The Oil Crunch: Securing the UK’s energy future

News UK October 2008

 * Leading businesses issue five year peak oil wake up call, October 29 Eight leading UK companies have launched a report, The Oil Crunch: Securing the UK’s energy future, warning that a peak in cheap, easily available oil production is likely to hit by 2013, posing a grave risk to the UK and world economy. The warning comes from a broad spectrum of industry (Arup, FirstGroup, Foster + Partners, Scottish and Southern Energy, Solarcentury, Stagecoach Group, Virgin Group, Yahoo).

The report from the newly-formed UK Industry Taskforce on Peak Oil and Energy Security is the first multi-company alarm bell to be sounded on peak oil. It sets out a series of practical recommendations for Government, including action to grasp the significant economic and environmental opportunities from a step-change in investment in renewable energy and sustainable transport.

Main conclusions
1. The effects of peak oil will be felt in the next five years - during the next term of government.

High oil prices combined with the credit crunch had a profound effect on the UK economy this year. The UK needs to plan for the impact of this scenario in the longer term.

In the absence of strong proactive action the Taskforce anticipate oil prices much higher than the existing record of $147 by 2013.

2. The risks to UK society from peak oil are far greater than those that tend to occupy the Government’s risk-thinking, including terrorism.

As easily and cheaply available oil supplies fall off, high oil prices will become a long-term trend having profound direct and indirect economic impacts:
 * Increased oil-based input costs for manufacturing and agriculture
 * Increased transport costs throughout the supply chain
 * Wider macro-economic shocks via higher inflation, balance of payments deficit and reduction of consumer demand.

3. The UK Government needs to re-prioritise peak oil - as the impacts are more likely to arrive first – before climate change.

Currently the Government places climate change as the first priority for policymaking, followed by energy security, with peak oil in last place. In contrast, the Taskforce analysis is that peak oil is more of an immediate threat to the economy and people’s lives than climate change, grave as that threat is too. A rapidly falling supply of oil is likely to hit us before the worst impacts of the greenhouse effect. The Government needs urgently to reflect this threat in their analysis and planning.

Welcome for new government department
The Taskforce welcomes the new Department of Energy and Climate Change headed by Ed Miliband and is encouraged by the steps he has taken to commit the UK to cut greenhouse gas emissions by 80% by 2050 and to introduce 'feed in' tariffs for renewable energy.

What the taskforce is calling for
At this critical turning point the Taskforce now urgently calls on the Government to:

Prioritise the peak oil threat and develop a strategy to address it Ed Miliband’s new department needs to develop a national energy plan that acknowledges the imminent threat of peak oil and addresses the entire energy sector.

Dramatically and rapidly increase investment in clean energy and renewables.

Policies in the UK Renewable Energy Strategy must go well beyond the EU targets for renewable energy (currently 20% of the energy mix by 2020).

Develop and implement a long term sustainable transport policy, with renewable energy sources at its heart

Increase transport fuelled by sustainable bio-liquids and electricity and escalate measures to reduce the amount of fossil-fuel-based road transport.

Quotes
"‘Toxic’ reserves are in danger of becoming for the oil industry what toxic derivatives have become for the financial industry. Having failed to act proactively to head off the credit crunch, we must not make the same mistake with the oil crunch. Oil deposits hold the potential for toxicity in three senses. Some we fear, have been claimed as proved reserves, but are exaggerated. Others may be in place underground, but are in danger of not being accessed in time to meet demand due to industry under-investment. Finally, the voluminous tar sands are especially greenhouse-toxic. We dare not forget the climate problem as we try to solve the end-of-easy-oil problem. ” Jeremy Leggett, Executive Chairman, Solarcentury