What if the Oil Runs Out?

The energy white paper the government published last week talks of new taxes, new markets, new research, new incentives. Anyone reading the chapter on transport would be forgiven for believing that the government has the problem under control: as a result of its measures, we are likely to see a great reduction in our use of geological time.

But buried in another chapter, and so far missed by all journalists, there is a remarkable admission. "The majority (66%) of UK oil demand is derived from demand for transport fuels which is expected to increase modestly over the medium term."(1) To increase? If the government is implementing all the exciting measures the transport chapter contains, how on earth could our use of fuel increase?

You won't find the answer in the white paper. It mysteriously forgets to mention that the government intends to build another 4000km of trunk roads and to double the capacity of our airports by 2030. Partly to permit this growth in transport, another white paper, also published last week, proposes a massive deregulation of planning law(2). There is no discussion in either paper of the implications of these programmes for energy use or climate change. There are plainly two governments of the United Kingdom: one determined to reduce our consumption of fossil fuel; the other determined to raise it.

What happens beyond the medium term is anyone's guess(3). But it should be pretty obvious that more roads and more airports will mean that our rising use of transport fuel becomes hard-wired: the future health of the economy will depend on it. So the government must have examined this question. If our economic lives depend on continued growth in the consumption of transport fuels, it must first have determined that such growth is possible. Mustn't it?

Last week I phoned four government departments (trade and industry, transport, environment, communities and local government) in the hope of finding this assessment. It does not exist. No report has ever been commissioned by the British government on the issue of whether or not there is enough oil to sustain its transport programme.

Instead, both the white paper and the civil servants I spoke to referred me to a book published by the International Energy Agency(4). This in itself is odd. On every other issue which might affect the United Kingdom's security or economic growth, the government conducts its own assessments. But in this case it relies exclusively on one external source. This reliance seems even odder when you read the IEA's book, and discover that it's as polemical as my columns.

Before it presents any evidence, the book dismisses people who have questioned future oil supplies as "doomsayers"(5). It announces that it has "long maintained that none of this [the possibility that oil supplies might be reaching a peak] is a cause for concern." Though it expects the global demand for oil to rise by 70% between now and 2030, and though it anticipates that output from the world's existing oilfields will decline by around 5% a year(6), it is confident that new supplies will make up the difference.

It bases this assessment on the finding that "the level of remaining reserves of oil has been remarkably constant historically, in spite of the volumes extracted each successive year"(7). As the IEA must know as well as anyone else, this is partly because the level has been forged by members of OPEC (the oil producers' cartel). The quota assigned to a member of OPEC reflects the size of its reserves. All members have a powerful interest in exaggerating their reserves in order to boost their quotas. The IEA admits in another report that Saudi Arabia has posted a constant level of reserves (260 billion barrels) over the past 15 years, despite the fact that it has produced over 100 billion barrels in the same period(8). Where has the magic oil come from?

But it is the liars of OPEC on which the agency's optimism relies. The growth in global demand will be met, it says, by a 150% increase in oil production from the Middle East by 2030(9). What if this oil doesn't materialise? It is a question the IEA raises then rapidly drops. "Because of the uncertainties over the respective amounts of resources and reserves, it is difficult to predict the moment of peak oil, when production might be expected to start to decline. Estimates range from today to 2050 or beyond."(10) Isn't that reassuring?

I should point out that peak oil is not like climate change: there is no consensus among scientists about when it is likely to happen. I cannot state with confidence that the IEA's assessment is wrong. But a report published in February by the US department of energy shows how dangerous it is to rely on a single source. "Almost all forecasts are based on differing, often dramatically differing geological assumptions ... Because of the large uncertainties, it is difficult to define an overriding geological basis for accepting or rejecting any of the forecasts."(11)

The report then publishes a long list of estimates by senior figures in and around the oil industry of a possible date for peak oil. They vary greatly, but many are clustered between 2010 and 2020. Another report, also commissioned by the US department of energy, shows that "without timely mitigation, the economic, social, and political costs will be unprecedented."(12) The disasters invoked by the peaking of global oil supplies can be avoided only with a "crash progamme" beginning 20 years before it occurs. If some of the estimates in the department of energy's report are correct, it is already too late.

The IEA believes that this crisis will be averted by opening new fields and using unconventional oil. But these cause environmental disasters of their own. Around half the new discoveries the agency expects over the next 25 years will take place in the Arctic or in the very deep sea (between 2000 and 4000 metres)(13). In either case, a major oil spill, in such slow and fragile ecosystems, would be catastrophic. Mining unconventional oil - such as the tar sands in Canada or the kerogen shales in the US - produces far more carbon dioxide than drilling for ordinary petroleum(14). It also uses and pollutes great volumes of freshwater, and wrecks thousands of acres of pristine land. "In the long-term future," the IEA says, "non-conventional, heavy oils may well become the norm rather than the exception."(15) If our future growth relies on these resources, we commit ourselves to ever-growing environmental impacts.

We don't need to invoke peak oil to produce an argument for cutting our use of transport fuel. But you might have imagined that the government would have shown just a little curiosity about whether or not its transport programme will bring the economy crashing down.

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References:

1. Department of Trade and Industry, May 2007. Meeting the Energy Challenge: A White Paper on Energy. Chapter 4, page 114. http://www.dtistats.net/ewp/ewp_full.pdf

2. HM Government, May 2007. Planning for a Sustainable Future: White Paper. http://www.communities.gov.uk/pub/669/PlanningforaSustainableFutureWhitePaper_id1510669.pdf

3. The medium term in this context is defined in one of the white paper's supporting documents as up to 2020. Wood Mackenzie, May 2007. Review of UK Oil Refining Capacity for Department of Trade and Industry. http://www.dti.gov.uk/files/file39390.pdf

4. International Energy Agency, 2005. Resources to Reserves: Oil & Gas Technologies for the Energy Markets of the Future. Available electronically at: http://www.iea.org/textbase/nppdf/free/2005/oil_gas.pdf

5. Page 3.

6. Page 13.

7. Page 27.

8. International Energy Agency, 2006. World Energy Outlook 2005: Middle East and North Africa Insights. Page 126. http://www.iea.org/textbase/nppdf/free/2005/weo2005.pdf

9. International Energy Agency, 2005, ibid. Page 61.

10. Page 28.

11. Robert L. Hirsch, 5th February 2007. Peaking of World Oil Production: Recent Forecasts. DOE/NETL2007/1263. US Department of Energy. http://www.netl.doe.gov/energy-analyses/pubs/Peaking%20of%20World%20Oil%20Production%20-%20Recent%20Forecasts%20-%20NETL%20Re.pdf

12. Robert L. Hirsch, Roger Bezdek and Robert Wendling, February 2005. Peaking Of World Oil Production: Impacts, Mitigation, & Risk Management. US Department of Energy. Available at http://www.hubbertpeak.com/us/NETL/OilPeaking.pdf

13. International Energy Agency, 2005, ibid. Page 65.

14. The IEA notes that: "Heavy oil production requires much more energy than conventional oil production. In fact, the production process in the upstream oil and gas industry currently consumes the equivalent of some 6% of the energy content of the hydrocarbons produced. With heavy oil, this ratio can rise to 20% or 25%." Page 78.

15. Page 26.