20 January 2006 06:05
What they don't want you to know about the coming oil crisis
Soaring fuel prices, rumours of winter power cuts, panic over the gas
supply from Russia, abrupt changes to forecasts of crude output... Is
something sinister going on? Yes, says former oil man Jeremy Leggett,
and it's time to face the fact that the supplies we so depend on are
going to run out
By Jeremy Leggett
Published: 20 January 2006
http://news.independent.co.uk/environment/article339928.ece
Adapted from "Half Gone: Oil, Gas, Hot Air and the Global Energy
Crisis", by Jeremy Leggett (Portobello Books, 99). To order a copy
for the special price of 99 (inc P&P), call Independent Books Direct
on 08700 798 8897
A spectre is haunting Europe - the spectre of an acute,
civilisation-changing energy crisis. The latest wobble over disruptions
to gas supplies from Russia is merely the latest in a series of
reminders of how dependent our economies are on growing supplies of oil
and gas. On Wednesday, Gazprom's deputy chairman was in London
reassuring Britain that there would be no risk of disruption to British
gas supplies in the fall-out from the ongoing spat between Russia and
Ukraine over pricing. The very next day, temperatures in Moscow broke a
50-year record, plunging to minus 30C. Gas normally exported was
diverted to the home front. Supplies to the West fell.
In December, Sir Digby Jones, director-general of the CBI, warned that
any shortfall in gas could cause disaster for British industry. The
problem, he said, was the likelihood - as forecast by the Met Office -
of a particularly cold British winter. This would mean more gas burning
in homes and power plants than our liberalised energy market - or its
infrastructure - might be able to supply. There aren't enough pipelines
from the continent to carry the imported gas that we need now that our
North Sea production is dropping. Tankers that are supposed to be
bringing liquefied natural gas (LNG) to the UK are instead following
market forces and going to the US, where gas prices have rocketed even
higher than they have here. Meanwhile, not enough gas has been
stockpiled, because market forces don't favour that kind of thing in
relatively warm years.
We shouldn't panic, insisted energy minister Malcolm Wicks, because
British Gas is being very grown up about it, and anyway all this will be
sorted out by 2007 when a new pipeline and more LNG plants come on
stream. Sceptics pointed out that our gas reserves were down to 11 days,
compared with an average of 55 on the Continent. That was before the
concerns about Russian supplies. If the thermometers fall in the UK it
is still quite possible that UK firms may have to stop using gas for one
day a week, or even that the suppliers will also have to introduce
rolling power cuts by postcode.
Meanwhile, domestic gas bills, which rose by more than a third last
year, are expected to rise even higher in the next few months. For many
people, such fluctuations have lethal implications. Last winter, there
were some 35,000 "excess winter deaths" in the UK, most of them
attributable to old people not being able to keep warm enough; and last
winter was a relatively mild one.
All this concerns gas, of which there are undoubtedly huge proved
reserves left in the ground (even if half of them are in Russia and
Iran). Consider oil. The geopolitical risks are the same. Only last week
Iran threatened to retaliate by cutting oil supplies if Europe continued
to meddle in what it sees as its right to develop a nuclear programme.
Where oil differs from gas is that a debate is fast emerging about
whether we have enough reserves to meet needs in the short term - even
if geopolitics don't kick in and the current infrastructure keeps
working as it should. At the annual summit of the Organisation of the
Petroleum Exporting Countries (Opec) in December, Kuwait told the world
that, without urgent outside help, it could not continue to pump oil at
its customary rate. The Kuwaiti oil minister invited Western oil
companies back into his country to see if they could do better. The very
next day the US government quietly slashed 11 million barrels a day
(that's equivalent to the entire daily output of Saudi Arabia) from its
forecast of oil production levels for 2025.
To most people who noticed them, such announcements will have seemed
remote and academic. In fact, as I shall attempt to explain, they
represent the tip of a very big iceberg indeed: one that holds the
potential to sink the global economy.
We have allowed oil to become vital to virtually everything we do.
Ninety per cent of all our transportation, whether by land, air or sea,
is fuelled by oil. Ninety-five per cent of all goods in shops involve
the use of oil. Ninety-five per cent of all our food products require
oil use. Just to farm a single cow and deliver it to market requires six
barrels of oil, enough to drive a car from New York to Los Angeles. The
world consumes more than 80 million barrels of oil a day, 29 billion
barrels a year, at the time of writing. This figure is rising fast, as
it has done for decades. The almost universal expectation is that it
will keep doing so for years to come. The US government assumes that
global demand will grow to around 120 million barrels a day, 43 billion
barrels a year, by 2025. Few question the feasibility of this
requirement, or the oil industry's ability to meet it.
They should, because the oil industry won't come close to producing 120
million barrels a day; nor, for reasons that I will discuss later, is
there any prospect of the shortfall being taken up by gas. In other
words, the most basic of the foundations of our assumptions of future
economic wellbeing is rotten. Our society is in a state of collective
denial that has no precedent in history, in terms of its scale and
implications.
Of the current global demand for oil, America consumes a quarter.
Because domestic oil production has been falling steadily for 35 years,
with demand rising equally steadily, America's relative share is set to
grow, and with it her imports of oil. Of America's current daily
consumption of 20 million barrels, 5 million are imported from the
Middle East, where almost two-thirds of the world's oil reserves lie in
a region of especially intense and long-lived conflicts. Every day, 15
million barrels pass in tankers through the narrow Straits of Hormuz, in
the troubled waters between Saudi Arabia and Iran. The US government
could wipe out the need for all their 5 million barrels, and staunch the
flow of much blood in the process, by requiring its domestic automobile
industry to increase the fuel efficiency of autos and light trucks by a
mere 2.7 miles per gallon. But instead it allows General Motors and the
rest to build ever more oil-profligate vehicles. Some sports utility
vehicles (SUVs) average just four miles per gallon. The SUV market share
in the US was 2 per cent in 1975. By 2003 it was 24 per cent. In
consequence, average US vehicle fuel efficiency fell between 1987 and
2001, from 26.2 to 24.4 miles per gallon. This at a time when other
countries were producing cars capable of up to 60 miles per gallon.
Most US presidents since the Second World War have ordered military
action of some sort in the Middle East. American leaders may prefer to
dress their military entanglements east of Suez in the rhetoric of
democracy-building, but the long-running strategic theme is obvious. It
was stated most clearly, paradoxically, by the most liberal of them. In
1980 Jimmy Carter declared access to the Persian Gulf a national
interest to be protected "by any means necessary, including military
force". This the US has been doing ever since, clocking up a bill
measured in the hundreds of billions of dollars, and counting. With such
a strategy comes a disquieting descent into moral ambiguity, at least in
the minds of something approaching half the country. The nation that
gave the world such landmarks in the annals of democracy as the Marshall
Plan is forced by deepening oil dependency into a foreign-policy maze
that involves arming some despotic regimes, bombing others, and
scrabbling for reasons to make the whole construct hang together.
America is not alone in her addiction and her dilemmas. The motorways of
Europe now extend from Clydeside to Calabria, Lisbon to Lithuania.
Agricultural produce that could have been grown for local consumption
rides along these arteries the length and breadth of the European Union.
The Chinese attempt to emulate this model even as they enforce
production downtime in factories because of diesel shortages and despair
that their vast national acreage seems to play host to so little oil.
There is a similar picture with gas. The scale of the addiction - and of
the resource - is smaller. But the patterns are the same: growing demand
for a finite resource, most of which has to be imported from the Middle
East and the former Soviet Union. Even a temporary blip in supply, such
as occurred in Europe this week, is enough to create something close to
panic among governments. But it is oil that keeps our civilisation
functioning.
This half-century of deepening oil dependency would be difficult to
understand even if oil were known to be in endless supply. But what
makes the depth of the current global addiction especially bewildering
is that, for the entire time we have been sliding into the trap, we have
known that oil is in fact in limited supply. At current rates of use,
the global tank is going to run too low to fuel the growing demand
sooner rather than later this century. This is not a controversial
statement. It is just a question of when.
Oil is a finite resource, and there will come a day, inevitably, when we
reach the highest amount of oil that can ever be pumped. Beyond that day
- which we can think of as the topping point, or "peak oil" as it is
often called - will lie a progressive overall decline in production.
Putting the same question a different way, then, at the current
prodigious global demand levels, where does oil's topping point lie?
This is a question, I contend, that will come to dominate the affairs of
nations before this first decade of the new century is out.
Already, a battle is raging, largely behind the scenes, about when we
reach the topping point, and what will happen when we do. In one camp,
those I shall call the "late toppers", are the people who tell us that 2
trillion barrels of oil or more remain to be exploited in oil reserves
and reasonably expectable future discoveries. This camp includes almost
all oil companies, governments and their agencies, most financial
analysts, and most business journalists. As you might expect, given this
line-up, the late toppers hold the ascendancy in the argument as things
stand.
In the other camp are a group of dissident experts, whom I shall call
the "early toppers". They are mostly people who - like me - have worked
in the heart of the oil industry, the majority of them geologists, many
of them members of an umbrella organisation called the Association for
the Study of Peak Oil (ASPO). They are joined by a small but growing
number of analysts and journalists. The early toppers reckon that 1
trillion barrels of oil, or less, are left.
In a society that has allowed its economies to become geared almost
inextricably to growing supplies of cheap oil, the difference between 1
and 2 trillion barrels is seismic. It is roughly the difference between
a full Lake Geneva and a half-full one, were that lake full of oil and
not water. If 2 trillion barrels of oil or more indeed remain, the
topping point lies far away in the 2030s. The "growing" and "cheap"
parts of the oil-supply equation are feasible until then, at least in
principle, and we have enough time to bring in the alternatives to oil.
If only 1 trillion barrels remain, however, the topping point will
arrive some time soon, and certainly before this decade is out. The
"growing" and "cheap" parts of the oil-supply equation become
impossible, and there probably isn't even enough time to make a
sustainable transition to alternatives.
Should the early toppers be right, recent history provides clear
signposts to what would happen. There have been five price peaks since
1965, all of them followed by economic recessions of varying severity:
after the 1973 Yom Kippur War; in 1979-80 after the Iranian revolution
and the outbreak of the Iran-Iraq war; in 1990, with the first Gulf War;
in 1997, with the Asian financial crisis; and in 2000, with the dot.com
collapse. The most intense peaks were the first two. In 1973, the oil
price more than doubled, reaching around $35 per barrel in modern value.
The cause was an embargo by Opec, led by Saudi Arabia, and triggered
through overt American support for Israel at the time of the Yom Kippur
War. World oil supplies fell only 9 per cent, and the crisis lasted only
for a few months, but the effect was simple and memorable for those who
lived through it: widespread panic.
The embargo was short-lived, largely because the Saudis feared that if
they kept it up they would create a global depression that would cripple
Western economies, and hence their own. As it was, the short embargo
created an economic recession. I spent much of it doing my homework by
candlelight. I didn't see much of my father. He was queuing for petrol.
The second, and worst, oil shock was triggered by the toppling of the
Shah of Iran in 1979, and prolonged by the outbreak of the Iran-Iraq War
in 1980. The first shock did not push prices as high as those at the
time of writing, but the second shock pushed them to more than $80 a
barrel in today's terms. Again panic reigned, even though the
interruption to global supplies was only four per cent.
The crisis ended in 1981 when the price fell for three main reasons.
First, the Saudis opened their taps. With their huge reserves, mostly
discovered in the 1940s and 1950s, they were able to act as a "swing
producer", increasing the flow to bring prices down just as they had
decreased it in 1973 to push prices up. Second, new oil came onstream
from giant oilfields in more stable regions of the globe, including the
North Sea. Third, large amounts of oil were released from government and
corporate stockpiles.
These three reasons are high on the list of why we should worry today,
because in the face of another shock things could not be resolved in a
similar way. First, there are grounds to worry that the Saudis are
pumping at or near their peak, no longer able to act as a swing
producer. Second, the early toppers fear that there are no more giant
oilfields left to find, much less wholly new oil provinces like the
North Sea. Third, there is not much oil in storage, relative to current
demand. The modern world works on the principle of just-in-time delivery
(another factor in the short-term crisis facing Britain this winter).
Our economies, overall, are more efficient in their use of oil than in
the 1970s - a point much emphasised by late toppers - but the sheer
weight of demand is much higher today, and it is still growing without
an end in sight, or even strong governmental or corporate leadership
demands that there should be one.
The cost of extracting a barrel of oil from the ground doesn't change
much. A good rule of thumb might be $5 a barrel today, though obviously
there are variations between oilfields in different geographic and
political settings. What influences the price of oil most is confidence
in supply and demand among oil traders. Oil prices are already at their
second highest levels ever, in real terms, at the time of writing. Some
pundits now profess that they will soon reach their highest ever levels,
in modern value. This situation has arisen for many reasons - but these
do not include the fear that the oil-production topping point is near.
