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.
My musings last week on “peak oil” drew a fair number of comments, not least a wonderfully thought-provoking essay from “Oil Lady” arguing that energy availability controls the market – not the other way round. The post that particularly caught my eye, though, came from a bon viveur commenting on someone else’s blog: “I’m more worried about peak wine than peak oil.”
This time last week I wasn’t convinced that we face “an irrecoverable fall in global oil supply by 2015 at the latest”, which is the view of the UK’s Industry Taskforce on Peak Oil and Energy Security. So have I changed my mind?
Well, not on that precise point. But, at the risk of stating the obvious, peak oil is not the issue. The real danger is the “oil crunch” that could well happen even if the world’s oil supplies plateau in the next few years rather than fall off dramatically.
Whatever the level of global oil production, the industrialisation of China and other developing countries is likely to open up a big gap between supply and demand. A “convulsive shock in the global economy”, as Oil Lady puts it, seems entirely plausible. Is this crunch almost upon us – as she and other campaigners warn?
I’ve been running through some arguments that offer reassurance.
Here’s the first … “we’ll just move on to other energy sources”. In the same way that “the stone age didn’t end because of the end of stones, the oil age will not end because of the end of oil,” Erik Haugane, chief executive of the Norwegian oil company Det Norske, told the BBC’s Newsnight programme last week.
Second, “there is enough coal to buy us time”. Oil’s share as a percentage of total world energy consumption is in decline – and the deficit is being made up mainly by coal. It will last another 119 years, according to BP’s Statistical Review of World Energy 2010, published last week. (This assumes last year’s rate of production – which, of course, may be surpassed.)
Third, “have you heard how shale gas is about to change the world?” Technological breakthroughs mean that many of the economic and technical concerns about exploiting America’s huge shale gas reserves are being dealt with, Gideon Rachman wrote in the FT last month:
So nothing to worry about then? Not as such. There is inertia in the system – it takes time for fledgling technologies to take on global proportions. As analyst Gregor MacDonald puts it on www.gregor.us:
Managing the transition to new sources of energy will require solving problems of scalability and infrastructure. But even if coal takes up some of the slack, we still might not escape an oil crunch. This is because oil is not just a fuel – it has two other important markets.
As Oil Lady points out, it is also a feedstock for the production of manufactured goods, including plastics, computer components, and exotic alloys and materials. And, the nitrogen/petroleum component of the super-fertilisers and super-pesticides used on today’s giant farm-factories:
So we’re stuck on oil whether we like it or not.
I’ll be visiting friends in Dorset soon. Maybe I’ll cheer myself up with a trip to the nodding donkey at Kimmeridge Bay, close to the site of a new land-based oil strike. According to the BBC, David Brunell, who owns an exploration company, has discovered seven potential multi-million barrel oilfields at the site which he believes could be “a very, very commercial situation for all people involved”. This is what is so good about onshore, he adds. “It’s quick, it’s clean, it’s easy. There is risk, but there’s less risk.”
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