Today Lenihan told us to “Tighten our belts”. we are living beyond our means. Any fashionistas tell us what kind of shirt that is?

Last week saw the publication of The Oil Crunch, securing the UK's energy future (discussed on TOD here). This is the first report from a taskforce of leading UK companies and sounds the alarm bell on peak oil. The group formed around 18 months ago through a common concern that peak oil and energy security are not receiving the attention they deserve.

Jeremy Leggett, Chairman of Solarcentury and taskforce member has provided The Oil Drum with an interview with "an anonymous cynical journalist". He discusses the thinking behind the report, the credit crunch, the global oil industry's culture towards the future and the report's recommendations. [break] Another 40,000 word report on energy. Why should we be bothered to read this one?

Jeremy Leggett: Leading British companies, across a broad spectrum of industry, are warning that a premature peak in global oil production is a grave risk to the world economy just three to five years from now, and maybe earlier. Our fundamentally oil-addicted global economy is geared for rising oil supply for several decades to come, so an unexpected oil crunch would compound the damage being inflicted by the credit crunch. "Toxic" reserves are in danger of becoming for the oil industry what toxic derivatives have become for the financial industry. Having failed to act proactively to head off the credit crunch, we must not make the same mistake with the oil crunch. When the oil price was near $150 earlier this year, panicking politicians flew around the world trying to do something about it. Even with significant reductions in demand, we risk oil prices far higher than $150 after peak oil hits.

Are you sure peak oil is so close? BP, ExxonMobil, and the Department of Business say you are not just wrong, but misguided.

JL: The global oil industry tends to lack of transparency where reserves and future oil prospects are concerned, and there are uncertainties as a consequence. But we believe the analysis we present – of a peak and descent in global oil supplies by 2013 at the latest – is, on the very strong balance of probabilities, correct, and that there is more downside risk than upside. Shell contributed a chapter to our risk assessment. Their opinion, which we had expected might be a summary of the case counter to our collective concerns, is in fact not much more encouraging than our own view. They forecast a flattening of production around 2015, and a plateau beyond, provided that the oil industry is given fairly open access to unconventional and otherwise difficult sources of oil. This proviso is far from a given outcome, not least for carbon/climate reasons. And even if it is achievable, it demands the same kind of proactive response that our scenario does. 2015 is tomorrow, when it comes to rapidly finding a new way of powering economies.

As for oil companies and government thinking our analysis is misguided, let's not forget that the banks and the Treasury completely failed to see the credit crunch coming. Why should we necessarily expect oil companies and the Department of Business to be prescient about the oil crunch?

The oil industry says they have made huge finds off the coast of Brazil recently. Lord Browne will be telling the new cabinet that there are massive amounts of oil yet to be found in deep water and the Arctic. The Saudis tell us they have plenty more left to pump and even more left to find. Are you calling them all liars?

JL: Nobody is lying, and there is no conspiracy. What we fear is that there is a pervasive and dysfunctional culture of over-optimism in the global oil business, resembling in many ways the one that has become so ruinously evident recently in the financial-services sector. In our report we present evidence that takes issue with every point made in your question. The Brazilian finds will eventually yield around an additional year's worth of supply ….more than a decade from now. That is, provided the discoveries haven't been exaggerated, as so many discoveries demonstrably are. The Brazilian finds are a blip in a spectacular megatrend of declining discoveries stretching back almost half a century. Lord Brown may say there is lots more oil to find, but Lord Oxburgh – the former Shell Chairman – says in the foreword of our report that significant "easy oil" discoveries are a thing of the past, and we show why he might think this in the body of the report. As for the Saudis, we offer reasons to fear that their production is on the point of shrinking, and we give reasons to suspect that they and other OPEC countries have been hyping their declared oil reserves ever since linking OPEC quotas to the size of national reserves way back in the 1980s.

But the oil industry says that there are well over a trillion barrels of proved reserves, and several trillions more in tar sands. In a world burning oil at not much more than 30 billion barrels a year, that means decades of supply before we need worry.

JL: Here you take on board a widespread misapprehension about the peak oil problem. Peak oil happens when flow-rate capacity coming onstream from oil discoveries fails to exceed declining flow-rate capacity from depletion of existing reserves. Peak oil is more a problem of flow rates than reserves. In our report, the consulting editor of Petroleum Review – a flagship oil-industry journal – shows how the flow rates from reported oil discoveries drop below decline rates no later than 2013, and possibly a good deal earlier. As for tar sands, you have to melt the tar. This is far from easy, and is far slower than lifting liquid crude out of the ground. Easy oil is depleting by at least 3.5 million barrels a day of capacity each year, and the oil industry can't squeeze more than 2.5 million barrels of capacity from the tar sands fully seven years from now, assuming all goes to plan and they aren't reined in because mining the tar sands creates a huge volume of greenhouse gas emissions. If we think of global oil reserves as a water tank, it's the state of the tap you need to worry about. If it is faulty, you won't get enough water out. We think the oil tap is faulty, and a lot of water is going to stay inaccessible in the tank.