Early-topper arguments are not on the radar screens of the oil traders
and analysts, as things stand. Should that happen, and should the mood
of the packs on the trading floors flip to the view that we live no
longer in a world of growing supplies of oil, but rather shrinking ones,
the price will soar north of $100 a barrel very quickly.
An investor friend of mine has already concluded that this scenario is
inevitable. He has switched his investment portfolio to anticipate the
moment of "market realisation". This peak panic point, as he calls it,
will not be limited to oil traders. The worlds of economics and business
routinely assume a future in which oil is in growing and cheap supply.
Economists tend to assume that their "price mechanism" will apply.
Higher prices will lead to more attractive conditions for exploration.
This will lead to more oil being found, and the inevitable discoveries
will bring the price down until the next cycle. Massive corporations
write five-year plans based on assumed access to cheap oil and gas.
Think, for example, how important such access must be to a chemical
company dealing in plastics derived from oil. Or a food-processing
company reliant on oil for every stage of food transportation, including
of perishable final products, plus almost all the bottling and packaging
and many of the preservatives and additives.
But suppose the economists and corporate planners are wrong? Imagine the
collapse of confidence when a critical mass of financial analysts,
across the full breadth of sectors in a stock exchange, conclude that
they are wrong?
If the topping point is indeed imminent, economic depression looms as a
real prospect. The Saudis were right to be scared of this possibility in
the 1970s. In the Great Depression of the 1930s, triggered in 1929 by
the worst-ever stock-market crash, economic hardship was horrific. World
trade fell by a breathtaking 62 per cent between 1929 and 1932. The
widespread unemployment and social unrest bred Fascism in many
countries, in some nations on a scale that would change the course of
history. As for the stock markets, it took them 50 years to regain their
pre-collapse value in real terms.
There are so many things to worry about in the fall-out from a premature
peak in oil production. Here is one that gives me particular nightmares.
When I and some of the oil-supply whistleblowers addressed a conference
on oil depletion in the formerly oil-rich nation known as Scotland last
year, five leaders of the British National Party sat in the audience.
They said nothing. They just listened, and learnt, and no doubt
reflected that the far right does well in tough times.
The stakes are high with energy policy. Higher than most people dream of
when they flip a light switch.
The question of how much oil is left actually breaks down into three
sub-questions. First, the existing-reserves question: how much oil is
there in discovered oilfields, mapped out, proved and ready to be
exploited? Second, the reserves-addition question: how much oil remains
to be added via new discoveries, enhanced recovery techniques and so
called unconventional oil? Finally, the speed-to-market question: how
fast can the oil, once found, be delivered to fuel tanks?
One also needs to consider these questions both in relation not only to
conventional oil - that is, liquid that sits underground in a reservoir
under pressure - but also unconventional oil (which consists of sands
and shales containing solidified oil or solid tar or bitumen deposits;
is mostly found in Canada, the United States and Venezuela; and carries
considerable environmental extraction costs). The same applies, strictly
speaking, to deep water oil (much-hyped by Exxon a few years ago but
already widely thought to have peaked) and gas, whose patterns of
availability tend to mirror those of oil, and which already faces its
own problems of increasing consumption (gas demand is expected to double
by 2030, reaching 4.3 billion tonnes of oil equivalent a year, of which
over 40 per cent will be used for power generation).
I find it hard to feel optimistic about any of the answers.
I say this as someone who, for most of the 1980s, was a creature of Big
Oil. I taught petroleum engineers and geologists at the
grandiose-sounding but in fact quite tatty Royal School of Mines, part
of Imperial College of Science and Technology in London. My researches
on the history of the planet included such issues as the source of oil,
and was funded by BP and Shell, among others. I also consulted for oil
companies. In those days, I was psychologically insulated in a quest for
the respect of my peer group, and highly selective as a consequence with
the information I allowed on to my radar screen. The build-up of
greenhouse gases (a separate but scarcely less urgent reason for
worrying about our dependence on oil) registered nowhere on my list of
concerns. I had concerns about oil depletion, but only in the sense that
this cloaked my quest to find more with a certain nobility, at least in
my own eyes.
But one thing that was clear to me even then was that most of the planet
has not a drop of drillable oil. Almost everywhere geologists have
looked - which means everywhere by now, at least at some level of
exploration - there is no oil because one or more of the key geological
requirements is missing. Even when all the boxes can be ticked, you can
end up finding no oil. Only one well drilled in every 10 finds oil. Only
one in a hundred finds an important oilfield. And the more wells that
are drilled in a province or country, the smaller the oilfields
generally tend to become.
In my book, Half Gone, I examine in detail the prospects of future
viability for each of the major sources described above. But one of the
most important arguments against over-confidence in future reserves can
be summarised simply.
Think of all that expertise that had been built up since the first oil
was drilled in 1859. Think of all the trillions of dollars in oil
revenues stacked up in the 20th century, and all the hundreds of
billions spent on exploration and the hi-tech toys of exploration in the
half-century since the biggest Saudi and Kuwait fields were discovered.
Think of the sophistication of the seismic reflection profiling
offshore. Consider the all-important oil source rocks, and how
relatively limited they are in distribution. As BP's former reserves
co-ordinator, Francis Harper, told the Energy Institute in November
2004: "We know how many world class source-rocks there are, and where
they are." Wouldn't it be reasonable to think that with modern
technology at least one more field of more than 80 billion barrels might
have been found somewhere, in all the places the companies have looked
these last 50 years?
The third-biggest oilfield in the world is Samotlor, discovered in 1961,
with 20 billion barrels. The fourth-biggest is Safaniya, discovered in
1951, at which time it also supposedly contained 20 billion barrels. The
fifth-biggest is Lagunillas, discovered in 1926, containing 14 billion
barrels. Only around 50 super-giant oilfields have ever been found, and
the most recent, in 2000, was the first in 25 years: the problematically
acidic 9-12 billion barrel Kashagan field in Kazakhstan.
Let us reduce our scale of scrutiny from the super-giant to the merely
giant. Half the world's oil lies in its 100 largest fields, and all of
these hold 2 billion barrels or more, and almost all of them were
discovered more than a quarter of a century ago. Consider the recent
record of discoveries of giant oil- and gas-fields of over 500 million
barrels of oil or oil equivalent. Half a billion barrels - the
definition of a "giant" field - sounds a lot. But since the world is
eating up more than 80 million barrels of oil a day at the moment, it is
in fact less than a week's global supply. In 2000 there were 16
discoveries of 500 million barrels of oil equivalent or bigger. In 2001
there were nine. In 2002 there were just two. In 2003 there were none.
On the basis of this kind of evidence, is the industry going to meet the
steady increase in demand with new discoveries? Francis Harper, for one,
doesn't seem to think so. "Worldwide, the frequency of finding giant oil
provinces and super-giant oilfields has been declining for decades and
will not be reversed," he told an agog audience at a November 2004
London conference on oil depletion held in the Energy Institute. "We've
looked around the world many times. I'd say there is no North Sea out
there. There certainly isn't a Saudi Arabia."
In January 2004, the early toppers' case suddenly looked a good deal
more worryingly feasible to those who have tended to take the late
toppers at face value. Shell's then chairman, Sir Philip Watts, told
investors that the company had overestimated its reserves by more than
20 per cent. By March, internal e-mails had been requisitioned by
lawyers and these made it clear that the chairman and his head of
exploration had known about this problem for some time, and had
deliberately lied about it. Both men departed the scene.
Shell's corporate scandal is dramatic enough. But there is a clear risk
that it is only the tip of an iceberg. Today, many people in the oil
industry appear to be under pressure when it comes to supplies of oil.
"There is something strange going on in this industry," Shell's
replacement boss, CEO Jeroen van der Veer, told the press in November
2004. He suspects that other companies have the same problems he
inherited. The Economist drew the following conclusion: "Industry
analysts and investors are quietly saying that Mr van der Veer may be
right, and another big reserves scandal may be brewing somewhere."
Against this unpromising start, how much oil do we think the oil
companies have found to date? Call BP for a bit of help with the answer
and you'll be sent their annual BP Statistical Review of World Energy.
In it, you'll see lists of data for national proven oil reserves. Add
these up to a global total of oil reserves year by year, and you'll see
the total creep reassuringly upwards over time. The chart on page seven
shows those figures, from successive annual reviews split into the
Middle East and the rest of the world. Global reserves rise from just
over 600 billion barrels in 1970 to almost double that today: 1,147
billion barrels at the last count, up to and including 2003.
So what's the problem? The first hint that something might be amiss
comes, as is so often the case in life, in the small print. Squinting
through a lens if you have anything but perfect eyesight, you will find
that the data in BP's own report are not BP's at all. The estimates have
been compiled using "a variety of primary official sources, third-party
data from the Opec Secretariat", and a few other places completely
removed from BP's headquarters in St James's Square with all its
accumulated research and knowledge. Think how many libraries of
understanding BP must have gathered in over a century of aggressive oil
exploration and production all over the world. And yet all they offer us
as a guide to our own understanding of how much "proved" oil reserves
there are left on the planet is a compilation of other people's data.
And much of that itself is secondhand.
After this revelation comes another. The small print continues: "The
reserves figures shown do not necessarily meet the United States
Securities and Exchange Commission definitions and guidelines for
determining proved reserves, nor necessarily represent BP's view of
proved reserves by country."
They don't even believe the figures they are publishing! Referee! This
is a publication used as an energy bible by researchers the world over.
Students quote it as whole truth in undergraduate essays. Journalists
quote it as gospel in legions of articles. They don't insert caveats
like this. Neither have they seen such caveats in earlier reports.
You might end up with a few questions for the authors of the BP Review
at this point. But then, at the end of the document, we read the
following: "BP regrets it is unable to deal with enquiries about the
data in the Statistical Review of World Energy."
So what is BP's real view of "proved" reserves? Could it go something
like this?
Looking closer at the chart and zooming in, you'll see that the figures
show that global reserves of oil went up particularly quickly between
1985 and 1990 (a big black oily arrow indicates the point). There must
have been some big new oilfields discovered then, right? Wrong. The
actual new discoveries in that period were less than 10 billion barrels.
But the Middle East nations hiked their "proved" reserves from already
discovered oilfields by fully 300 billion barrels collectively in that
period, professing one after another that their national calculations
had all somehow hitherto been too conservative. Three hundred billion
barrels is a lot of oil. It is more than a decade of demand at current
levels.
Here's how it happened. In the 1950s, the nations with oil organised
themselves into the cartel known as Opec. Opec's main aim was and is to
try and control the price of oil. They don't want it too low. That would
cut their income. Neither do they want it too high. That might get the
addicts thinking of maybe going elsewhere. They want it just right,
perhaps around $30 per barrel in today's money. To do this they can't
produce too much, because that would flood the market, causing the price
to drop. They have to produce exactly the right amount collectively, and
that means quotas. After much bickering in the early days, the Opec oil
ministers decided in 1982 to allocate a quota to each country in the
cartel according to the size of its reserves.
But in 1985, they began to - how shall I put it? - massage the data.
Kuwait was the first to give in to temptation. They found that their
reserves had gone up overnight from 64 to 90 billion barrels. In 1988,
Abu Dhabi, Dubai, Iran and Iraq all played the same card. Abu Dhabi had
been so needlessly conservative that their reserves went up from 31 to
92 billion barrels. They surely must have employed some incompetent
geologists. How could they have overlooked 60 billion barrels? Finally,
in 1990, Saudi Arabia decided it too had been conservative, hiking its
total from 170 to 258 billion barrels.
You can also see in BP's data that the Middle East's reserves have been
almost constant in size since then. What you don't see in the figure -
but do see in the data - is that this is apparently the case not just
for the sum of the reserves of the Middle Eastern oil producers but also
for the figures of reserves for the individual nations.
Consider the enormity of this coincidence. It means that the billions of
barrels found in new discoveries each year would have to match exactly
the billions of barrels produced each year in each of the Middle Eastern
OPEC nations, and do so consistently every year for more than a decade.
BP's Statistical Review of Everyone's World Energy Statistics Except
Their Own invites us to believe all this without comment from them or
recourse to questions by us. We are left to look at the total figure
they cite for "proved" reserves, 1.1 trillion barrels, and think to
ourselves ... "Er, really?"
The early toppers have a different view. Being in most cases old hands
from the oil industry, they know a thing or two about the games that go
on in their industry. They estimate the total of proved reserves to be
780 billion barrels, some 300 billion barrels short of "BP's" figures.
