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20 May 2008

Why Planning for $200 Barrel Oil is so Important, or, Why Government is Failing Us in Times of Transition

signWith the oil price looking pretty settled at $126 a barrel having reached as high in recent days as $128, what does the UK Government estimate the future oil price to be? Clearly one would imagine that as the most responsible body in the land, charged with making long term decisions that affect us all, they would have their fingers on the pulse of this one. Unfortunately the official position is as insulting as it is pathetic.

In the Department for Business Enterprise and Regulatory Reform’s Energy White Paper (page 4) published in February 2008, they write;

The projections are based on three illustrative fuel price scenarios of low, central and high prices which reflect uncertainty over the outturn of future prices and are not detailed forecasts of future prices. The low prices scenario assumes a level oil price of 25$ per bbl throughout the projection period (2010 – 2020), a central scenario assumes $57/bbl in 2010, $50/bbl in 2015 and $52.5/bbl in 2020 and in the high price scenario where oil is $70/bbl in 2010 increasing to $80/bbl by 2020.

nbSo their worst case scenario in February 2008 was $70 a barrel by 2010. The oil price when the report was published had already passed $100 a barrel! Had they all fallen asleep? In an attempt to try and probe a bit deeper and hopefully to reveal that the Government had finally seen the error of its ways and upped their estimates, Norman Baker MP (see right: MP for Lewes, also the MP who questioned the death of Dr. Kelly), asked the following question the other day in the House of Commons, as reported in Hansard.

Norman Baker: To ask the Secretary of State for Transport pursuant to the answer of 4 March 2008, Official Report, columns 2263-4W, on oil: prices, whether she plans to revise her projections for the future price of oil in (a) 2010, (b) 2015 and (c) 2020. [204668]

Jim Fitzpatrick [holding answer 9 May 2008]: The Department for Transport uses oil price projections from the Department for Business, Enterprise and Regulatory Reform (BERR) in its transport modelling. On 2 May 2008, BERR published revised oil price assumptions to (a) $65; (b) $68; and (c) $70 for the years requested. These are in 2007 prices and refer to their central scenario. We are in the process of using these updated projections to make new road traffic and congestion forecasts. The new oil price projections will also be incorporated into the latest versions of Department guidance and software used in developing business cases for funding by promoters.

So in other words, when prodded by a Parliamentary question to come up with an overall assumption, months after oil first broke $100 for the first time on January 1st 2008, since when it has not dipped back into double figures, they go for something midway between their central and high scenarios in their White Paper. Heartening.

Especially as they must have been aware of the recent Goldman Sachs report that came out around the same time which said that the price was going up not down, and that $200 a barrel was not too far off. They also revised their forecast for the second half of 2008 from $107 to $141. At least someone is paying attention.

Couple that with the various indicators from, among others, Saudi Arabia, Russia and Norway that suggest forcibly that the UK has a major energy security crisis looming sooner rather than later and the Government’s feeble assessment really beggars belief.

Strikes me that at this point in time, in terms of our future forecasting, we need to be seriously planning for a $200 a barrel world, and that planning for anything less is criminally negligent. Whether it is a year away or 3 years away, fact is we have left ourselves virtually no time to prepare for it at all. At $200 a barrel, expansions to airports cease to be worth the investment, and one would have to question whether anyone has questioned how viable it is to build new nuclear power plants at that cost (given the high amount of embodied energy in the materials). Indeed, planning for $200 a barrel will lead to the asking of some very hard questions, questions which business as usual will really struggle to answer. $200 a barrel should become the equivalent to peak oil of what 35oppm is to the climate change campaigners, ie. the line in the sand. Anything less (or in the case of 350ppm, more) is not acceptable as it condemns us to breakdown and chaos, to lurching into an avoidable but entirely predictable mess.

Indeed it is not just Government who need to be planning for the $200 a barrel era. There are plenty of other organisations who develop long term plans that affect us all, principally local authorities, but also a range of others. I mentioned here the other day a talk I gave recently at Hartpury College near Gloucester, at the end of which I sat on a panel with various representatives of the South West Regional Development Agency. I was heartened to read in the local paper the following summary of the evening;

Director Makes Green Promise. 17th May 2008

An Agency charged with boosting Gloucestershire’s economy has pledged to go “carbon neutral” within five years.The South West Regional Development Agency’s area director for the West of England and Gloucestershire, Ian Knight, made a personal commitment to commission a study of the way rising oil prices will impact on the region’s economy.

The announcement was made in response to questioning of agency officials at the recent Gloucestershire Rural Partnership conference.