But demand has been falling fast since we hit $147 oil. It's little short of amazing how quickly systemic change is kicking in through the transport sector. The credit crunch is sure to depress demand still further. Surely that's that going to head off the problem. We'll adjust to lower supplies. The credit crunch problem will fix any peak oil problem.

JL: It is true that the transport sector is morphing in front of our eyes, and it shows the scope we have for cutting global energy demand and changing supply if we try. But there are problems with the sanguine analysis. First continuing growth in demand in China and India is likely to drown out any demand reduction from structural changes in the west. Second, the oil industry has - almost incomprehensibly - been investing less in exploration in recent years. Third, the industry is relying on aged oilfields, aged infrastructure, and an aged workforce just at the time when oilfields are becoming more difficult to find and are taking ever longer - up to a decade - to bring onstream even when they are found. Fourth, the oil- and gas-producing nations have massive and growing infrastructure programmes that are increasingly cutting into their own scope for export. In the oil crunch that we describe, oil and gas exporters are going to start keeping their oil and gas for use at home. For some nations, perhaps most, that risks turning an energy crisis turn into an energy famine.

In any case, invoking global recession is hardly the best way to deal with the prospect of an oil crunch. We should be able to do better than that, and we can. The taskforce argues that if we accelerate the green industrial revolution already underway, we will surprise ourselves with how quickly we can reverse out of oil dependence. We explore that positive vision in some detail in the report.

Isn't the financial crisis the immediate priority and won't everything else, however serious, have to wait till financial markets stabilise?

JL: All three crises - credit, climate and oil – are deadly serious and have to be dealt with at the same time. Lord Stern, former chief economist at the Treasury, has argued that a £ invested today will avoid £10 in damage from climate change in years to come. The same is true of investing today to head off the impact of an oil crunch on the economy. We don't have a figure for the ratio of pain avoided, but we suspect it is higher than 10.

What have you said that is fundamentally new? Plenty of people have warned before about peak oil.

JL: This is the first multi-company alarm bell to be sounded on peak oil, anywhere in the world. We are endeavouring to warn governments, fellow corporates, and the public of a threat far worse then terrorism: a threat that holds the potential to hit us for six on the watch of the next government. Yes individuals and institutions have said that the oil and gas taps can slow, or turn off, and in growing numbers of late. Even the International Energy Agency has warned of an oil crunch in 5 years. But never before has a diverse group of businesses said this, much less compiled a deep analysis to back the warning.

So what's the solution then?

JL: We have to start building clean-energy technologies to reverse us out of oil at the speed that America mobilised for the Apollo project in the 1960s. The good news is that the survival technologies exist – dozens of them, across the full spectrum of energy supply and demand. More good news is that hundreds of billions of dollars have been already been invested in them in recent years, and they are in some of the fastest growing markets in the world as a consequence. The bad news is that these markets are still pitifully small compared to fossil fuels. We have a long way to go, and we have to move fast, just like the Americans did during the Apollo project. Another thing to recall is just how fast nations can build tanks and planes when they mobilize for world war.

UK Industry Taskforce on Peak Oil & Energy Security

On Wednesday 29th October 2008 I attended a press conference at the London Stock Exchange. The meeting was convened by the "Industry Taskforce on Peak Oil & Energy Security" (www.peakoiltaskforce.net) to introduce a new report: The Oil Crunch, securing the UK’s energy future. September last year, former US Energy Secretary Dr James Schlesinger addressed the ASPO6 conference in Cork, Ireland with these words: The peakists have won ... to the peakists I say, you can declare victory. You are no longer the beleaguered small minority of voices crying in the wilderness. You are now mainstream. You must learn to take yes for an answer and be gracious in victory. The taskforce behind this report formed around 18 months ago.

Click to download .pdf

[break] Wednesday's meeting proved Schlesinger right. A group of serious, respectable organisations, had just published a serious and respectable report, in a serious and respectable venue stating:

The effects of peak oil will be felt in the next five years.

The risks to UK society from peak oil are far greater than those that tend to occupy the Government's risk-thinking, including terrorism.