This is less than the world has produced since the first oil was struck
over a century ago: 920 billion barrels by the end of 2003 (a figure
about which there is somewhat less controversy).
Let us take some opinions that ought to be difficult to discount, one
from the top of the oil tree in the US and two from the Middle East. The
Houston-based energy investment banker Matthew Simmons has been one of
George W Bush's energy advisers. He has studied reports by Saudi
engineers showing that pressure is dropping in Saudi oilfields. The four
biggest fields (Ghawar, Safaniyah, Hanifa, and Khafji) are all more than
50 years old, having produced almost all Saudi oil in the past
half-century. These days, Simmons says, they have to be kept flowing
largely by injection of water. This is of explosive significance, he
argues. "We could be on the verge of seeing a collapse of 30 or 40 per
cent of their production in the imminent future. And imminent means some
time in the next three to five years - but it could even be tomorrow."
The Saudis dismiss this, claiming that they have slightly more than the
258 billion barrels of "proved" reserves they claimed they had in 1970,
with lots more yet to be found, and that they can lift the current
extraction rate of around 9.5 million barrels a day to more than 10 with
little difficulty. As Nansen Saleri, Manager of Reservoir Management at
Saudi Aramco, puts it: "... we have lots of oil, not only for our
grandchildren but for the grandchildren of our grandchildren."
Saudi Aramco has the largest reserves of all the oil companies in the
world: 20 times the size of ExxonMobil's, if they indeed have 260
billion barrels. They also have the lowest discovery and development
costs, some 50 cents per barrel, or 10 per cent of what the private
companies pay in Russia or the Gulf of Mexico. And, being state-run,
without much need for debt, they are under no pressure to divulge much
to the financial markets.
Lately, in the face of concerns about their ability to ramp up
production, they have been marginally more open. They say they can
maintain spare capacity of 1.5 to 2 million barrels per day and would be
content with a fair price of $32-$34 a barrel. Aramco's geologists have
insisted they can hike output to 15 million barrels a day (adding more
than 5 million to the 9.5 million reported today); 5 million of which
come from the giant Ghawar field alone. Contractors report that drilling
activity is increasing, as it needs to, given the age of the fields.
But consider what A M Samsam Bakhtiari of the National Iranian Oil
Company (NIOC) has told the Oil & Gas Journal about the
existing-reserves question: "I know from experience how 'reserves' are
estimated in major Middle Eastern and Opec countries, and the methods
used are usually far from scientific, as the basic knowledge for such a
complex exercise is not to hand." Bakhtiari is withering about Saudi
Arabia's reserves hike of 90 billion barrels in 1990. But he is not too
keen on his own national figures either. The BP Statistical Review cited
92 billion barrels of "proved" oil reserves at the end of 1993, but
Bakhtiari preferred the estimate of a retired NIOC expert, Dr Ali
Muhammed Saidi, who could add the proved reserves up to only 37 billion
barrels.
Dr Mamdouh Salameh, a consultant on oil to the World Bank, agrees there
is a 300-billion-barrel exaggeration in Opec's reserves. More recently,
a former director of Aramco has said that Saudi Arabia's proved
developed reserves stand at 130 billion barrels. An anonymous informer
talking to Dr Colin Campbell of the Association for the Study of Peak
Oil goes further. His conclusion is that Saudi Arabia would have gone
over its peak of production in the last quarter of 2004. This person
speaks with front-line inside knowledge. "Saudi has at various times put
19 fields into production," he says. "Of these, eight are 'stars', being
highly productive fields that produce around 90 per cent of the
country's production. All the others are 'dogs' that have never worked
well and probably never will. Recovery rates of up to 50 per cent may be
appropriate for the 'stars'. For the 'dogs', 10, 15 or 20 per cent would
be more appropriate. Make this adjustment and Saudi has depleted more
than 50 per cent of its realistically recoverable reserves."
In February 2005, Matthew Simmons speculated that the Saudis may have
damaged their giant oilfields by over-producing them in the past: a
geological phenomenon known as "rate sensitivity". In oilfields where
the oil is pumped too hard, the structure of the oil reservoir can be
impaired. In bad cases, most of a field's oil can be left stranded below
ground, essentially unextractable. "If Saudi Arabia has damaged its
fields, accidentally or not," Simmons said, "then we may already have
passed peak oil."
Is there any chance that the early topping point of oil production is
somehow wrong, all just a bad dream? I am sorry to say that I think not.
It is important to realise that the early toppers are not advocates or
agitators by choice. They tend to have high residual affection for the
industry they have spent their lives in. Colin Campbell, for example,
the founder of the Association for the Study of Peak Oil (ASPO), worked
for 40 years in the oil industry before retiring to western Ireland.
Chris Skrebowski, the editor of Petroleum Review, a leading trade
journal of the oil industry, spent nearly a decade arguing against
Campbell before conceding that he was right. "In 1995 it all seemed
pretty fantastic," says Skrebowski. "I tried hard to prove him wrong. I
have failed for nine years. I am now with him. In fact, I think he's a
bit of an optimist." Other early-toppers include Richard Hardman, former
chief executive of Amerada Hess; Roger Bentley, formerly of Imperial Oil
in Canada; and Roger Booth, who spent his professional life at Shell,
and who now believes that, when the peak does hit: "A crash of 1929
proportions is not improbable."
Chris Skrebowski believes that, from as early as 2007, the volumes of
new oil production are likely to fall short of the combined need to
replace lost capacity from depleting older fields and to satisfy
continued growth in demand. In fact, given the time frames with which
offshore oilfields are developed and depleted, it seems certain that
there will be nowhere near enough oil to meet the combined forces of
depletion and demand between 2008 and 2012. If there were, it would be
from projects we would know about today (oil companies liking as they do
to boast to their shareholders about every sizeable discovery). Given
the inevitable time-lag from discovery to production, there is now no
way to plug that gap.
There is worse: people in the oil industry must know this. They should
be alerting governments and consumers to the inevitability of an energy
crunch, and they aren't.
In July 2004, Campbell and Skrebowski tried to carry their warning
jointly to the UK parliament. In the Thatcher Room they delivered a
seminar to a pitifully thin audience, including only three MPs and a
handful of researchers. I sat there listening to it with as surreal a
feeling as I have ever experienced in all my years working on energy.
Over the course of a decade at and around the climate negotiations, I
have rarely been able to claim that the global warming problem is not
reaching the ears it needs to. The same can manifestly not be said about
the oil-depletion problem. This is the starting point for any analysis
of how serious the problem is. How can evidence so compelling go almost
unheard in one of the world's centres of government, even with a
suspiciously high oil price at the time and so much obvious oil-related
trouble brewing in the Middle East?
Having built their cases, the two spelt out the consequences of the
early topping point. "The perception of looming decline may be worse
than the decline itself," Campbell said. "There will be panic. The
market overreacts to even small imbalances. Prices are set to soar in
the absence of spare capacity until demand is cut by recessions. We will
enter a volatile epoch of price shocks and recessions in increasingly
vicious circles. A stock-market crash is inevitable."
"If the economic recovery continues," Skrebowski added, "supply will get
very tight from 2008 or 2009. Prices will soar. There is very little
time and lots of heads are in the sand."
In 1956, a Shell geologist called M King Hubbert famously calculated
that oil production in the "lower 48" states of America would peak in
1971. Almost nobody believed him. Shell censored the written version of
Hubbert's address to the American Petroleum Institute, changing the
wording of his conclusion to read that "the culmination should occur
within the next few decades". The US Geological Survey, in particular,
did everything it could to hike the estimates of ultimately recoverable
American oil to a level that would make the problem go away. The US had
590 billion barrels of recoverable oil, the survey said, in 1961,
meaning that the industry had 30 years of growth to look forward to.
The years went by and the "lower 48" did indeed hit their topping point.
It came a year ahead of estimate, in 1970, at 3.5 billion barrels. Since
then, production has sunk down the second half of the curve at a steady
rate. Many billions of dollars have been spent on ever more
sophisticated exploration, including in areas where nobody imagined oil
would be found at the peak of discovery in the 1930s, such as the deep
water in the Gulf of Mexico. A frenzy of new domestic exploration began
after the first Arab embargo in 1973 and the realisation that domestic
production could be ramped up no more. Every enhanced production
technique invented has been tried and tested in American oilfields. But
it has all made no difference to the remarkable symmetry of the
up-and-down curve that expressed Hubbert's thinking. The US is just
short of halfway down the second half of the curve now. In other words,
it has used up some three-quarters of its original endowment of
recoverable oil. Given its almost total lack of attention to the
efficiency with which oil is burned, the US becomes more dependent on
foreign oil imports by the day.
The US Secretary of the Interior at the time, Stewart Udall, later
apologised for having helped lull Americans into a "dangerous
overconfidence" by accepting the advice of the US Geological Survey so
unquestioningly. A long-serving US Geological Survey director who had
led the campaign against Hubbert, V E McKelvey, was forced to resign in
1977.
We need to remember this sequence of events, and the windows it gives us
into individual and collective behaviour, when we come to consider the
global oil topping point.
The American pattern of historical oil discovery and production is only
a loose guide to what is going on in the rest of the world. In the US,
oil, once found, was pumped without much substantive effort at
constraint. The curves for discovery and production are going to look
different where conservative nationalised companies are doing the
looking, or where - as in the case of Saudi Arabia - there has been so
much oil that the taps can be turned up and down for long periods so as
to moderate supply and thus influence price. Countries that have onshore
and offshore oil can have two curves, because the technology for
offshore oil exploitation was developed much later than that for
onshore. Curves will also be disrupted by wars, big political events,
even accidents. None the less, country after country follows a crude
bell curve - like Hubbert's curve - in both discovery and production.
Today, more than 60 out of the 65 countries possessing oil have passed
their discovery topping points and 49 of them have passed their
production topping points. The US has a particularly long gap between
the two: 40 years (1930 to 1970). The UK has one of the shortest: 25
years (1974 to 1999). This is because the first discoveries were made
much later in the UK, when technology for both exploration and
production were more advanced. Growing supplies of British oil didn't
last long, though. Britain is now a net oil importer just like the US.
Nor is there any comfort to be derived from gas. Gasfields deplete very
differently from oilfields, gas being much more mobile than oil. It is
normal for a gasfield to yield 70-80 per cent of its gas over its
production lifetime, whereas an oilfield will typically yield only 35-40
per cent of its oil. Drillers normally set gas production far below the
natural production capacity so as to give a long production plateau. But
the danger in this is that the end of the production plateau comes
abruptly, and without market signals.
Colin Campbell, a prominent early topper, estimates that the original
global endowment of conventional gas was around 10,000 trillion cubic
feet (equivalent to 1.8 trillion barrels of oil), of which about a
quarter has been produced to date. He expects a global plateau in
production of around 130 trillion cubic feet per year during the period
2015 to 2040, with production falling over a cliff beyond that. Jean
Laherrère forecasts 12,000 trillion cubic feet for all gas including
unconventional sources (2 trillion barrels of oil equivalent). He puts
the peak of gas depletion in 2030, at 130 trillion cubic feet per year.
But the exact figures need not concern us. What matters is that gas has
all the same problems of dependence on overseas supplies as oil, and
more besides.
Meanwhile, the five essential facts about global oil discovery can be
summarised as follows.
1. The biggest oilfields in the world were discovered more than half a
century ago, either side of the Second World War.
The big discoveries on the Arabian Peninsula opened with the discovery
of the Greater Burgan field in Kuwait in 1938. At that time, it
supposedly held 87 billion barrels. The slightly bigger Saudi Arabian
Ghawar field, supposedly holding 87.5 billion barrels before extraction
started, followed in 1948. These fields, the two biggest in the world,
are so big that they dominate the global figures in their years of
discovery.
2. The peak of oil discovery was as long ago as 1965.
How many people appreciate this? I invite you to do a bit of personal
market research. Line up ten of your better-educated friends. Preface
your question to them with a few reminders about how many millions of
dollars the oil companies make in daily profit, tell them, if you can,
an anecdote or two about the technical wizardry they use, and ask them
to imagine how many billions of dollars they must have spent on
exploration over the years - both of the companies' own money and of the
massive tax-deduction subsidies available to them. Then ask: in what
year would you guess the most oil was ever discovered?
3. There were a few more big discovery years in the 1970s, but there
have been none since then.
The biggest irregularity on the downside of the global discovery curve
involved the discovery of oil in Alaska's giant Prudhoe Bay field, and
the North Sea, in the late 1970s. I was a geology student then. I
remember the thrill as the giant fields were discovered one after the
other. They all had such serious-sounding names. Forties, Brent, Piper.
