When Richard Branson starts talking about peak oil, it would be only natural to react with suspicion. He has no qualifications in this area, and his principal business depends on burning huge volumes of oil-based fuel.
As my colleague Kate Mackenzie observes, if you believe we are facing an “oil crunch”, should you really be investing a lot of money into space tourism? (The Virgin Galactic space plane is a rocket, not a jet, but it needs to be launched from a aircraft, and the rocket fuel needs to be manufactured.)
One of the prime movers behind the initiative is Jeremy Leggett, the British solar power entrepreneur who was a regular contributor to Energy Source from the Copenhagen climate talks, and is the author of books on peak oil, most notably “Half Gone“.
He has staked out his position on peak oil very clearly, but the group of businesses that he has collected is not taking a doctrinaire position of the kind that has led peak oilists to look foolish in the past.
As John Miles of Arup, the engineering consultancy that is part of the group, explains, it is not arguing that the peak in oil production is already passed, or that further expansion is impossible. He suggests an absolute maximum of about 95m barrels per day, in line with forecasts from Total, and at the bottom end of the range suggested by Tony Hayward of BP.
Nor is Mr Miles asserting there will be a steep decline thereafter. He accepts it is quite possible that production could stay at that level, in the low 90s of millions of barrels per day, for some time. As he points out, the real problems are likely to come not from plunging supply, but from soaring demand in emerging economies. The “peak demand” thesis has a lot of merit, but no-one believes it applies to China or India.
Another sign of cool-headedness is in Mr Miles’ oil price prediction. $100-$120 per barrel, he says, is likely to be the new equilibrium level, up from $75-ish today in mid-February 2010. That will create pressures on the economy, of course – it did last time – but is not quite the breakdown in civilisation that some peak oilists envisage.
Whether Virgin Atlantic is positioned for a sustained period of $100-plus oil is an interesting question. Will Whitehorn of Virgin points out that the company is backing research into biofuels and advanced materials for aircraft, but those efforts are unlikely to pay off within the five-year time frame talked about by Mr Branson.
Similarly, it is in the area of practical advice for policy makers that the report really falls down. There are some sensible ideas – support energy efficiency, increase incentives to sustain UK oil and gas production – but they are only sketchily developed.
Highlighting the risk of possible fossil fuel shortages and price volatility is a valuable service, but setting a clear lead on addressing those risks would be even better.