The UK Government needs to re-prioritise peak oil – as the impacts are more likely to arrive first – before climate change.

The Taskforce

"no longer the beleaguered small minority of voices crying in the wilderness".

FirstGroup plc – the world’s leading transport company. Annual revenue of over $5bn, 137,000 employees and carry more than 2.5bn passengers per year.

Scottish and Southern Energy (SSE) – one of the UK’s big six electricity companies.

Solarcentury – one of Europe's leading solar energy companies, specialising in design and supply of building integrated solar thermal and electric technology.

Stagecoach Group – public transport group operating bus, coach, rail and tram services. Employs around 30,000 people with extensive operations in UK, US and Canada.

Virgin – a leading branded venture capital organisation, has created more than 250 branded companies, employs approximately 50,000 people in 29 countries. 2007 revenue exceeded $22bn.

Arup – a global firm of designers, engineers and business consultants with over 10,000 staff working in 37 countries.

Foster + Partners – an international studio for architecture, planning and design.

Yahoo - a leading Internet services company.

These companies have come together in this taskforce with the commonly held belief that the threats to energy security are not receiving the attention they merit. Where have we heard that before? The aim of this report is to engage government on the peak oil threat and to alert other businesses and the public to the problem.

I note the involvement of public transport and the absence of the private transport sector. This might say more about the state of the UK car industry than the sector's position on peak oil. Virgin's interest seems to stem from aviation and train businesses however the taskforce's chair is Will Whitehone president of Virgin Galactic, the company trying to create the world's first commercial spaceline. He did a very good job at the press conference presenting the report however (and I now regret not asking him) it eludes me as to how space travel sits with peak oil occurring within the next 5 years.

The Context

The context of the report was explained by Will Whitehorn. This was not just a response to this summer's extreme price rises but the result of a broad range of companies recognising something was up in the oil market. The unacceptable uncertainty in the future oil supply/demand spurned this research. The taskforce concluded that we are going to reach peak in the early part of the next decade and that this represents a serious threat.

That conclusion is not new to regular Oil Drum readers. What is new is that a man like Will Whitehorn is saying it – with the support of those companies. The report is downloadable from the companies websites.

Jeremy Leggett made an analogy between the credit-crunch and the coming oil crunch:

If you could have imagined five years ago, eight companies across a big spectrum of British industry warning the government that five years hence – now – there would be a thing called a credit crunch because the financial institutions had been irrationally exuberant about their ability to manage really complex financial instruments ... had that happened, had they listened and exercised [proactively] the kind of leadership they now have exercised retroactively ... could we have softened the blow?

The difference with the oil crunch is that, if our analysis is correct, there are three to five years where we could try and engineer a soft landing, begin the restructuring ahead of time.

Risk

The main body of the report consists to two risk assessments – two essays on the "Risk from Oil Depletion". The first from Chris Skrebowski making the case for oil supplies peaking within the early part of the next decade and encouragingly the second essay or risk assessment was provided by Royal Dutch Shell, authored by Jeremy Benrham, Vice-President Global Business Environment. Whilst not part of the taskforce Shell were willing to engage constructively.

Shell's position is not as cornucopian as it could have been. They criticise the language of "peak oil", preferring to talk of sustained plateaus and muddy the waters somewhat by only referring to oil and gas production (around 135mbpd oil equivalent). However Shell also talks of: an "easy oil" supply gap, and say that by 2015 growth in supplies of easy oil and gas will no longer match the pace with which demand is growing.

Perhaps the most interesting inclusion is Shell's criticism of the IEA World Energy Outlook 2007. The IEA's reference scenario calls for oil supply to increase at 1.3% per year to 2030. Shell suggest that this may appear reasonable as for the last 25 years supply has grown at 1% per year but go on to point out that non-OPEC growth provided more of this past growth than OPEC did. With non-OPEC production "levelling off the IEA seems to assume a growth rate of OPEC production that is double or more the rate we saw in the last 25 years. This is not likely to happen".

It is a refreshing change to see an oil major publicly criticising IEA forecasts in this way.

Skrebowski's analysis behind this report, whilst predicting a peak within five years is likely conservative. The IEA World Energy Outlook 2008 report due to be released Nov 12th but seen last week by the Financial Times prompted them to write:

Without extra investment to raise production, the natural annual rate of output decline is 9.1 per cent, the International Energy Agency says in its annual report, the World Energy Outlook, a draft of which has been obtained by the Financial Times.