I look back on those days now and I see something of the primeval
attractions of the hunt in it. As a junior trainee hunter, I used to
listen to the tales of the senior hunters, and how they had found their
quarry, quite atremble with admiration. However, what I and the other
hunters didn't know was that the days of giant discoveries were more or
less over.
4. The last year in which we discovered more oil than we consumed was a
quarter of a century ago.
Since then, despite all those generations of eager brainwashed geology
students, we have been burning progressively more, and finding
progressively less. This is another one to try out on the 10 educated
friends.
5. Since then there has been an overall decline.
A small rise in discoveries in the 1990s that must have looked promising
at the time has dropped in the opening years of the new century. Does
this sound like a world without a looming oil depletion problem, as
portrayed by BP's CEO Lord Browne - who in March last year insisted
"There is no physical shortage. The resources are there"? Are people are
being lulled into a sense of false security about oil supply based on
his speeches, and publications like the BP Statistical Review of World
Energy? Or are we simply failing to pay sufficient attention to alarm
signals such as last month's little-noticed announcement by the US
government's Energy Information Administration, in which forecasts of
Opec production between now and 2025 were slashed by 11 million barrels
a day?
Let us suppose for a moment that the late toppers are correct. The
topping point, as defined by reserves available in principle, is off in
the 2020s or 2030s, and we can look forward to growing supplies of
relatively cheap oil for a decade or more. There is another aspect of
the problem: whether or not the production capacity is sufficient.
Oil-industry analyst Michael Smith, who took his PhD in geology just
after me - sitting in the same chair as I did in the research lab - is
an expert in this subject. He has spent most of his vocational life as
an oil-industry geologist working around the world, particularly in the
Middle East. "Reserves are largely irrelevant to the peak," he says.
"Production capacity is the important thing - how quickly you can get it
out. It is an engineering problem, not a geological problem."
Of the 11 countries in the Middle East, only five are significant oil
producers: Iran, Iraq, Kuwait, Saudi Arabia and the United Arab
Emirates, known sometimes as the Middle East Five. They produce around
20 million barrels a day today, a quarter of the global total. If global
demand rises at the average rate of the past 30 years, 1.5 per cent per
year, these five countries will have to meet around two-thirds of the
demand, Smith calculates.
Let us assume they can do what they say they can, no more, no less.
Where does that leave us? Saudi Arabia says it can lift production from
9.5 million barrels per day today to 12 million by 2016 and 15 million
beyond that. This despite 50 per cent of the oil coming from the Ghawar
field, where a water cut is already reported. Smith sums all the
reported capacities in the Middle East Five and finds that if the rate
of demand growth continues at 1.5 per cent they will fail to meet global
demand by as soon as 2011. If it rises to 2.5 per cent the demand gap
appears in 2008. If it is 3.5 per cent - the rates in China and the US
of late - the gap is already here.
"What's more," Smith adds, referring back wryly to the starting
assumption, "I do not truly believe the claims of the Middle East Five.
In fact, although I don't believe Saudi and Iranian claims in
particular, I think their politicians do believe them. I don't think
there is a conspiracy, more a division of labour such that no one knows
the whole story, each part of which has wide error bars. The summed
result is inevitably the most positive conclusion which goes to the
politicians. I've seen this in all the oil companies I have worked for."
At the November 2004 conference on oil depletion at the Energy
Institute, Michael Smith showed a slide at the end of his presentation
that gave a pictorial summary of his views. It showed a group of firemen
posing for the camera outside a burning house.
The investment bank Goldman Sachs drew attention to the problem of
access to oil on a global scale in a much-quoted 2004 report. "The
industry is not running out of oil - reserves are large and continue to
grow," it asserts - though failing to offer evidence of this analysis.
"What the industry is running out of is the ability to access this oil."
Two decades of chronic underinvestment in the 1980s and 1990s are
responsible. During this time the industry was feasting on reserves
discovered in the 1960s and earlier with infrastructure capitalised in
the 1970s, after the first oil shock. Global oil demand is now closing
fast on tanker capacity and refining capacity. The peak year for tanker
capacity was way back in 1981. So, too, was the peak for refinery
capacity. Global rig counts also peaked that year.
So, how much new investment is needed to fix the shortfall? Over the
next 10 years, assuming oil demand increases as commonly projected,
fully $2.4trillion will need to be spent, according to Goldman Sachs.
This is nearly triple the level of capital investment by the oil
industry in the 1990s. And if it isn't spent? "If the core
infrastructure does not improve, energy crises are likely to become
progressively more frequent, more severe and more disruptive of economic
activity," the investment bank concludes.
Stated simply, it seems that even if an early topping point doesn't hit
us, the results of two decades of negligence in investment in
infrastructure and exploration will. You need to read between the lines
of the Goldman Sachs report to smell the level of anguish about this.
Even where substantial money has been invested, a further list of
serious unresolved problems can often be quickly summoned up. Oil in the
Caspian is central to every scenario that envisages oil supply meeting
demand off into the 2020s. The oil industry has long regarded the
Baku-Ceyhan pipeline from Azerbaijan to Turkey as essential if it is to
get Caspian oil out to market without the need to go through Chechnya
and Russia. By the time this pipeline begins to shift oil as planned in
2005, it will have cost $4bn, almost three-quarters of that in the form
of bank loans. The problems for this pipeline begin with reports of its
construction standard. Four whistleblowers recently told a UK national
newspaper that the pipeline was failing all international construction
standards, including installation of inadequately welded pipe before it
had even been inspected. It passes through a major earthquake zone.
Turkey has had 17 major shocks in the past 80 years, and the pipeline is
supposed to last for 40 years.
At the time the pipeline was conceived, industry reports talked of
several hundreds of billions of barrels in the Caspian region. Now
estimates of around 50 billion barrels, about the same as the North Sea,
are more common. After the discovery of the last of the super-giants,
the Kashagan field in 1990, there was a burst of predictable interest in
Kazakhstan. But now, in terrain where individual wells cost $1bn to
drill, in conditions where only foreign companies have the know-how and
technology to drill, the Kazakh government has introduced new
legislation that makes investment unattractive. As an ExxonMobil
executive told Petroleum Review, "...the jury is still out on whether
all these obstacles will delay Kazakhstan's production".
This example of a real-world current problem for the oil industry raises
the subject of the interplay between the early topping point and oil
geopolitics. As the world's No 1 consumer, the United States will have
much to say about how the crisis - whether of early depletion or
inadequate infrastructure and investment, or both - plays out. The
geopolitics of American oil dependency is well summarised by Michael
Klare in his recent Blood and Oil. He sees four key trends in US energy
behaviour: more imports, increasingly unstable and unfriendly suppliers,
escalating risk of anti-American violence and rising competition for
diminishing supplies. Imports we have talked about above. Increasingly
unfriendly suppliers and escalating anti-American violence are linked.
The point here is that the US can have relationships with governments in
unstable countries if it chooses the path of oil dependency, but not
easily with their populations. Terrorism can be expected to grow with
every American act interpretable as imperialistic in the Middle East and
Central Asia. The Iraq-to-Turkey pipeline illustrates the problem
perfectly. It suffered near daily attacks in 2003.
As for competition over diminishing supplies, therein lies the stuff of
nightmares. The Pentagon established a Central Command in 1983, one of
five unified commands around the world, with the clear task of
protecting the global flow of petroleum. "Slowly but surely," Michael
Klare concludes, "the US military is being converted into a global
oil-protection service."
At $30 a barrel, the total bill for imported oil - now more than half
the US daily consumption and rising fast - should reach $3.5 trillion
over the next 25 years, and this does not include the Pentagon's
overhead. Beyond the Middle East Five, the Bush strategy of supplier
diversification will look to eight main sources, which Klare calls the
Alternative Eight: Mexico, Venezuela, Colombia, Russia, Azerbaijan,
Kazakhstan, Nigeria and Angola. These countries and their oil operations
are characterised by one or more of the following attributes:
corruption, organised crime, civil war, political turmoil short of civil
war, and ruthless dictators. The US military is being forced into deeper
relationships with such regimes, including joint military exercises.
The bottom line for Klare is this. "Any eruption of ethnic or political
violence in these areas could do more than entrap our forces there. It
could lead to a deadly confrontation between the world's military
powers." Because obviously, in a world as enduringly addicted to oil as
ours is, others are going to be looking for their own supplies. Russia
and China will be among them. As one global-security analyst recently
put it: "I am afraid that over the years we will see China become more
involved in Middle East politics. And they will want to have access to
oil by cutting deals with corrupt dictatorships in the region, and
perhaps providing components of weapons of mass destruction, ballistic
missiles and other things they have been involved with, and that could
definitely put them on a collision course with the United States." Oil
dependency could yet prove to be the route to a Third World War. The
stress associated with an unforeseen early topping point surely makes
that horrific prospect more, not less, likely.
Humans are good at staying loyal to their theocracies, and a hundred
years of fossil fuel addiction has created impressive theocracies.
However, as Einstein said, you can't solve the world's problems with the
same thinking that created them. We have to think outside the box. That
means giving renewable energy, alternative fuels, energy efficiency and
storage technologies the space they need to grow explosively.
The good news is that it will be possible to replace oil, gas and coal
completely with a plentiful supply of renewable energy, and faster than
most people think. Shell employs roomfuls of clever people just to think
about the future. They are called scenario planners. In their 2001 book
of scenarios, Shell's planners mention that renewable energy holds the
potential to power a future world populated with 10 billion people, and
do so with ease. The needs of the 10 billion can be met even in the
unlikely and undesirable event that all of them use energy at levels
well above the average per-capita consumption today in the EU. The Shell
futurists mention this almost in passing, in the caption of a diagram
showing the continent-by-continent potential for individual
renewable-energy technologies to contribute to such a power-rich future.
Working for an oil and gas giant as they do, it is perhaps no surprise
that they fail to explore a scenario wherein something resembling this
renewable-power-rich future comes to pass. Others are not so constrained.
When I began my time in Greenpeace, in 1989, the protestations my
colleagues and I made that renewable energy could displace fossil fuels
and run the world were ridiculed by energy experts and officialdom as
naïve wishful thinking. Now, more than a decade later, such views can be
found in the heart of government, at least in Europe. The Blair
Government published a report in 2003 that concluded: "It would be
technologically and economically feasible to move to a low
carbon-emissions path, and achieve a virtually zero-carbon-energy system
in the long term, if we used energy more efficiently and developed and
used low-carbon technologies."
Among the low-carbon technologies on offer, the government report placed
heavy emphasis on renewable energy and hydrogen, rather than nuclear
power. Of solar energy, the report concludes: "[It] alone could meet
world energy demand by using less than 1 per cent of land currently used
for agriculture." Tony Blair used these same words in the speech he gave
launching the UK Energy White Paper. I sat there watching him do it, 10
feet away in the front row. I was momentarily tempted to leap to my feet
and shout: "So why don't you invest in it like the Germans and Japanese,
then?" But he hasn't. Not then. Not now.
Microcosms of what could be done can be found already on the local
government scene. Take the small town of Woking. Its borough council has
cut carbon-dioxide emissions by fully 77 per cent - yes, more than three
quarters - since 1990 using a hybrid-energy system involving small
private electricity grids, combined heat and power (CHP), solar
photovoltaics (PV), and energy efficiency. Woking has turned its town
centre, its housing estates, and its old people's homes into
inspirational islands of energy self-sufficiency. The UK grid could go
down for ever, and these folks would have their own heating and
electricity year-round. The technologies work in perfect harmony. The
CHP units generate heating when needed in winter, and lots of
electricity along with it when the PV is not working at its best. The PV
generates plenty of electricity in the summer, when the heating isn't
needed, meaning the CHP can't generate much electricity. Because the use
of private wires is so much cheaper than using the national grid, the
whole package costs fractionally less than the equivalent heating and
electricity supply would cost from the big energy suppliers.
Compare such out-of-the-box ingenuity with what nuclear has to offer.
Even if there were no environmental problems associated with it, and we
could afford the billions needed in perpetuity from the public purse to
make the voodoo economics stack up, a new fleet of stations couldn't
come on-stream in the UK much before 2020. And if we and the Americans
can't solve the energy crisis without resorting to nuclear, the whole
world will follow our example. Bad as the terrorist threat is now, it
would be compounded many times as a result. We would live with much
increased risk of losing whole cities to suitcase bombers.
There is a part of me that looks at the prospect of a cold snap in
Britain this winter, and of a consequent fuel-supply crisis, and thinks
"Bring it on." Maybe this is what we need to stop our sleepwalk towards
catastrophe, and to make us rethink our energy policy. Perhaps the
government can be judo-thrown into the Wokingisation of Britain now, and
dissuaded from the nuclearisation of Britain 15 years from now.
