Policymakers recognise peak oil threat, now they need
to deal with it
Most officals in both Europe and the UK still believe peak oil is a
problem the markets will solve. That's a dangerous game to play
with our energy supplies, says Lionel Badal.
Two years ago, the British government was still confident that oil
reserves were abundant enough to meet rising demand until at least 2030.
In other words, we should not worry. This cheerful message
relied on the contested assessments made by the Paris-based
International Energy Agency (IEA).
However, ever since numerous academic studies and industry reports
have demonstrated that sometime within this decade global oil production
will star to decline. In shosrt, we are about to reach Peak Oil,
and we are completely unprepared. Brace for impact.
Who to believe?
To its credit, the British government, through the voice of the
Department of Energy and Climate Change (DECC), has recently changed its
previous position. DECC now admits that, 'we don't know what the
future of supply and demand will be, but we do recognise the risks.
Is Peak Oil happening next year or in 20 years? DECC just
doesn't know who to believe.
As a student working on this topic, earlier this year, I was able to
meet officials of DECC and a team of experts from the European
Commission's Energy Directorate-General. Those are the ones in
charge of securing our energy supplies.
You will be glad to learn that DECC doesn't have the capacity of make
its own assessments on oil production, or so I was told. OUr
societies may be totally dependent upon a finite resource, but the
government has no idea when it will start to decline. This has a
name: irresponsible behavior.
Oil shock risk
During the discussion, the head of DECC’s team eventually
admitted that, 'obviously, there is an issue' on Peak Oil. In fact, when
I mentioned the possibility of having a shortfall of 10 million barrels
per day (MBD) by 2015, as recently warned by the US Joint Forces
Command, they didn’t deny it could happen.
If a decline of 10 MBD seems too abstract, just imagine what would
happen tomorrow if a coup was to take place in Saudi-Arabia, shutting
down its entire oil production: a global catastrophe.
Still, they seemed to believe that only an oil shock could force us to
reduce our oil-addiction. They may be right, but shouldn’t we try
something else? As always, the poor will be the most severely affected
by such a crisis. But make no mistake the rich will be hit too. DECC’s
recent decision to enact a £34m cut in low-carbon tech programmes is
clearly reckless.
Alas, the situation at the European Commission’s Energy
directorate-general is not better. When I asked them why they were not
making their own assessments on Peak Oil, they replied that they did not
want to give a precise date, and risk being wrong. I was stunned.
That the US could want to influence the IEA as revealed by
whistleblowers is not impossible to imagine as it contributes to about
half of its budget. Call me naïve if you want but, if the IEA claims to
be independent and objective, this cannot be tolerated.
A market not supply problem
Except for one official of the European Commission team, out of the six
present, they all believed that, somehow, the market will solve the
problem of Peak Oil. The irony? The concerned senior energy economist,
used to work for Exxon Mobil, a leading Peak Oil denier.
How do the others expect the market to solve Peak Oil?
As production declines and tensions appear, oil prices will rise,
boosting investments in renewables, (climate unfriendly) unconventional
oil and energy efficiency. In appearance, it could, but mainstream
economists fail to understand a key element: Oil shocks lead to economic
recessions. They always do.
Prices will rise, but at some point they will push the economy into a
recession and perhaps even a depression. Then, demand will decline, as
will prices and any incentives to make these vital investments a
reality. What we will see is huge price volatility, a nightmare for any
energy investors. A self-destructive cycle of oil shocks followed by
recessions could be the new paradigm.
The market alone cannot solve Peak Oil.
What I witnessed during these meetings was a lack of courage, pervasive
wishful thinking and a frightening level of complacency.
An unanticipated decline in global oil production will have severe
effects on our oil-dependent societies. Regrettably, around 95 per cent
of transportation still relies on oil and our food production and
distribution systems are totally dependent upon this non-renewable
resource.
Failure to understand the issue and act now will result in a dramatic
energy famine. I cannot accept that, and neither should you.
This article originally published at:
http://www.theecologist.org
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