The findings suggest the world will struggle to produce enough oil to make up for steep declines in existing fields, such as those in the North Sea, Russia and Alaska, and meet long-term demand. The effort will become even more acute as prices fall and investment decisions are delayed.

The IEA, the oil watchdog, forecasts that China, India and other developing countries' demand will require investments of $360bn (£230bn) each year until 2030. The agency says even with investment, the annual rate of output decline is 6.4 per cent.

This 6.4-9.1% decline is more aggressive than the 4.0-4.5% decline rate used in the Taskforce's report.

Scenarios

The report distinguishes four qualitative global oil supply scenarios; growth, plateau, descent and collapse.

Growth represents the position of ExxonMobil and Cambridge Energy Research Associates (CERA) which see production growing well beyond 100mbpd. Plateau represents Shell’s position, a plateau starting around 2015 and continuing into the 2020s. Descent represents the position of Skrebowski with a decline setting in within five years and collapse represents steep decline as some - possibly many - aged supergiant fields collapse.

These scenarios are then mapped onto the UK with the required "Annual rates of oil replacement" calculated – and compared with the climate change scenario of achieving an 80% cut in CO2 by 2050. Critically both descent and collapse, the two scenarios thought most likely (descent more so than collapse), call for faster "replacement" than climate change. I presume it is this result that led to the taskforce to call on Government to "re-prioritise peak oil – as the impacts are more likely to arrive first – before climate change."

Conclusion

In conclusion, this is a ground breaking report, not so much for its content as for the companies behind it. Shell's inclusion is a very positive development. These are not a "beleaguered small minority of voices" but billion dollar, international companies, employing tens of thousands of people sounding the alarm bell.

Those who were left with the fallout from Bertie Ahern’s ten years in office, namely Cowen and Lenihan, were probably impressed by the production value of the Bertie documentary series last night - if nothing else. The programme was exceptionally well put together and surpassed what I had expected it to be. It wasn’t reliant on journalists to tell the story, it had all the main players bar Celia Larkin. The interviews were even combative in parts. I thoroughly enjoyed it, as it is the first draft of historical perspectives on Bertie part drafted by himself.

Yet to what extent it analyses our current situation in light of the past ten years is an interesting point. Ahern presided over a government that couldn’t or wouldn’t say no. Money being spent was, and remains, vital for the health of this country, economy and society. The manner in which some was spent, shrinking the tax base and ramping up spending was on the whole unsustainable. The inflated property bubble allowed the numbers to add up but it was not for long.

Now Brain Brian Lenihan is forced into admitting embarrasingly that we may have another mini-budget again soon to rectify our budgetary shortfall. The EU is annoyed with us and P O Neill has raised the point that we may be wearing out our welcome in Brussles with our behaviour. They are starting proceedings against us for our deficit of 6.5% breaching the EU max by some way. At this rate, we are moving toward quarterly budgets to coincide with the horror statement of public finances.

Yesterday, in the aftermath of the climbdown regarding the Medical Cards fiasco, I read a post on the weblog of Green Party Justice Spokesperson Ciarán Cuffe, which dealt with the Medical Cards issue.

After reading the post, I gave him my view of the Fianna Fáíl / Green coalition, and put some questions to him and ended by making some constructive suggestions that the Government can take to raise the nations finances.

As of yet, he has not responded, so I’ve taken the liberty of stating those views and posting the questions here….

Ciarán, I’ll be frank - I think the Green Party will suffer very badly at the locals, and perhaps at the next General Election, if this sort of attacking of the vulnerable continues.

My advice is simple - get out of the coalition now. You cannot stop FF - they will do as they please, with little regard for anybody else. Anecdotally, most people I know who would vote or transfer to Green candidates will not be doing so now - particularly in light of what their parents, grandparents, in-laws and other family members have just had to go through.

Some questions -

1. Will the free travel pass for OAP’s be ended?

2. What guarantee can you give me to pass on to my elderly relatives that the threshold for medical cards won’t be altered in 6 months?

3. Why is the state investing in what can only be described as sub-prime lending, through the Home Choice loans scheme? It is cheaper to buy on the open market at present - people on the scheme run the risk of negative equity.

4. What impact will funding cutbacks have on local government? Specifically, will Dublin have a mayor to elect in the lifetime of this Government, or will we be forced to watch the Council elect a figurehead?

5. What is the present timeline for Metro North and the Interconnector?

6.a. What is the status of Metro West?

6.b. What is the status of Luas Line F, Luas Line BX and other modes of rail transport?