But then I think of all the grans and granddads that would die in a
one-in-ten winter, and I just feel sad. Sad, and mad with our hot-air
Government.
Adapted from "Half Gone: Oil, Gas, Hot Air and the Global Energy
Crisis", by Jeremy Leggett (Portobello Books, 99). To order a copy
for the special price of 99 (inc P&P), call Independent Books Direct
on 08700 798 8897
A spectre is haunting Europe - the spectre of an acute,
civilisation-changing energy crisis. The latest wobble over disruptions
to gas supplies from Russia is merely the latest in a series of
reminders of how dependent our economies are on growing supplies of oil
and gas. On Wednesday, Gazprom's deputy chairman was in London
reassuring Britain that there would be no risk of disruption to British
gas supplies in the fall-out from the ongoing spat between Russia and
Ukraine over pricing. The very next day, temperatures in Moscow broke a
50-year record, plunging to minus 30C. Gas normally exported was
diverted to the home front. Supplies to the West fell.
In December, Sir Digby Jones, director-general of the CBI, warned that
any shortfall in gas could cause disaster for British industry. The
problem, he said, was the likelihood - as forecast by the Met Office -
of a particularly cold British winter. This would mean more gas burning
in homes and power plants than our liberalised energy market - or its
infrastructure - might be able to supply. There aren't enough pipelines
from the continent to carry the imported gas that we need now that our
North Sea production is dropping. Tankers that are supposed to be
bringing liquefied natural gas (LNG) to the UK are instead following
market forces and going to the US, where gas prices have rocketed even
higher than they have here. Meanwhile, not enough gas has been
stockpiled, because market forces don't favour that kind of thing in
relatively warm years.
We shouldn't panic, insisted energy minister Malcolm Wicks, because
British Gas is being very grown up about it, and anyway all this will be
sorted out by 2007 when a new pipeline and more LNG plants come on
stream. Sceptics pointed out that our gas reserves were down to 11 days,
compared with an average of 55 on the Continent. That was before the
concerns about Russian supplies. If the thermometers fall in the UK it
is still quite possible that UK firms may have to stop using gas for one
day a week, or even that the suppliers will also have to introduce
rolling power cuts by postcode.
Meanwhile, domestic gas bills, which rose by more than a third last
year, are expected to rise even higher in the next few months. For many
people, such fluctuations have lethal implications. Last winter, there
were some 35,000 "excess winter deaths" in the UK, most of them
attributable to old people not being able to keep warm enough; and last
winter was a relatively mild one.
All this concerns gas, of which there are undoubtedly huge proved
reserves left in the ground (even if half of them are in Russia and
Iran). Consider oil. The geopolitical risks are the same. Only last week
Iran threatened to retaliate by cutting oil supplies if Europe continued
to meddle in what it sees as its right to develop a nuclear programme.
Where oil differs from gas is that a debate is fast emerging about
whether we have enough reserves to meet needs in the short term - even
if geopolitics don't kick in and the current infrastructure keeps
working as it should. At the annual summit of the Organisation of the
Petroleum Exporting Countries (Opec) in December, Kuwait told the world
that, without urgent outside help, it could not continue to pump oil at
its customary rate. The Kuwaiti oil minister invited Western oil
companies back into his country to see if they could do better. The very
next day the US government quietly slashed 11 million barrels a day
(that's equivalent to the entire daily output of Saudi Arabia) from its
forecast of oil production levels for 2025.
To most people who noticed them, such announcements will have seemed
remote and academic. In fact, as I shall attempt to explain, they
represent the tip of a very big iceberg indeed: one that holds the
potential to sink the global economy.
We have allowed oil to become vital to virtually everything we do.
Ninety per cent of all our transportation, whether by land, air or sea,
is fuelled by oil. Ninety-five per cent of all goods in shops involve
the use of oil. Ninety-five per cent of all our food products require
oil use. Just to farm a single cow and deliver it to market requires six
barrels of oil, enough to drive a car from New York to Los Angeles. The
world consumes more than 80 million barrels of oil a day, 29 billion
barrels a year, at the time of writing. This figure is rising fast, as
it has done for decades. The almost universal expectation is that it
will keep doing so for years to come. The US government assumes that
global demand will grow to around 120 million barrels a day, 43 billion
barrels a year, by 2025. Few question the feasibility of this
requirement, or the oil industry's ability to meet it.
They should, because the oil industry won't come close to producing 120
million barrels a day; nor, for reasons that I will discuss later, is
there any prospect of the shortfall being taken up by gas. In other
words, the most basic of the foundations of our assumptions of future
economic wellbeing is rotten. Our society is in a state of collective
denial that has no precedent in history, in terms of its scale and
implications.
Of the current global demand for oil, America consumes a quarter.
Because domestic oil production has been falling steadily for 35 years,
with demand rising equally steadily, America's relative share is set to
grow, and with it her imports of oil. Of America's current daily
consumption of 20 million barrels, 5 million are imported from the
Middle East, where almost two-thirds of the world's oil reserves lie in
a region of especially intense and long-lived conflicts. Every day, 15
million barrels pass in tankers through the narrow Straits of Hormuz, in
the troubled waters between Saudi Arabia and Iran. The US government
could wipe out the need for all their 5 million barrels, and staunch the
flow of much blood in the process, by requiring its domestic automobile
industry to increase the fuel efficiency of autos and light trucks by a
mere 2.7 miles per gallon. But instead it allows General Motors and the
rest to build ever more oil-profligate vehicles. Some sports utility
vehicles (SUVs) average just four miles per gallon. The SUV market share
in the US was 2 per cent in 1975. By 2003 it was 24 per cent. In
consequence, average US vehicle fuel efficiency fell between 1987 and
2001, from 26.2 to 24.4 miles per gallon. This at a time when other
countries were producing cars capable of up to 60 miles per gallon.
Most US presidents since the Second World War have ordered military
action of some sort in the Middle East. American leaders may prefer to
dress their military entanglements east of Suez in the rhetoric of
democracy-building, but the long-running strategic theme is obvious. It
was stated most clearly, paradoxically, by the most liberal of them. In
1980 Jimmy Carter declared access to the Persian Gulf a national
interest to be protected "by any means necessary, including military
force". This the US has been doing ever since, clocking up a bill
measured in the hundreds of billions of dollars, and counting. With such
a strategy comes a disquieting descent into moral ambiguity, at least in
the minds of something approaching half the country. The nation that
gave the world such landmarks in the annals of democracy as the Marshall
Plan is forced by deepening oil dependency into a foreign-policy maze
that involves arming some despotic regimes, bombing others, and
scrabbling for reasons to make the whole construct hang together.
America is not alone in her addiction and her dilemmas. The motorways of
Europe now extend from Clydeside to Calabria, Lisbon to Lithuania.
Agricultural produce that could have been grown for local consumption
rides along these arteries the length and breadth of the European Union.
The Chinese attempt to emulate this model even as they enforce
production downtime in factories because of diesel shortages and despair
that their vast national acreage seems to play host to so little oil.
There is a similar picture with gas. The scale of the addiction - and of
the resource - is smaller. But the patterns are the same: growing demand
for a finite resource, most of which has to be imported from the Middle
East and the former Soviet Union. Even a temporary blip in supply, such
as occurred in Europe this week, is enough to create something close to
panic among governments. But it is oil that keeps our civilisation
functioning.
This half-century of deepening oil dependency would be difficult to
understand even if oil were known to be in endless supply. But what
makes the depth of the current global addiction especially bewildering
is that, for the entire time we have been sliding into the trap, we have
known that oil is in fact in limited supply. At current rates of use,
the global tank is going to run too low to fuel the growing demand
sooner rather than later this century. This is not a controversial
statement. It is just a question of when.
Oil is a finite resource, and there will come a day, inevitably, when we
reach the highest amount of oil that can ever be pumped. Beyond that day
- which we can think of as the topping point, or "peak oil" as it is
often called - will lie a progressive overall decline in production.
Putting the same question a different way, then, at the current
prodigious global demand levels, where does oil's topping point lie?
This is a question, I contend, that will come to dominate the affairs of
nations before this first decade of the new century is out.
Already, a battle is raging, largely behind the scenes, about when we
reach the topping point, and what will happen when we do. In one camp,
those I shall call the "late toppers", are the people who tell us that 2
trillion barrels of oil or more remain to be exploited in oil reserves
and reasonably expectable future discoveries. This camp includes almost
all oil companies, governments and their agencies, most financial
analysts, and most business journalists. As you might expect, given this
line-up, the late toppers hold the ascendancy in the argument as things
stand.
In the other camp are a group of dissident experts, whom I shall call
the "early toppers". They are mostly people who - like me - have worked
in the heart of the oil industry, the majority of them geologists, many
of them members of an umbrella organisation called the Association for
the Study of Peak Oil (ASPO). They are joined by a small but growing
number of analysts and journalists. The early toppers reckon that 1
trillion barrels of oil, or less, are left.
In a society that has allowed its economies to become geared almost
inextricably to growing supplies of cheap oil, the difference between 1
and 2 trillion barrels is seismic. It is roughly the difference between
a full Lake Geneva and a half-full one, were that lake full of oil and
not water. If 2 trillion barrels of oil or more indeed remain, the
topping point lies far away in the 2030s. The "growing" and "cheap"
parts of the oil-supply equation are feasible until then, at least in
principle, and we have enough time to bring in the alternatives to oil.
If only 1 trillion barrels remain, however, the topping point will
arrive some time soon, and certainly before this decade is out. The
"growing" and "cheap" parts of the oil-supply equation become
impossible, and there probably isn't even enough time to make a
sustainable transition to alternatives.
Should the early toppers be right, recent history provides clear
signposts to what would happen. There have been five price peaks since
1965, all of them followed by economic recessions of varying severity:
after the 1973 Yom Kippur War; in 1979-80 after the Iranian revolution
and the outbreak of the Iran-Iraq war; in 1990, with the first Gulf War;
in 1997, with the Asian financial crisis; and in 2000, with the dot.com
collapse. The most intense peaks were the first two. In 1973, the oil
price more than doubled, reaching around $35 per barrel in modern value.
The cause was an embargo by Opec, led by Saudi Arabia, and triggered
through overt American support for Israel at the time of the Yom Kippur
War. World oil supplies fell only 9 per cent, and the crisis lasted only
for a few months, but the effect was simple and memorable for those who
lived through it: widespread panic.
The embargo was short-lived, largely because the Saudis feared that if
they kept it up they would create a global depression that would cripple
Western economies, and hence their own. As it was, the short embargo
created an economic recession. I spent much of it doing my homework by
candlelight. I didn't see much of my father. He was queuing for petrol.
The second, and worst, oil shock was triggered by the toppling of the
Shah of Iran in 1979, and prolonged by the outbreak of the Iran-Iraq War
in 1980. The first shock did not push prices as high as those at the
time of writing, but the second shock pushed them to more than $80 a
barrel in today's terms. Again panic reigned, even though the
interruption to global supplies was only four per cent.
The crisis ended in 1981 when the price fell for three main reasons.
First, the Saudis opened their taps. With their huge reserves, mostly
discovered in the 1940s and 1950s, they were able to act as a "swing
producer", increasing the flow to bring prices down just as they had
decreased it in 1973 to push prices up. Second, new oil came onstream
from giant oilfields in more stable regions of the globe, including the
North Sea. Third, large amounts of oil were released from government and
corporate stockpiles.
These three reasons are high on the list of why we should worry today,
because in the face of another shock things could not be resolved in a
similar way. First, there are grounds to worry that the Saudis are
pumping at or near their peak, no longer able to act as a swing
producer. Second, the early toppers fear that there are no more giant
oilfields left to find, much less wholly new oil provinces like the
North Sea. Third, there is not much oil in storage, relative to current
demand. The modern world works on the principle of just-in-time delivery
(another factor in the short-term crisis facing Britain this winter).
Our economies, overall, are more efficient in their use of oil than in
the 1970s - a point much emphasised by late toppers - but the sheer
weight of demand is much higher today, and it is still growing without
an end in sight, or even strong governmental or corporate leadership
demands that there should be one.
The cost of extracting a barrel of oil from the ground doesn't change
much. A good rule of thumb might be $5 a barrel today, though obviously
there are variations between oilfields in different geographic and
political settings. What influences the price of oil most is confidence
in supply and demand among oil traders. Oil prices are already at their
second highest levels ever, in real terms, at the time of writing. Some
pundits now profess that they will soon reach their highest ever levels,
in modern value. This situation has arisen for many reasons - but these
do not include the fear that the oil-production topping point is near.
