A year ago Tony Blair declared in the Energy Review that securing a ‘sustainable, secure and affordable energy supply is one of the principal duties of government’. He was right. But under New Labour energy policy has veered from criminal to farcical. And with the recent reappointment of Malcolm Wicks as Energy Minister that farce is ready to transfer from Whitehall to the West End stage.
It was unfortunate that the undeclared part of Tony Blair’s energy policy involved invading Iraq, causing the deaths of perhaps a million people so far. The policy has also been a disaster in terms of the oil supply. As I report in The Last Oil Shock, the plan was to defer the onset of terminal decline in global oil production (so called ‘peak oil’) by opening up Iraq as a free-market playground for the international oil companies and raising the country’s output threefold. But in the chaos and butchery that transpired, Iraqi oil production still languishes at about the pre-invasion, sanctions-bound level of less than 2 million barrels per day. Far from putting off the date of peak oil, the invasion may well have brought it closer.
After a blatantly temporizing energy white paper in 2003, Blair finally made up his mind about nuclear power two years ago – to renew the ageing power stations – and only then announced a ‘consultation’. Greenpeace exposed this sham through judicial review and forced the government to repeat the process. But in his first Prime Minister’s Questions Gordon Brown blew the gaff once again, declaring that that the government had already “made the decision to continue with nuclear power” and that “the security of our energy supply is best safeguarded by building a new generation of nuclear power stations”. If the new consultation proves as meaningless as the last Greenpeace will not hesitate to return to court.
This is bad news, since unfortunately the government is right about nuclear power. If Britain fails to renew its nuclear fleet, the next 9,000 (3 megawatt) wind turbines we build will do nothing to expand non-CO2 emitting generating capacity, but simply replace that which we have lost from nuclear. We currently have less than 1700 turbines in total. The plain fact is that we are going to need every last scrap of low-carbon generation we can lay our hands on, but the risk is that New Labour’s arrogant and incompetent handling of the politics will mean further delay. Its failure to secure the immediate construction of a prototype carbon capture and storage project is equally derelict.
The new prime minister has also miserably failed to deliver on hopes that he would reform the government’s energy policy-making apparatus into something remotely fit for purpose. Leaks earlier this year suggested Gordon Brown was planning to create a super-ministry of energy and the environment to be led by David Miliband. This would have given energy its own dedicated cabinet minister for the first time in 15 years, and one who backs the introduction of personal carbon trading – a system of progressively tightening energy rationing, and the only policy remotely likely to deliver reduced energy consumption and emissions. This would have been a real advance, but instead the DTI has simply been rebranded as the Department of Business Enterprise and Regulatory Reform, whose priorities remain the same; energy doesn’t even make it onto the nameplate and the portfolio has been consigned to a junior minister.
Worse, that junior minister is one Malcolm Wicks, who held the post until November last year, and has now been reappointed despite his evidently shaky grasp of the biggest challenge in his portfolio. During his first stint, when I quizzed him about the government’s view on when global production would peak, and how serious the event might be, his feeble reply ended: “But when it’s going to run out, do you know, can you tell us? I mean, I don’t know”.
Perhaps his ignorance should not have been surprising, since some of his officials appear equally clueless. As I report in The Last Oil Shock, they prepared a letter sent out under Wicks’s signature in May last year which played down the importance of oil depletion on utterly spurious grounds. The letter asserted that increasing exploration effort would in future lead companies to discover not only more oil, but also bigger individual oil fields. Since both the total amount of oil discovered annually and the average field size has collapsed over the last forty years, while the oil price has risen from $2 per barrel in the 1960s to near-record levels of just under $80 today, this is evident nonsense. Yet these energy-illiterates are apparently entrusted to run policy.
The British government has never produced its own forecast of when global oil production will peak, unlike France (2013-2023) or Germany (2017). The UK has long dismissed such alarmist talk on the basis of much more sanguine forecasts from the International Energy Agency. But now even the IEA has shifted position dramatically, predicting a global oil crisis by 2012. The Agency argues this will happen almost irrespective of the strength or weakness of economic growth – “the supply crunch could be deferred – but not by much” – and concludes that any attempt to boost oil exploration “might do more to fuel further [oil industry] inflation rather than generate extra oil”. Not only does oil look extremely tight in five years time, but this “coincides with the prospects of even tighter natural gas markets at the turn of
The IEA insists that its “supply crunch” will be caused by above ground factors such as Iraq, and is not the same thing as peak oil – the geologically-driven, irreversible decline of global oil production. But those living through it may be forgiven for failing to appreciate the distinction. The IEA’s predicted crisis falls squarely within the range of independent forecasts of the date of peak oil. Meanwhile, Goldman Sachs has predicted $95 per barrel as early as this autumn if OPEC fails to raise its production, which many experts doubt it can. The farce of British energy policy would hysterical if the challenges were not so deadly serious.
David Strahan is the author of The Last Oil Shock: A Survival Guide to the Imminent Extinction of Petroleum Man. www.lastoilshock.com