London (Platts)--10Feb2010/819 am EST/1319 GMT

A UK industry group Wednesday warned of the dangers to the country's economy from peak oil, which it said could occur by 2015 with production plateauing at "less than" 95 million b/d.

The UK Industry Taskforce on Peak Oil and Energy Security (ITPOES), made up of leading UK businesses such as Virgin, transportation company Stagecoach and utility Scottish and Southern Energy, said supply would soon be unable to match growing demand and that a subsequent oil price hike, to possibly more than $150/barrel, would be extremely damaging to oil consuming countries such as the UK.

ITPOES sees global oil demand rising to as high as 120 million b/d by 2030, which would push prices "well in excess" of $100/b, and maybe $150/b, in the next decade.

"For the UK at least, this could represent a structural change in the shape of our economy," it said in its report called "The Oil Crunch: A Wake-up Call for the UK Economy" published Wednesday.

The group called on the UK government to address the issue as a matter of urgency.

"Working together, we must ensure that the government takes action to address the impact of the oil crunch and ensure the UK is better prepared to withstand higher and more volatile oil prices," Richard Branson, the founder of Virgin, told a briefing in London.

"UK competitiveness will be hampered unless we can develop viable, affordable and secure long term sources of alternative energy," he said.

Branson warned that the imminent end of the era of cheap oil would have a "very wide" impact on all areas of the UK economy.

"Oil is and remains the blood of our economic life..but let's not let an oil crunch take us by surprise," he said.

The group called on the UK government to address the issue as quickly as possible.

"We need to pay attention now, the next government must prepare a contingency plan," Branson said.

GOVERNMENT RESPONSE

Chris Barton, head of the UK government's energy security department at the Department of Energy and Climate Change, said the government was already working to address the issues raised by the ITPOES report, including the setting up of a government-industry forum.

"We are in talks with the Energy Institute to set up a forum to discuss practical solutions," Barton said, adding that the UK needs to move from "strategy to delivery."

However, he said the government has "no firm view" on how oil supply and demand will develop in the coming years.

"We don't know what the future of supply and demand will be, but we do recognize the risk," Barton said.

"We need to reduce our dependency on oil as a key way to mitigate the risk," he said.

ITPOES was created in 2008 to address the issue of the UK's dependency on oil.

Philip Dilley, chairman of UK consultancy Arup, which drew up the report, said the aim was to provide "a united industry voice on peak oil."

"The recession has bought us probably two years of time, but we have little breathing space," he said.

"Oil shortages in terms of supply are just around the corner," he said.

Arup believes production will likely plateau at around 90 million b/d by 2015. "It is difficult to see it going anywhere north," Arup's John Miles told the briefing.

"We think supply will then begin to slide down the slope, [and] it is difficult to come to any other conclusion than that the price will go up," Miles said.

Ian Marchant, the CEO of Scottish and Southern Energy, said the UK should improve the tax regime for producing oil from the North Sea as one way to prepare for the "oil crunch."

"The tax regime for the North Sea needs an overhaul," he said, adding that the UK could supply as much as 60% of its oil needs from the North Sea by 2020, but only 40% "if we don't get the tax right."

Virgin's Will Whitehorn added that there needs to be immediate action from the government.

"We need the government to recognize the clear and present danger," he said. "And we need to hurry up or we will have a dislocated economy."

--Stuart Elliott, stuart_elliott@platts.com