Module B1 Study Book - the Graduate School of the Environment

greenhouse gas emissions exceed the planet’s critical ‘tipping point’, it will
set us on course for abrupt, accelerated or runaway climate change. This
could entail massive agricultural losses, widespread economic collapse,
international water shortages, dangerous rises in sea levels, a slowdown of
the Gulf Stream, and tens of millions of environmental refugees -- a complex
of global catastrophes on a scale that would dwarf the recent events in New
Orleans and run for tens of thousands of years.
2) Access to abundant, cheap fossil fuels
Our unstoppable oil economies are now being halted by the immovable facts
of geology. Rather than talking about when oil could “run out”, the peak oil
experts predict that despite accelerating demand, global rates of production
may be at, or approaching, its peak. This is not news, way back 1956;
an oil geologist named M King Hubbert predicted that U.S. oil production
would peak in 1970. His superiors at Shell Oil were aghast. They even tried
to persuade him not to speak publicly about it. His peers, accustomed to
decades of making impressive oil discoveries, were highly sceptical, arguing
technological improvements in exploration and recovery would increase the
amount of available oil. But after decades of derision, Hubbert was proved
right. U.S. oil production did indeed peak in 1970, and it has declined steadily
ever since. Even impressive discoveries such as Alaska’s Prudhoe Bay,
with 13 billion barrels in recoverable reserves, or the developments of new
extraction technologies haven’t been able to reverse that trend – it is simply
imposed by the geology.
Peak Oil should come as no shock the oil industry who well understands the
process of discovery, extraction and depletion. North Sea oil has peaked,
as have the supplies of Mexico, Indonesia, China, Oman and Norway. The
inevitable peak of world oil production is now imminent, and to compound
the problem we are using oil quicker than ever before. There will be warning
signs. Set against escalating demand, prices will rise dramatically and
become increasingly volatile. With little or no excess production capacity, any
supply disruptions such as hurricanes in the Gulf of Mexico will drive world
oil markets into frenzy. As will occasional admissions by oil companies and
oil-rich nations that they have been overestimating their reserves.
Despite continuous warning from oil geologists and oil economists across
the world little action has been taken to deal with Peak Oil, and its inevitable
price shock. Why not? Because the prevailing belief is that the free market
will take care of it. However, normal economics break down when it comes to
oil. In most cases if the price of something goes up, more of it is produced.
But the price of oil has no effect on how much oil there is to be found. We are
currently using oil that we found 40 years ago. The industry can of course
switch to remote smaller fields, containing harder to extract oil, or make oil
from coal but this is neither cheap nor quick. A high price will not bring back
the massive, easily accessible discoveries of the early days. In addition, free
market principles forget about time lag. We cannot assume that as soon as
oil becomes scarce and expensive alternative forms of generation will be
ready to completely fill the gap. If the new energy technologies we require
12 Lecture: Energy futures