Early-topper arguments are not on the radar screens of the oil traders
and analysts, as things stand. Should that happen, and should the mood
of the packs on the trading floors flip to the view that we live no
longer in a world of growing supplies of oil, but rather shrinking ones,
the price will soar north of $100 a barrel very quickly.
An investor friend of mine has already concluded that this scenario is
inevitable. He has switched his investment portfolio to anticipate the
moment of "market realisation". This peak panic point, as he calls it,
will not be limited to oil traders. The worlds of economics and business
routinely assume a future in which oil is in growing and cheap supply.
Economists tend to assume that their "price mechanism" will apply.
Higher prices will lead to more attractive conditions for exploration.
This will lead to more oil being found, and the inevitable discoveries
will bring the price down until the next cycle. Massive corporations
write five-year plans based on assumed access to cheap oil and gas.
Think, for example, how important such access must be to a chemical
company dealing in plastics derived from oil. Or a food-processing
company reliant on oil for every stage of food transportation, including
of perishable final products, plus almost all the bottling and packaging
and many of the preservatives and additives.
But suppose the economists and corporate planners are wrong? Imagine the
collapse of confidence when a critical mass of financial analysts,
across the full breadth of sectors in a stock exchange, conclude that
they are wrong?
If the topping point is indeed imminent, economic depression looms as a
real prospect. The Saudis were right to be scared of this possibility in
the 1970s. In the Great Depression of the 1930s, triggered in 1929 by
the worst-ever stock-market crash, economic hardship was horrific. World
trade fell by a breathtaking 62 per cent between 1929 and 1932. The
widespread unemployment and social unrest bred Fascism in many
countries, in some nations on a scale that would change the course of
history. As for the stock markets, it took them 50 years to regain their
pre-collapse value in real terms.
There are so many things to worry about in the fall-out from a premature
peak in oil production. Here is one that gives me particular nightmares.
When I and some of the oil-supply whistleblowers addressed a conference
on oil depletion in the formerly oil-rich nation known as Scotland last
year, five leaders of the British National Party sat in the audience.
They said nothing. They just listened, and learnt, and no doubt
reflected that the far right does well in tough times.
The stakes are high with energy policy. Higher than most people dream of
when they flip a light switch.
The question of how much oil is left actually breaks down into three
sub-questions. First, the existing-reserves question: how much oil is
there in discovered oilfields, mapped out, proved and ready to be
exploited? Second, the reserves-addition question: how much oil remains
to be added via new discoveries, enhanced recovery techniques and so
called unconventional oil? Finally, the speed-to-market question: how
fast can the oil, once found, be delivered to fuel tanks?
One also needs to consider these questions both in relation not only to
conventional oil - that is, liquid that sits underground in a reservoir
under pressure - but also unconventional oil (which consists of sands
and shales containing solidified oil or solid tar or bitumen deposits;
is mostly found in Canada, the United States and Venezuela; and carries
considerable environmental extraction costs). The same applies, strictly
speaking, to deep water oil (much-hyped by Exxon a few years ago but
already widely thought to have peaked) and gas, whose patterns of
availability tend to mirror those of oil, and which already faces its
own problems of increasing consumption (gas demand is expected to double
by 2030, reaching 4.3 billion tonnes of oil equivalent a year, of which
over 40 per cent will be used for power generation).
I find it hard to feel optimistic about any of the answers.
I say this as someone who, for most of the 1980s, was a creature of Big
Oil. I taught petroleum engineers and geologists at the
grandiose-sounding but in fact quite tatty Royal School of Mines, part
of Imperial College of Science and Technology in London. My researches
on the history of the planet included such issues as the source of oil,
and was funded by BP and Shell, among others. I also consulted for oil
companies. In those days, I was psychologically insulated in a quest for
the respect of my peer group, and highly selective as a consequence with
the information I allowed on to my radar screen. The build-up of
greenhouse gases (a separate but scarcely less urgent reason for
worrying about our dependence on oil) registered nowhere on my list of
concerns. I had concerns about oil depletion, but only in the sense that
this cloaked my quest to find more with a certain nobility, at least in
my own eyes.
But one thing that was clear to me even then was that most of the planet
has not a drop of drillable oil. Almost everywhere geologists have
looked - which means everywhere by now, at least at some level of
exploration - there is no oil because one or more of the key geological
requirements is missing. Even when all the boxes can be ticked, you can
end up finding no oil. Only one well drilled in every 10 finds oil. Only
one in a hundred finds an important oilfield. And the more wells that
are drilled in a province or country, the smaller the oilfields
generally tend to become.
In my book, Half Gone, I examine in detail the prospects of future
viability for each of the major sources described above. But one of the
most important arguments against over-confidence in future reserves can
be summarised simply.
Think of all that expertise that had been built up since the first oil
was drilled in 1859. Think of all the trillions of dollars in oil
revenues stacked up in the 20th century, and all the hundreds of
billions spent on exploration and the hi-tech toys of exploration in the
half-century since the biggest Saudi and Kuwait fields were discovered.
Think of the sophistication of the seismic reflection profiling
offshore. Consider the all-important oil source rocks, and how
relatively limited they are in distribution. As BP's former reserves
co-ordinator, Francis Harper, told the Energy Institute in November
2004: "We know how many world class source-rocks there are, and where
they are." Wouldn't it be reasonable to think that with modern
technology at least one more field of more than 80 billion barrels might
have been found somewhere, in all the places the companies have looked
these last 50 years?
The third-biggest oilfield in the world is Samotlor, discovered in 1961,
with 20 billion barrels. The fourth-biggest is Safaniya, discovered in
1951, at which time it also supposedly contained 20 billion barrels. The
fifth-biggest is Lagunillas, discovered in 1926, containing 14 billion
barrels. Only around 50 super-giant oilfields have ever been found, and
the most recent, in 2000, was the first in 25 years: the problematically
acidic 9-12 billion barrel Kashagan field in Kazakhstan.
Let us reduce our scale of scrutiny from the super-giant to the merely
giant. Half the world's oil lies in its 100 largest fields, and all of
these hold 2 billion barrels or more, and almost all of them were
discovered more than a quarter of a century ago. Consider the recent
record of discoveries of giant oil- and gas-fields of over 500 million
barrels of oil or oil equivalent. Half a billion barrels - the
definition of a "giant" field - sounds a lot. But since the world is
eating up more than 80 million barrels of oil a day at the moment, it is
in fact less than a week's global supply. In 2000 there were 16
discoveries of 500 million barrels of oil equivalent or bigger. In 2001
there were nine. In 2002 there were just two. In 2003 there were none.
On the basis of this kind of evidence, is the industry going to meet the
steady increase in demand with new discoveries? Francis Harper, for one,
doesn't seem to think so. "Worldwide, the frequency of finding giant oil
provinces and super-giant oilfields has been declining for decades and
will not be reversed," he told an agog audience at a November 2004
London conference on oil depletion held in the Energy Institute. "We've
looked around the world many times. I'd say there is no North Sea out
there. There certainly isn't a Saudi Arabia."
In January 2004, the early toppers' case suddenly looked a good deal
more worryingly feasible to those who have tended to take the late
toppers at face value. Shell's then chairman, Sir Philip Watts, told
investors that the company had overestimated its reserves by more than
20 per cent. By March, internal e-mails had been requisitioned by
lawyers and these made it clear that the chairman and his head of
exploration had known about this problem for some time, and had
deliberately lied about it. Both men departed the scene.
Shell's corporate scandal is dramatic enough. But there is a clear risk
that it is only the tip of an iceberg. Today, many people in the oil
industry appear to be under pressure when it comes to supplies of oil.
"There is something strange going on in this industry," Shell's
replacement boss, CEO Jeroen van der Veer, told the press in November
2004. He suspects that other companies have the same problems he
inherited. The Economist drew the following conclusion: "Industry
analysts and investors are quietly saying that Mr van der Veer may be
right, and another big reserves scandal may be brewing somewhere."
Against this unpromising start, how much oil do we think the oil
companies have found to date? Call BP for a bit of help with the answer
and you'll be sent their annual BP Statistical Review of World Energy.
In it, you'll see lists of data for national proven oil reserves. Add
these up to a global total of oil reserves year by year, and you'll see
the total creep reassuringly upwards over time. The chart on page seven
shows those figures, from successive annual reviews split into the
Middle East and the rest of the world. Global reserves rise from just
over 600 billion barrels in 1970 to almost double that today: 1,147
billion barrels at the last count, up to and including 2003.
So what's the problem? The first hint that something might be amiss
comes, as is so often the case in life, in the small print. Squinting
through a lens if you have anything but perfect eyesight, you will find
that the data in BP's own report are not BP's at all. The estimates have
been compiled using "a variety of primary official sources, third-party
data from the Opec Secretariat", and a few other places completely
removed from BP's headquarters in St James's Square with all its
accumulated research and knowledge. Think how many libraries of
understanding BP must have gathered in over a century of aggressive oil
exploration and production all over the world. And yet all they offer us
as a guide to our own understanding of how much "proved" oil reserves
there are left on the planet is a compilation of other people's data.
And much of that itself is secondhand.
After this revelation comes another. The small print continues: "The
reserves figures shown do not necessarily meet the United States
Securities and Exchange Commission definitions and guidelines for
determining proved reserves, nor necessarily represent BP's view of
proved reserves by country."
They don't even believe the figures they are publishing! Referee! This
is a publication used as an energy bible by researchers the world over.
Students quote it as whole truth in undergraduate essays. Journalists
quote it as gospel in legions of articles. They don't insert caveats
like this. Neither have they seen such caveats in earlier reports.
You might end up with a few questions for the authors of the BP Review
at this point. But then, at the end of the document, we read the
following: "BP regrets it is unable to deal with enquiries about the
data in the Statistical Review of World Energy."
So what is BP's real view of "proved" reserves? Could it go something
like this?
Looking closer at the chart and zooming in, you'll see that the figures
show that global reserves of oil went up particularly quickly between
1985 and 1990 (a big black oily arrow indicates the point). There must
have been some big new oilfields discovered then, right? Wrong. The
actual new discoveries in that period were less than 10 billion barrels.
But the Middle East nations hiked their "proved" reserves from already
discovered oilfields by fully 300 billion barrels collectively in that
period, professing one after another that their national calculations
had all somehow hitherto been too conservative. Three hundred billion
barrels is a lot of oil. It is more than a decade of demand at current
levels.
Here's how it happened. In the 1950s, the nations with oil organised
themselves into the cartel known as Opec. Opec's main aim was and is to
try and control the price of oil. They don't want it too low. That would
cut their income. Neither do they want it too high. That might get the
addicts thinking of maybe going elsewhere. They want it just right,
perhaps around $30 per barrel in today's money. To do this they can't
produce too much, because that would flood the market, causing the price
to drop. They have to produce exactly the right amount collectively, and
that means quotas. After much bickering in the early days, the Opec oil
ministers decided in 1982 to allocate a quota to each country in the
cartel according to the size of its reserves.
But in 1985, they began to - how shall I put it? - massage the data.
Kuwait was the first to give in to temptation. They found that their
reserves had gone up overnight from 64 to 90 billion barrels. In 1988,
Abu Dhabi, Dubai, Iran and Iraq all played the same card. Abu Dhabi had
been so needlessly conservative that their reserves went up from 31 to
92 billion barrels. They surely must have employed some incompetent
geologists. How could they have overlooked 60 billion barrels? Finally,
in 1990, Saudi Arabia decided it too had been conservative, hiking its
total from 170 to 258 billion barrels.
You can also see in BP's data that the Middle East's reserves have been
almost constant in size since then. What you don't see in the figure -
but do see in the data - is that this is apparently the case not just
for the sum of the reserves of the Middle Eastern oil producers but also
for the figures of reserves for the individual nations.
Consider the enormity of this coincidence. It means that the billions of
barrels found in new discoveries each year would have to match exactly
the billions of barrels produced each year in each of the Middle Eastern
OPEC nations, and do so consistently every year for more than a decade.
BP's Statistical Review of Everyone's World Energy Statistics Except
Their Own invites us to believe all this without comment from them or
recourse to questions by us. We are left to look at the total figure
they cite for "proved" reserves, 1.1 trillion barrels, and think to
ourselves ... "Er, really?"
The early toppers have a different view. Being in most cases old hands
from the oil industry, they know a thing or two about the games that go
on in their industry. They estimate the total of proved reserves to be
780 billion barrels, some 300 billion barrels short of "BP's" figures.
This is less than the world has produced since the first oil was struck
over a century ago: 920 billion barrels by the end of 2003 (a figure
about which there is somewhat less controversy).