The keynote address to the event, at Hartpury College, was given by Rob Hopkins, founder and co-ordinator of the Transition Town Movement. Mr Hopkins explained that by addressing the challenge of oil dependency now, and being prepared, Gloucestershire’s local economy could turn a potential crisis into an opportunity.

So I didn’t just imagine it. Good. This is the question we need to ask all levels of Government, and you can be pretty sure that no-one will have an answer for you. This is where Energy Descent Action Plans come in, they demonstrate what creative thinking looks like when applied to this question, something Councils seem unable to do. They will set out creatively and practically how the town might thrive in this new world. We start serious work on the Transition Town Totnes one in a couple of weeks, and Lewes, Mr Baker’s constituency, are already underway.

Me, I long for a $200 a barrel world, as much as anything because perhaps when we get there, we will be able to sit down with the people at BERR who write this rubbish, and ask them what they thought they were doing. It should, as we sit beneath a mature walnut tree, with children running through the abundant food gardens behind us and as ripe, full walnuts punctuate the conversation by dropping earthwards and bouncing off our heads, be a most instructive conversation.

Comments are now closed on this site, please visit Rob Hopkins' blog at Transition Network to read new posts and take part in discussions.

15 Comments

PSJ
20 May 11:09am

The government/civil service, on this issue, perhaps should be seen as either guilty of criminal obfuscation, gross incompetence or living in la-la land. So many departments and ministries have been engaged on this issue, and it is all over the media, that there is no excuse for not knowing.

They are so out of line with the views of the independent experts and business analysts it is quite staggering, yet there is no way that they can be held to account.

Rob
20 May 2:10pm

To add a quote here that I came across today which sums up the above very nicely…

“We have only two modes – complacency and panic.”

James R. Schlesinger, the first U.S. Dept. of Energy secretary, on the country’s approach to energy (1977).

We are still stuck in the first mode, but the second can’t be too far off…

John Marshall
20 May 3:19pm

It’s likely that the Government and their advisors are in denial over peak oil since to initiate enquiries leading to proper contingency planning would, in their view bring about the second mode stated by Schlesinger (panic). It is insulting to say the least that our elected representatives have so little trust in the people of this country that they feel we will panic over sensible measures.
I personally feel a rising sense of panic due to the inaction present in central government at the moment.
I hope that all of our MP’s have signed John Hemmings Early Day Motion.

Jason Cole
20 May 8:02pm

I personally feel a rising sense of panic due to the inaction present in central government at the moment.
Yep, me too. Include society, pressure groups and the media as well; it’s not only the Government who are paralysed.

Doug Low
20 May 10:40pm

When I was with the Oil Depletion Analysis Centre, myself, Chris Skrebowski and Richard Hardman (both ODAC Trustees) met a team of four (economists) from the BERR Oil Markets team. Only one of them did all the talking on their behalf, and she said that oil prices would have to reach $500/barrel before they had a negative effect on the UK economy. Perhaps BERR is not worried about oil reaching $200/barrel?

Francis Macnaughton
21 May 7:35am

I raised this very issue with Anthony Steen, the Totnes MP, 3 weekends ago when he opened Sustainable South Brent’s “one year on” event. I still live in hope that he will raise it via more PQs but I am not holding my breath. I can only suggest that everyone who is concerned about this matter and PO generally approach their own MPs to highlight this gross failure of government to adequately plan for the future.

Dominique Kuster
21 May 1:04pm

This denial is not unique to the british government, I’ve seen similar numbers (or even worse but they were published in January 2007) from the swiss federal department of energy.

I guess that if they decided to start planning with real, non-cornucopians, numbers the conclusions would look like the Hirsh report and they are afraid of it because it would break all their illusions.

Anyway, this is another sample of the uselessness of governments to manage our changing future. Change must be induced by ourselves.

I take this opportunity to announce to french readers that a group is working on the translation of the “Transition initiative primer” into french: http://groups.google.com/group/objectif-resilience

Kind regards

Michael Connolly
21 May 1:47pm

By the time they admit the house is on fire all we will be able to do is fire fight “with no water” My mother used to say “You cant fatten a pig on market day”. The human project resembles nothing as much as cancer. If you ask a person who is aware of our predicament what they are willing to do to safeguard their children’s future they will say anything but do nothing. We behave in a malignant way constantinaly putting our immediate wants ahead of future needs even when that compromises our children’s ability to feed themselves.

mat noir
21 May 8:04pm

Paralysis of governments and despair of people results from sheer absence of alternatives that would fix the oil problem overnight or even in a generation. Neither blue collar scientists nor market systems based on quarterly results are in any position to offer a business-as-usual solution.

Even longer-term solutions involve pain, suffering, and war. How many politicians can admit to that and survive?

