UK: Do not discount the threat of peak oil

By Will Whitehorn and Jeremy Leggett

Last week, the government published a review of the UK’s energy security situation. In a report commissioned by the prime minister, Malcolm Wicks, the former energy minister, pronounced that “there is no crisis”.

His findings were in marked contrast to those of the UK Industry Taskforce on Peak Oil and Energy Security, which concluded last year that the economy faces a clear and present energy-security threat. The taskforce, a group that includes Virgin, Scottish and Southern Energy, Arup, Stagecoach and Solarcentury, was set up in 2007 on the basis of our shared opinion that peak oil merited serious study as a business risk. Some began with the assumption that the issue was low-risk but high-consequence. Sadly, we are now of the collective view that peak oil is a high-risk, high-consequence issue.
How can government be so out of tune with such a wide spectrum of companies? The core of the disagreement is the point at which the world pumps as much oil in a day as it is ever going to pump. Beyond the peak, or plateau perhaps, lies a descent that would pose huge challenges for oil-dependent economies. There is a grave danger, in the view of the taskforce, that this will happen earlier than widely expected. In the words of its report: “The risks to UK society from peak oil are far greater than those that tend to occupy the government’s risk-thinking, including terrorism.”

We fear this is because of over-estimation of reserves by the global oil industry, underinvestment in exploration and production, or a combination of the two. Once the descent begins, the realisation would sweep the world that another leading industry has its asset assessment systemically wrong. The danger is that producing nations then start cutting exports. At that point, for some oil-consuming nations, energy crisis becomes energy famine.

Financial Times, through Google News