Let us take some opinions that ought to be difficult to discount, one
from the top of the oil tree in the US and two from the Middle East. The
Houston-based energy investment banker Matthew Simmons has been one of
George W Bush's energy advisers. He has studied reports by Saudi
engineers showing that pressure is dropping in Saudi oilfields. The four
biggest fields (Ghawar, Safaniyah, Hanifa, and Khafji) are all more than
50 years old, having produced almost all Saudi oil in the past
half-century. These days, Simmons says, they have to be kept flowing
largely by injection of water. This is of explosive significance, he
argues. "We could be on the verge of seeing a collapse of 30 or 40 per
cent of their production in the imminent future. And imminent means some
time in the next three to five years - but it could even be tomorrow."
The Saudis dismiss this, claiming that they have slightly more than the
258 billion barrels of "proved" reserves they claimed they had in 1970,
with lots more yet to be found, and that they can lift the current
extraction rate of around 9.5 million barrels a day to more than 10 with
little difficulty. As Nansen Saleri, Manager of Reservoir Management at
Saudi Aramco, puts it: "... we have lots of oil, not only for our
grandchildren but for the grandchildren of our grandchildren."
Saudi Aramco has the largest reserves of all the oil companies in the
world: 20 times the size of ExxonMobil's, if they indeed have 260
billion barrels. They also have the lowest discovery and development
costs, some 50 cents per barrel, or 10 per cent of what the private
companies pay in Russia or the Gulf of Mexico. And, being state-run,
without much need for debt, they are under no pressure to divulge much
to the financial markets.
Lately, in the face of concerns about their ability to ramp up
production, they have been marginally more open. They say they can
maintain spare capacity of 1.5 to 2 million barrels per day and would be
content with a fair price of $32-$34 a barrel. Aramco's geologists have
insisted they can hike output to 15 million barrels a day (adding more
than 5 million to the 9.5 million reported today); 5 million of which
come from the giant Ghawar field alone. Contractors report that drilling
activity is increasing, as it needs to, given the age of the fields.
But consider what A M Samsam Bakhtiari of the National Iranian Oil
Company (NIOC) has told the Oil & Gas Journal about the
existing-reserves question: "I know from experience how 'reserves' are
estimated in major Middle Eastern and Opec countries, and the methods
used are usually far from scientific, as the basic knowledge for such a
complex exercise is not to hand." Bakhtiari is withering about Saudi
Arabia's reserves hike of 90 billion barrels in 1990. But he is not too
keen on his own national figures either. The BP Statistical Review cited
92 billion barrels of "proved" oil reserves at the end of 1993, but
Bakhtiari preferred the estimate of a retired NIOC expert, Dr Ali
Muhammed Saidi, who could add the proved reserves up to only 37 billion
barrels.
Dr Mamdouh Salameh, a consultant on oil to the World Bank, agrees there
is a 300-billion-barrel exaggeration in Opec's reserves. More recently,
a former director of Aramco has said that Saudi Arabia's proved
developed reserves stand at 130 billion barrels. An anonymous informer
talking to Dr Colin Campbell of the Association for the Study of Peak
Oil goes further. His conclusion is that Saudi Arabia would have gone
over its peak of production in the last quarter of 2004. This person
speaks with front-line inside knowledge. "Saudi has at various times put
19 fields into production," he says. "Of these, eight are 'stars', being
highly productive fields that produce around 90 per cent of the
country's production. All the others are 'dogs' that have never worked
well and probably never will. Recovery rates of up to 50 per cent may be
appropriate for the 'stars'. For the 'dogs', 10, 15 or 20 per cent would
be more appropriate. Make this adjustment and Saudi has depleted more
than 50 per cent of its realistically recoverable reserves."
In February 2005, Matthew Simmons speculated that the Saudis may have
damaged their giant oilfields by over-producing them in the past: a
geological phenomenon known as "rate sensitivity". In oilfields where
the oil is pumped too hard, the structure of the oil reservoir can be
impaired. In bad cases, most of a field's oil can be left stranded below
ground, essentially unextractable. "If Saudi Arabia has damaged its
fields, accidentally or not," Simmons said, "then we may already have
passed peak oil."
Is there any chance that the early topping point of oil production is
somehow wrong, all just a bad dream? I am sorry to say that I think not.
It is important to realise that the early toppers are not advocates or
agitators by choice. They tend to have high residual affection for the
industry they have spent their lives in. Colin Campbell, for example,
the founder of the Association for the Study of Peak Oil (ASPO), worked
for 40 years in the oil industry before retiring to western Ireland.
Chris Skrebowski, the editor of Petroleum Review, a leading trade
journal of the oil industry, spent nearly a decade arguing against
Campbell before conceding that he was right. "In 1995 it all seemed
pretty fantastic," says Skrebowski. "I tried hard to prove him wrong. I
have failed for nine years. I am now with him. In fact, I think he's a
bit of an optimist." Other early-toppers include Richard Hardman, former
chief executive of Amerada Hess; Roger Bentley, formerly of Imperial Oil
in Canada; and Roger Booth, who spent his professional life at Shell,
and who now believes that, when the peak does hit: "A crash of 1929
proportions is not improbable."
Chris Skrebowski believes that, from as early as 2007, the volumes of
new oil production are likely to fall short of the combined need to
replace lost capacity from depleting older fields and to satisfy
continued growth in demand. In fact, given the time frames with which
offshore oilfields are developed and depleted, it seems certain that
there will be nowhere near enough oil to meet the combined forces of
depletion and demand between 2008 and 2012. If there were, it would be
from projects we would know about today (oil companies liking as they do
to boast to their shareholders about every sizeable discovery). Given
the inevitable time-lag from discovery to production, there is now no
way to plug that gap.
There is worse: people in the oil industry must know this. They should
be alerting governments and consumers to the inevitability of an energy
crunch, and they aren't.
In July 2004, Campbell and Skrebowski tried to carry their warning
jointly to the UK parliament. In the Thatcher Room they delivered a
seminar to a pitifully thin audience, including only three MPs and a
handful of researchers. I sat there listening to it with as surreal a
feeling as I have ever experienced in all my years working on energy.
Over the course of a decade at and around the climate negotiations, I
have rarely been able to claim that the global warming problem is not
reaching the ears it needs to. The same can manifestly not be said about
the oil-depletion problem. This is the starting point for any analysis
of how serious the problem is. How can evidence so compelling go almost
unheard in one of the world's centres of government, even with a
suspiciously high oil price at the time and so much obvious oil-related
trouble brewing in the Middle East?
Having built their cases, the two spelt out the consequences of the
early topping point. "The perception of looming decline may be worse
than the decline itself," Campbell said. "There will be panic. The
market overreacts to even small imbalances. Prices are set to soar in
the absence of spare capacity until demand is cut by recessions. We will
enter a volatile epoch of price shocks and recessions in increasingly
vicious circles. A stock-market crash is inevitable."
"If the economic recovery continues," Skrebowski added, "supply will get
very tight from 2008 or 2009. Prices will soar. There is very little
time and lots of heads are in the sand."
In 1956, a Shell geologist called M King Hubbert famously calculated
that oil production in the "lower 48" states of America would peak in
1971. Almost nobody believed him. Shell censored the written version of
Hubbert's address to the American Petroleum Institute, changing the
wording of his conclusion to read that "the culmination should occur
within the next few decades". The US Geological Survey, in particular,
did everything it could to hike the estimates of ultimately recoverable
American oil to a level that would make the problem go away. The US had
590 billion barrels of recoverable oil, the survey said, in 1961,
meaning that the industry had 30 years of growth to look forward to.
The years went by and the "lower 48" did indeed hit their topping point.
It came a year ahead of estimate, in 1970, at 3.5 billion barrels. Since
then, production has sunk down the second half of the curve at a steady
rate. Many billions of dollars have been spent on ever more
sophisticated exploration, including in areas where nobody imagined oil
would be found at the peak of discovery in the 1930s, such as the deep
water in the Gulf of Mexico. A frenzy of new domestic exploration began
after the first Arab embargo in 1973 and the realisation that domestic
production could be ramped up no more. Every enhanced production
technique invented has been tried and tested in American oilfields. But
it has all made no difference to the remarkable symmetry of the
up-and-down curve that expressed Hubbert's thinking. The US is just
short of halfway down the second half of the curve now. In other words,
it has used up some three-quarters of its original endowment of
recoverable oil. Given its almost total lack of attention to the
efficiency with which oil is burned, the US becomes more dependent on
foreign oil imports by the day.
The US Secretary of the Interior at the time, Stewart Udall, later
apologised for having helped lull Americans into a "dangerous
overconfidence" by accepting the advice of the US Geological Survey so
unquestioningly. A long-serving US Geological Survey director who had
led the campaign against Hubbert, V E McKelvey, was forced to resign in
1977.
We need to remember this sequence of events, and the windows it gives us
into individual and collective behaviour, when we come to consider the
global oil topping point.
The American pattern of historical oil discovery and production is only
a loose guide to what is going on in the rest of the world. In the US,
oil, once found, was pumped without much substantive effort at
constraint. The curves for discovery and production are going to look
different where conservative nationalised companies are doing the
looking, or where - as in the case of Saudi Arabia - there has been so
much oil that the taps can be turned up and down for long periods so as
to moderate supply and thus influence price. Countries that have onshore
and offshore oil can have two curves, because the technology for
offshore oil exploitation was developed much later than that for
onshore. Curves will also be disrupted by wars, big political events,
even accidents. None the less, country after country follows a crude
bell curve - like Hubbert's curve - in both discovery and production.
Today, more than 60 out of the 65 countries possessing oil have passed
their discovery topping points and 49 of them have passed their
production topping points. The US has a particularly long gap between
the two: 40 years (1930 to 1970). The UK has one of the shortest: 25
years (1974 to 1999). This is because the first discoveries were made
much later in the UK, when technology for both exploration and
production were more advanced. Growing supplies of British oil didn't
last long, though. Britain is now a net oil importer just like the US.
Nor is there any comfort to be derived from gas. Gasfields deplete very
differently from oilfields, gas being much more mobile than oil. It is
normal for a gasfield to yield 70-80 per cent of its gas over its
production lifetime, whereas an oilfield will typically yield only 35-40
per cent of its oil. Drillers normally set gas production far below the
natural production capacity so as to give a long production plateau. But
the danger in this is that the end of the production plateau comes
abruptly, and without market signals.
Colin Campbell, a prominent early topper, estimates that the original
global endowment of conventional gas was around 10,000 trillion cubic
feet (equivalent to 1.8 trillion barrels of oil), of which about a
quarter has been produced to date. He expects a global plateau in
production of around 130 trillion cubic feet per year during the period
2015 to 2040, with production falling over a cliff beyond that. Jean
Laherrère forecasts 12,000 trillion cubic feet for all gas including
unconventional sources (2 trillion barrels of oil equivalent). He puts
the peak of gas depletion in 2030, at 130 trillion cubic feet per year.
But the exact figures need not concern us. What matters is that gas has
all the same problems of dependence on overseas supplies as oil, and
more besides.
Meanwhile, the five essential facts about global oil discovery can be
summarised as follows.
1. The biggest oilfields in the world were discovered more than half a
century ago, either side of the Second World War.
The big discoveries on the Arabian Peninsula opened with the discovery
of the Greater Burgan field in Kuwait in 1938. At that time, it
supposedly held 87 billion barrels. The slightly bigger Saudi Arabian
Ghawar field, supposedly holding 87.5 billion barrels before extraction
started, followed in 1948. These fields, the two biggest in the world,
are so big that they dominate the global figures in their years of
discovery.
2. The peak of oil discovery was as long ago as 1965.
How many people appreciate this? I invite you to do a bit of personal
market research. Line up ten of your better-educated friends. Preface
your question to them with a few reminders about how many millions of
dollars the oil companies make in daily profit, tell them, if you can,
an anecdote or two about the technical wizardry they use, and ask them
to imagine how many billions of dollars they must have spent on
exploration over the years - both of the companies' own money and of the
massive tax-deduction subsidies available to them. Then ask: in what
year would you guess the most oil was ever discovered?
3. There were a few more big discovery years in the 1970s, but there
have been none since then.
The biggest irregularity on the downside of the global discovery curve
involved the discovery of oil in Alaska's giant Prudhoe Bay field, and
the North Sea, in the late 1970s. I was a geology student then. I
remember the thrill as the giant fields were discovered one after the
other. They all had such serious-sounding names. Forties, Brent, Piper.
I look back on those days now and I see something of the primeval
attractions of the hunt in it. As a junior trainee hunter, I used to
listen to the tales of the senior hunters, and how they had found their
quarry, quite atremble with admiration. However, what I and the other
hunters didn't know was that the days of giant discoveries were more or
less over.