Neil L
22 May 1:51pm

Today – Thu 22 May – $135 a barrel is here – http://news.bbc.co.uk/1/hi/business/7414093.stm
a $4 increase on the previous day!

Plus a few stories that were briefly reported in the Metro whilst on my commute to work today…

1) Protests in Indonesia against rising fuel costs – a 30% increase in recent weeks

2) French fisherman blockade Calais and Boulogne in protests at rising fuels costs – since November diesel has risen from 32p a litre to 55p a litre – and they can’t catch more fish to offset rises due to EU quotas

3) Call for help as gallon of fuel tops £6 – rural communities in Scotland have called for government help as rural garages charging above the national average for fuel

4) Burma rejects US aid offer over fears for oil – Burma’s junta claims that aid offer ‘comes with strings attached’ that are ‘not acceptable’ to the Burmese people’ as they think the US will try to steal oil supplies

Not sure what to make of it all – passed the tipping point??

ROG
22 May 11:19pm

The danger of predicting higher oil prices in the near to medium future is that it gives people the impression that as long as they have some cash they’ll still be able to nip down to local petrol station and fill up as usual. The only thing that will have changed is the price on the board. This may turn out to be misleading. We have been told for twenty or thirty years that free markets are as close as we’re going to get to the ‘perfect market’ conditions economists seem to like. But with oil we are very far from a free market and even further from a perfect one. Before oil prices go up all that much further we’ll be facing a situation of absolute supply shortage. In other words when we go to the pump for our expensive petrol, someone else in another country will already have bought it. This is already happening in many parts of the world. Ironically, it often happens in oil exporting countries too – that’s how imperfect the market for oil is. What we should now be paying attention to is the legal framework for emergency measures in the event of widespread oil shortage. I’m not saying it’s definitely going to happen, but if it does, the laws that will come into effect have the potential, from a ‘transition’ perspective, to make the situation worse, rather than better. In a time of shortage, there will be some kind of prioritisation of who gets the supply, and, crucially, this is already legislated for. This will clearly affect the directtion of society from that point on. In particular, many of the existing emergency laws will probably assume that the ‘emergency’ is temporary and things will return to ‘normal’ later. One of the best thigs transition people could do vis-a-vis national government is to influence the legal framework to make it more receptive to the possibility that, allowing for some fluctuations, this situation is permanent and is not, in fact, an emergency.

Neil L
23 May 2:47pm

An interesting article on the MSN website http://money.uk.msn.com/investing/articles/nicklouth/article.aspx?cp-documentid=8133723

Actually speaking a bit of sense to say that this price increase is not temporary but is here to stay. No explicit mention of peak oil.

A great ‘royal’ quote: King Abdullah of Saudi Arabia summed up the new conservation attitude, one which perhaps Britain should have followed with North Sea oil, when he said “I keep no secret form you that when there are some new [oil] finds, I said: ‘No, leave it in the ground, with grace from God our children need it.’”

Mauibrad
25 May 8:15am

Good topic…$200 per barrel. Surprised there isn’t much more out there on it.

I’m looking for what is the high price per barrel at which trucking companies, shipping companies, utilities, banks, etc. can no longer effectively operate? Would it be higher or lower than $200 per barrel, esp. for transportation companies? Anybody out there know or done a good analysis on it?

Aloha, Brad

[...] for the assigning of values to variables, the recent surge in the price of oil has, as been noted here by Rob Hopkins, made a mockery of the Government’s scenarios in this year’s Energy [...]

[...] O cautare sumara pe web dupa cuvinte-cheie gen “oil peak” sunt suficiente pentru a lamuri despre ce vorbesc. In fine, problema pare a afecta mai mult pe cei din economiile cu adevarat avansate, care depinde in mod serios de aceste resurse energetice. Aparent, in afara unor proiecte gigantice precum al NASA de a crea o statie spatiala care sa capteze energie solara si apoi s-o trimita pe Pamant, alte chestii care sa rezolve o buna parte a problemei resurselor nu prea exista. Fisiunea nucleara se bazeaza pe minereuri greu de extras si prezinta riscuri serioase in exploatare, fuziunea pare a fi doar un basm, de ars vom mai avea lemn si carbune, cel putin pentru o vreme. Energia solara este captivanta ca idee, insa eficienta celulelor fotovoltaice este scazuta, plus ca acestea sunt construite din tot felul de materiale care necesita multa energie in procesul constructiei, si apoi mai au si o durata de viata limitata, asa ca per total s-ar putea sa nu fie asa economicoase. Ar mai fi energia hidroelectrica, ce merita o soarta mai buna. Pe alocuri, de asemenea, energia vantului si cea geotermala abia asteapta punerea la munca. clipped from transitionculture.org [...]