7. Will there be a threshold in relation to those who have a parking space at their employers place of business?

Here are some suggestions on raising the state finances -

1. A commercial rate charged for the bank guarantee.

2. An end to funding for the likes of Bord na gCon or Horse Racing Ireland.

3. An increased levy on high income earners - for example, why weren’t those earning 300K per annum charged a 3% levy etc?

4. An additionate tax band applicable at say, €250,000.

Brian Cowen is talking to the EU Legal Service about drafting opt-outs and protocols to make the Lisbon Treaty “palatable to the Irish public” according to Jamie Smyth and others this morning.

Cowen, who said the France, which is the current president of the EU, had also asked the Council of Ministers’ legal services “to see what can be done and what can be achieved”, listed the composition of the European Commission, defence, social issues and taxation as “areas that need to be addressed” to satisfy Irish voters, who rejected the treaty in a referendum held in June. The Council’s legal services are thought to be examining whether declarations or protocols can be drafted on these issues to make the Lisbon treaty more acceptable to the Irish electorate ahead of a possible second referendum.

But Cowen remained non-committal on the idea of a second vote. “We had a referendum on the last occasion [that Irish voters rejected an EU treaty, the Treaty of Nice in 2001] and we have to see where this process that we are now engaged with brings us this time. We’ll discuss it in December when it will be far clearer what the options might be.”

“We will define the elements of a solution in December and I shall have the opportunity to make proposals,” France’s President Nicolas Sarkozy told journalists late on Wednesday.

On the back of the solidarity being shown by Ministers in taking a 10% pay cut for next year, a source got me wondering whether those Ministers with additional income streams - like teachers’ pensions - might not be convinced to forgo these also. What with them spending enough time in the Dail to qualify for a nice pension that way.

How about it Noel Dempsey, Michael Martin and Mary Hanafin (not to mention the great Enda Kenny)

Suzy brings up an interesting point on the White Paper/Estimates and the budget cut for government agencies. Mergers and abolitions are taking place in 41 agencies and budget cuts/logistic sharing is the order of the day as well.

However some have fared better than others.

The Equality Authority’s budget has been cut by 43% and the Irish Human Rights Commission has been cut by 24% - but the National Disability Authority has only been cut by 2%. There is something very fishy going on there - a case of not rocking the boat and thus you don’t get cut??

A sharing of backservices by the Equality Authority and the Human Rights Commission could not possibly save that much money - there will be policy implications with these cuts, monitoring and protection of the rights of the most at risk in Irish society have been put at risk.

Look at the table of cuts - the NDA’s drop of 2% and mergering of other bodies to it seems to stand out as quite the oddity.

B.2 - Human Rights Commission 24% Cut
E.1 - Equality Authority 43% Cut
E.2 - Equality Tribunal 15% Increase
E.3 - Grants to National Women’s Organisations 5% Cut
E.5 - Cosc - Domestic, Sexual AND Gender-Based Violence 18% Cut
E.6 - Equality Monitoring/Consultative Committee 8% Cut
E.7 - Gender Mainstreaming And Postive Action for Women …. 45% Cut
E.8 - Office of The Minister for Integration 26% Cut

F.1 - Status of People With Disabilities 5 % Cut
F.2 - National Disability Authority 2% Cut
F.3 - Disability Projects 10% Cut

(First published at Green Ink)

1 Do you ever lose time from work or school due to gambling?
2 Has gambling ever made your home life unhappy?
3 Is gambling affecting your reputation?
4 Have you ever felt remorse after gambling?
5 Did you ever gamble to get money with which to pay debts or otherwise solve financial difficulties?
6 Does gambling cause a decrease in your ambition or efficiency?
7 After losing do you feel you must return as soon as possible and win back your losses?
8 After a win do you have a strong urge to return and win more?
9 Do you often gamble until your last dollar was gone?
10 Have you ever borrowed to finance your gambling?
11 Have you ever sold any real or personal property to finance gambling?
12 Are you reluctant to use “gambling money” for normal expenditures?
13 Does gambling make you careless of the welfare of yourself or your family?
14 Have you ever gambled longer than you had planned?
15 Have you ever gambled to escape worry or trouble?
16 Have you ever committed, or considered committing, an illegal act to finance gambling?
17 Does gambling cause you to have difficulty in sleeping?
18 Do arguments, disappointments or frustrations create within you an urge to gamble?
19 Did you ever have an urge to celebrate any good fortune by a few hours of gambling?
20 Have you ever considered self destruction or suicide as a result of your gambling?

If you answer yes to 7 or more of the above Brian, please email info@gamblersanonymous.ie.