4. The last year in which we discovered more oil than we consumed was a
quarter of a century ago.
Since then, despite all those generations of eager brainwashed geology
students, we have been burning progressively more, and finding
progressively less. This is another one to try out on the 10 educated
friends.
5. Since then there has been an overall decline.
A small rise in discoveries in the 1990s that must have looked promising
at the time has dropped in the opening years of the new century. Does
this sound like a world without a looming oil depletion problem, as
portrayed by BP's CEO Lord Browne - who in March last year insisted
"There is no physical shortage. The resources are there"? Are people are
being lulled into a sense of false security about oil supply based on
his speeches, and publications like the BP Statistical Review of World
Energy? Or are we simply failing to pay sufficient attention to alarm
signals such as last month's little-noticed announcement by the US
government's Energy Information Administration, in which forecasts of
Opec production between now and 2025 were slashed by 11 million barrels
a day?
Let us suppose for a moment that the late toppers are correct. The
topping point, as defined by reserves available in principle, is off in
the 2020s or 2030s, and we can look forward to growing supplies of
relatively cheap oil for a decade or more. There is another aspect of
the problem: whether or not the production capacity is sufficient.
Oil-industry analyst Michael Smith, who took his PhD in geology just
after me - sitting in the same chair as I did in the research lab - is
an expert in this subject. He has spent most of his vocational life as
an oil-industry geologist working around the world, particularly in the
Middle East. "Reserves are largely irrelevant to the peak," he says.
"Production capacity is the important thing - how quickly you can get it
out. It is an engineering problem, not a geological problem."
Of the 11 countries in the Middle East, only five are significant oil
producers: Iran, Iraq, Kuwait, Saudi Arabia and the United Arab
Emirates, known sometimes as the Middle East Five. They produce around
20 million barrels a day today, a quarter of the global total. If global
demand rises at the average rate of the past 30 years, 1.5 per cent per
year, these five countries will have to meet around two-thirds of the
demand, Smith calculates.
Let us assume they can do what they say they can, no more, no less.
Where does that leave us? Saudi Arabia says it can lift production from
9.5 million barrels per day today to 12 million by 2016 and 15 million
beyond that. This despite 50 per cent of the oil coming from the Ghawar
field, where a water cut is already reported. Smith sums all the
reported capacities in the Middle East Five and finds that if the rate
of demand growth continues at 1.5 per cent they will fail to meet global
demand by as soon as 2011. If it rises to 2.5 per cent the demand gap
appears in 2008. If it is 3.5 per cent - the rates in China and the US
of late - the gap is already here.
"What's more," Smith adds, referring back wryly to the starting
assumption, "I do not truly believe the claims of the Middle East Five.
In fact, although I don't believe Saudi and Iranian claims in
particular, I think their politicians do believe them. I don't think
there is a conspiracy, more a division of labour such that no one knows
the whole story, each part of which has wide error bars. The summed
result is inevitably the most positive conclusion which goes to the
politicians. I've seen this in all the oil companies I have worked for."
At the November 2004 conference on oil depletion at the Energy
Institute, Michael Smith showed a slide at the end of his presentation
that gave a pictorial summary of his views. It showed a group of firemen
posing for the camera outside a burning house.
The investment bank Goldman Sachs drew attention to the problem of
access to oil on a global scale in a much-quoted 2004 report. "The
industry is not running out of oil - reserves are large and continue to
grow," it asserts - though failing to offer evidence of this analysis.
"What the industry is running out of is the ability to access this oil."
Two decades of chronic underinvestment in the 1980s and 1990s are
responsible. During this time the industry was feasting on reserves
discovered in the 1960s and earlier with infrastructure capitalised in
the 1970s, after the first oil shock. Global oil demand is now closing
fast on tanker capacity and refining capacity. The peak year for tanker
capacity was way back in 1981. So, too, was the peak for refinery
capacity. Global rig counts also peaked that year.
So, how much new investment is needed to fix the shortfall? Over the
next 10 years, assuming oil demand increases as commonly projected,
fully $2.4trillion will need to be spent, according to Goldman Sachs.
This is nearly triple the level of capital investment by the oil
industry in the 1990s. And if it isn't spent? "If the core
infrastructure does not improve, energy crises are likely to become
progressively more frequent, more severe and more disruptive of economic
activity," the investment bank concludes.
Stated simply, it seems that even if an early topping point doesn't hit
us, the results of two decades of negligence in investment in
infrastructure and exploration will. You need to read between the lines
of the Goldman Sachs report to smell the level of anguish about this.
Even where substantial money has been invested, a further list of
serious unresolved problems can often be quickly summoned up. Oil in the
Caspian is central to every scenario that envisages oil supply meeting
demand off into the 2020s. The oil industry has long regarded the
Baku-Ceyhan pipeline from Azerbaijan to Turkey as essential if it is to
get Caspian oil out to market without the need to go through Chechnya
and Russia. By the time this pipeline begins to shift oil as planned in
2005, it will have cost $4bn, almost three-quarters of that in the form
of bank loans. The problems for this pipeline begin with reports of its
construction standard. Four whistleblowers recently told a UK national
newspaper that the pipeline was failing all international construction
standards, including installation of inadequately welded pipe before it
had even been inspected. It passes through a major earthquake zone.
Turkey has had 17 major shocks in the past 80 years, and the pipeline is
supposed to last for 40 years.
At the time the pipeline was conceived, industry reports talked of
several hundreds of billions of barrels in the Caspian region. Now
estimates of around 50 billion barrels, about the same as the North Sea,
are more common. After the discovery of the last of the super-giants,
the Kashagan field in 1990, there was a burst of predictable interest in
Kazakhstan. But now, in terrain where individual wells cost $1bn to
drill, in conditions where only foreign companies have the know-how and
technology to drill, the Kazakh government has introduced new
legislation that makes investment unattractive. As an ExxonMobil
executive told Petroleum Review, "...the jury is still out on whether
all these obstacles will delay Kazakhstan's production".
This example of a real-world current problem for the oil industry raises
the subject of the interplay between the early topping point and oil
geopolitics. As the world's No 1 consumer, the United States will have
much to say about how the crisis - whether of early depletion or
inadequate infrastructure and investment, or both - plays out. The
geopolitics of American oil dependency is well summarised by Michael
Klare in his recent Blood and Oil. He sees four key trends in US energy
behaviour: more imports, increasingly unstable and unfriendly suppliers,
escalating risk of anti-American violence and rising competition for
diminishing supplies. Imports we have talked about above. Increasingly
unfriendly suppliers and escalating anti-American violence are linked.
The point here is that the US can have relationships with governments in
unstable countries if it chooses the path of oil dependency, but not
easily with their populations. Terrorism can be expected to grow with
every American act interpretable as imperialistic in the Middle East and
Central Asia. The Iraq-to-Turkey pipeline illustrates the problem
perfectly. It suffered near daily attacks in 2003.
As for competition over diminishing supplies, therein lies the stuff of
nightmares. The Pentagon established a Central Command in 1983, one of
five unified commands around the world, with the clear task of
protecting the global flow of petroleum. "Slowly but surely," Michael
Klare concludes, "the US military is being converted into a global
oil-protection service."
At $30 a barrel, the total bill for imported oil - now more than half
the US daily consumption and rising fast - should reach $3.5 trillion
over the next 25 years, and this does not include the Pentagon's
overhead. Beyond the Middle East Five, the Bush strategy of supplier
diversification will look to eight main sources, which Klare calls the
Alternative Eight: Mexico, Venezuela, Colombia, Russia, Azerbaijan,
Kazakhstan, Nigeria and Angola. These countries and their oil operations
are characterised by one or more of the following attributes:
corruption, organised crime, civil war, political turmoil short of civil
war, and ruthless dictators. The US military is being forced into deeper
relationships with such regimes, including joint military exercises.
The bottom line for Klare is this. "Any eruption of ethnic or political
violence in these areas could do more than entrap our forces there. It
could lead to a deadly confrontation between the world's military
powers." Because obviously, in a world as enduringly addicted to oil as
ours is, others are going to be looking for their own supplies. Russia
and China will be among them. As one global-security analyst recently
put it: "I am afraid that over the years we will see China become more
involved in Middle East politics. And they will want to have access to
oil by cutting deals with corrupt dictatorships in the region, and
perhaps providing components of weapons of mass destruction, ballistic
missiles and other things they have been involved with, and that could
definitely put them on a collision course with the United States." Oil
dependency could yet prove to be the route to a Third World War. The
stress associated with an unforeseen early topping point surely makes
that horrific prospect more, not less, likely.
Humans are good at staying loyal to their theocracies, and a hundred
years of fossil fuel addiction has created impressive theocracies.
However, as Einstein said, you can't solve the world's problems with the
same thinking that created them. We have to think outside the box. That
means giving renewable energy, alternative fuels, energy efficiency and
storage technologies the space they need to grow explosively.
The good news is that it will be possible to replace oil, gas and coal
completely with a plentiful supply of renewable energy, and faster than
most people think. Shell employs roomfuls of clever people just to think
about the future. They are called scenario planners. In their 2001 book
of scenarios, Shell's planners mention that renewable energy holds the
potential to power a future world populated with 10 billion people, and
do so with ease. The needs of the 10 billion can be met even in the
unlikely and undesirable event that all of them use energy at levels
well above the average per-capita consumption today in the EU. The Shell
futurists mention this almost in passing, in the caption of a diagram
showing the continent-by-continent potential for individual
renewable-energy technologies to contribute to such a power-rich future.
Working for an oil and gas giant as they do, it is perhaps no surprise
that they fail to explore a scenario wherein something resembling this
renewable-power-rich future comes to pass. Others are not so constrained.
When I began my time in Greenpeace, in 1989, the protestations my
colleagues and I made that renewable energy could displace fossil fuels
and run the world were ridiculed by energy experts and officialdom as
naïve wishful thinking. Now, more than a decade later, such views can be
found in the heart of government, at least in Europe. The Blair
Government published a report in 2003 that concluded: "It would be
technologically and economically feasible to move to a low
carbon-emissions path, and achieve a virtually zero-carbon-energy system
in the long term, if we used energy more efficiently and developed and
used low-carbon technologies."
Among the low-carbon technologies on offer, the government report placed
heavy emphasis on renewable energy and hydrogen, rather than nuclear
power. Of solar energy, the report concludes: "[It] alone could meet
world energy demand by using less than 1 per cent of land currently used
for agriculture." Tony Blair used these same words in the speech he gave
launching the UK Energy White Paper. I sat there watching him do it, 10
feet away in the front row. I was momentarily tempted to leap to my feet
and shout: "So why don't you invest in it like the Germans and Japanese,
then?" But he hasn't. Not then. Not now.
Microcosms of what could be done can be found already on the local
government scene. Take the small town of Woking. Its borough council has
cut carbon-dioxide emissions by fully 77 per cent - yes, more than three
quarters - since 1990 using a hybrid-energy system involving small
private electricity grids, combined heat and power (CHP), solar
photovoltaics (PV), and energy efficiency. Woking has turned its town
centre, its housing estates, and its old people's homes into
inspirational islands of energy self-sufficiency. The UK grid could go
down for ever, and these folks would have their own heating and
electricity year-round. The technologies work in perfect harmony. The
CHP units generate heating when needed in winter, and lots of
electricity along with it when the PV is not working at its best. The PV
generates plenty of electricity in the summer, when the heating isn't
needed, meaning the CHP can't generate much electricity. Because the use
of private wires is so much cheaper than using the national grid, the
whole package costs fractionally less than the equivalent heating and
electricity supply would cost from the big energy suppliers.
Compare such out-of-the-box ingenuity with what nuclear has to offer.
Even if there were no environmental problems associated with it, and we
could afford the billions needed in perpetuity from the public purse to
make the voodoo economics stack up, a new fleet of stations couldn't
come on-stream in the UK much before 2020. And if we and the Americans
can't solve the energy crisis without resorting to nuclear, the whole
world will follow our example. Bad as the terrorist threat is now, it
would be compounded many times as a result. We would live with much
increased risk of losing whole cities to suitcase bombers.
There is a part of me that looks at the prospect of a cold snap in
Britain this winter, and of a consequent fuel-supply crisis, and thinks
"Bring it on." Maybe this is what we need to stop our sleepwalk towards
catastrophe, and to make us rethink our energy policy. Perhaps the
government can be judo-thrown into the Wokingisation of Britain now, and
dissuaded from the nuclearisation of Britain 15 years from now.
But then I think of all the grans and granddads that would die in a
one-in-ten winter, and I just feel sad. Sad, and mad with our hot-air
Government.