Tag: Oil crunch

Ian Holdsworth

I once came across a letter to a newspaper from someone who had calculated that wind turbines and tidal power might damage global weather patterns by extracting too much energy. Another reader suggested, not without sarcasm, that he should put away his solar calculator to avoid draining the sun.

Some other energy scare stories are not so easily dismissed. “Peak oil” campaigners warn, for example, that the world’s supplies of oil are about to peak and then quickly enter an irreversible decline – causing a global oil crunch. Among their number is solar power pioneer Jeremy Leggett, who this week wrote in the FT that “premature peak oil would be quite as bad as the credit crunch”.

Mr Leggett is a member of the UK’s Industry Taskforce on Peak Oil and Energy Security, which fears “an irrecoverable fall in global oil supply by 2015 at the latest”. The taskforce fears that “if oil producers then husband resources, a global energy crisis could abruptly morph into energy famine for some oil-consuming nations,” Mr Leggett says.

There are people on YouTube who believe peak oil has already arrived. Yet, in their annual reports, many oil companies continue to state every year that they are finding at least as much oil as they are producing. If you believe such data, reserve bases aren’t shrinking and peak oil could even be receding.

Yesterday, BP published its Statistical Review of World Energy 2010. There’s a table saying that at the end of 2009 the world’s proved oil reserves totalled 1,333.1bn barrels , which should last 45.7 years if production continues at the 2009 rate.

Such figures won’t impress Mr Leggett:

“Every year, peak-oil worriers say that they doubt the Opec oil producers’ reserve statistics echoed in BP’s review, that technology can only slow depletion not reverse it, that rising oil prices do not help when it takes so many years to extract new oil from increasingly exotic locations and that global supply is heading for an imminent fall.”

I’m no energy expert, but it seems only wise to me that we should take peak oil seriously, and I’m glad that the report produced in February by Mr Leggett’s taskforce was well-received by the UK’s Department of Energy and Climate Change. Still, I don’t see how the world can be in danger by 2015.

Some of the 1,333.1bn barrels in BP’s report will be deep under the ocean, but this fact is unlikely to precipitate peak oil. Despite President Barack Obama’s moratorium on new deepwater drilling since the Gulf of Mexico disaster, such projects will eventually resume and will continue for as long as oil companies find them profitable.

The oil price will therefore be a big factor in determining when peak oil arrives. If the price goes up as supplies dwindle, then the industry will continue to explore increasingly difficult areas, and peak oil will recede. But if it goes down, then peak oil may come sooner. The only way that prices will go down if supply goes down is if demand also goes down.

This brings me back to the winds and the tides – and some wishful thinking. Leaving aside China’s growing industrialisation, a green revolution could one day cut the price of oil. With lower prices, the industry will be unable to push the boundaries of its exploration, and peak oil will be ushered in just as we drive off in our electric cars.

I’ve learnt a few things in writing this. Most notably it seems that my letter-writer may have been on the right track. Apparently wind farms can change the weather.

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Christopher Cook is an FT editorial writer. Before joining the FT in 2008 as a Peter Martin Fellow, he worked for three years for the Conservative party.

Lorien Kite is deputy comment editor, a post he took up in 2009 after four years as a commissioning editor on the analysis page. He joined the FT in 2000.

Ian Holdsworth became assistant features editor in 2009 and was previously chief production journalist for the features pages.