peak of 2008 before the global downturn hit. “We are producing more (now than we were then), but only a little bit more. So already we have caught that up. In oil demand terms the recession is behind us, and demand is powering up, driven by the Chinas and the Indias where their growth is being fuelled by oil,” Skrebowski says.

"The news is not very bright"

In this audio broadcast Catalyst provides a lot more comment from Fatih Birol, the chief economist of the IEA, than it features in Newby’s TV documentary (see Part 3). Fatih Birol:

"The news is not very bright. On the one hand we see that the global oil demand will increase substantially, mainly driven by the transportation sector, cars, and also by China as a country. Today in China 30 people out of 1,000 owns a car, and in the United States 700 people out of 1,000 people owns a car. And the Chinese, with their increasing income levels, are going to buy cars, which is justified, and therefore the demand for oil will increase substantially. On the one hand we have this pressure on the demand side, but when we look at the production side the prospects are a little bleak. We think that the crude oil production has already peaked in 2006, but we expect oil to come from the natural gas liquids, the type of liquid we have through the production of gas, and also a bit from the oil sands. But in any case it will be very challenging to see an increase in the production to meet the growth in the demand, and as a result of that one of the major conclusions we have from our recent work in the energy outlook is that the age of cheap oil is over. We all have to prepare ourselves, as governments, as industry, or as a private car driver, for higher oil prices...

I think governments in general are not well prepared for the difficulties we are going to face in the oil markets, because the bulk of the growth is coming from the transportation sector, and if we have to find the solution to the oil problems, we have to find a way to change our mobility habits. The only way I see, and it is well-documented in our book, is that to move from an oil-based to an electricity-based mobility system we should lower the oil demand growth and therefore comfort the oil markets. But it will be too optimistic to say that any of the governments, yours or mine, or many of the OECD governments are ready to face this challenge...”

Those who want a more detailed view can take a look at the free summary of the IEA’s 2010 Global Energy Report. But the upshot, as Dr. Birol says, is that the world needs to shift to electric cars tomorrow, or by next week at the latest. Is it doing so? Well, not exactly...

Half Gone: Oil, Gas, Hot Air and the Global Energy Crisis by Dr Jeremy Leggett is available in paperback from Portobello Books.

Further reading looking at shale gas, energy prices and collapse scenarios:

Tags: ARUP , Catalyst , china future , Chinese economy , Chris Skrebowski , collapse scenarios , credit crunch , Dr Jeremy Leggett , Fatih Birol , fossil fuels , Half Gone , IEA , International Energy Agency , ITPEOS , Kingfisher , OECD , oil and gas , oil crisis , Oil Crunch , oil debate , oil demand , oil prices , oil reserves , Peak Oil , Portobello Books , shale gas , Stagecoach Group , The UK Industry Taskforce on Peak Oil and Energy Security , Virgin
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