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9 January 2012

Resilience

Just this weekend, my partner and I were chatting about the UK petrol protests of 2000 (it's laugh a minute in our house sometimes...). At the time my partner was working in Poland for a week and couldn't believe my reports from home - empty petrol stations, empty roads, no fresh fruit in the supermarkets and semi-panic buying of staple foods - all within a couple of days of fuel depots getting picketed. This small action had a massive impact on business, communities and individuals. It was a graphic demonstration of how vulnerable our modern economy is to quite minor events.

As chance would have it, Chatham House has released a report today suggesting our economy has taken 'just in time' to an extreme, leaving it vulnerable to low-probability/high-impact events like the Icelandic volcano, the Japanese earthquake and the 2004 tsunami. But, the report notes, there are also concerns about the resilience to high-probability/incremental impact environmental issues like climate change, resource depletion and water pressures.

We are seeing the pressures of unsustainability across the economy with energy prices having a higher impact on the economy than Government spending cuts. The big question for individual organisations is "are we resilient to these sudden and long term events?"

The subsidiary questions are:

What will rising energy bills do to our business?
What will scarcity of resources like rare earth metals do to our business?
What will scarcity of water do to our business?
What would legislation designed to protect or ration natural resources do to our business?
What would the impact of more extreme weather events be on our business?
Are our data and other resources safe from, say, increased flood risk?
Do we have contingency plans in place for, say, expected lack of travel?

Of course the flip side to this is providing resilience to others as a business offering. As the effects of climate change and resource depletion ratchet up, this will be a growing market.

Tags: climate change, peak oil, resilience, resources

Posted by Gareth Kane no responses

30 November 2011

Is our obsession with the cuts blinding us to the oil shock?

The BBC's Evan Davis made a very interesting point when interviewing Labour's Shadow Chancellor Ed Balls this morning on Radio 4. Trying to wrongfoot Balls, the economically astute Davis stated that the 1% impact on consumer spending from Chancellor George Osbourne's cuts was much smaller than the 1.5% impact from what he called the 'oil shock'.

I was, ironically, driving to a client's site at the time and nearly swerved off the road. I have always believed that oil prices were hurting the recovery, but I didn't realise just how much an effect they were having.

We have pages and pages of newsprint and hour after hour of broadcast on the political battle between Osbourne and Balls over public spending, but almost nothing on oil prices. If Davis is right, and he most probably is, we are barking up the wrong tree. If we want to get the economy running again, weaning ourselves off our addiction to oil ~~should~~ must be much higher up the agenda.

Tags: economics, low carbon economy, oil prices, peak oil, politics

Posted by Gareth Kane no responses

31 May 2011

Time to up our game!

The International Energy Agency (IEA) is fast becoming the scariest organisation in the world - almost every press release contains extraordinarily bad news - that peak oil probably occurred back in 2006, that the price of oil is going to undermine any global economic recovery and, now, that 2010 saw record carbon emissions making hitting the 2°C target almost impossible. While there's a strong temptation to hide our head in the sand in the face of such a stark warning, the only sane response is to up our game.

Here's a mini-manifesto for progress:

1. Stop finger pointing: sustainability is everybody's responsibility - Governments, business, the media, civil society and individual citizens. Playing the blame game just slows us down, waiting for others to act will get us nowhere, sitting on a high horse is for pompous fools;

2. Be practical: let's bin the political ideology, sacred cows and conspiracy theories that clog both sides of the environmental debate and do what works;

3. Be ambitious: for all the posturing, most environmental improvements are merely incremental. Let's stretch ourselves and use ingenuity, determination and vision to get us out of the hole we're digging for ourselves;

4. Be prepared to pull the plug. Face up to the fact we're going to have to stop doing some stuff - sustainability is not just about starting to do good stuff, but phasing out bad stuff;

5. Relish the challenge and enjoy the ride. If others see you enjoying making your household, your neighbourhood, your organisation or the whole world a better place, they're far more likely to join in.

This isn't going to be easy, but as the great philosopher Billy Ocean once sang, when the going gets tough, the tough get going.

Tags: climate change, iea, peak oil, sustainability

Posted by Gareth Kane no responses

3 May 2011

Worried about Peak Oil? You might be 5 years too late.

In the last week, UK newspapers have been dominated by two pieces of news - the Royal Wedding and the death of Bin Laden - both picked over in meticulous detail plumped out with the filler that the press adds to abide to its 'bigger story => more ink' rule. As a result of all that attention, another much more important, if less sensational, story has been largely missed. The chief economist at the International Energy Agency told Australian TV last Thursday that we hit Peak Oil back in 2006 (source Irish Times).

Peak oil, for those who don't know, is when the maximum amount of oil is being extracted. After the peak, oil production generally declines quickly (following the bell shaped Hubbert Curve), pushing prices up, particularly if demand keeps rising. The impact of this cannot be understated. Our entire modern economy is predicated on oil being cheap. If oil prices rise, so do the prices commodities like plastics, metals and food, never mind the price of petrol at the pump. At a time the world is recovering from a massive financial jolt, this could hurt. A lot.

Peak oil will drive change in a way that a less tangible threat like climate change cannot. Soaring prices will push energy efficiency and low carbon energy production to the fore. Saudi Arabia is reported to have recently invested $100bn in low carbon energy technologies (source FastCompany) - a nation built on oil, now looking to the sun. Maybe the rest of us - society, governments and industry - should take heed.

Tags: energy efficiency, news, peak oil, renewable energy

Posted by Gareth Kane no responses

7 March 2011

The Politics of Oil

This weekend the global oil situation finally made its way onto the front pages of the UK press with, for example, The Guardian's report on Energy Secretary Chris Huhne calling for the UK to wean itself off oil and fast. By chance I've been reading Andrew Marr's excellent 'A History of Modern Britain' and came across this apposite paragraph:

One could write a useful political history which did not move beyond the dilemmas of energy supply. We can follow it from the winter of 1947 when the frozen coal stocks blew Attlee off course, through the oil-related shock of Suez and the destruction of Eden, to Heath's double confrontation with the miners, ending in his defeat in 1974, the rise of Scottish nationalism fuelled by North Sea oil, and then the epic coalfield confrontation between Margaret Thatcher and Arthur Scargill taking the story up to today's arguments about global warming and gas dependency on Russia. The simple fact of a small and crowded island energy dependent in an uncertain world has toppled prime ministers and brought violent confrontation to the streets.

Marr could have added many more in here - the rise of Al-Qaeda out of the murky world of the Saudi oil world, Saddam Hussein's original invasion of Kuwait - and many would say the US war on Iraq in 2003, the near bankruptcy of Russia by the oligarchs and a whole host of grubby, bloody little conflicts and kleptocracies all around the world.

Back here in the UK, being Energy Secretary used to be an extremely important role in Government, but it seemed to be relegated to the lower tiers during the North Sea oil and gas boom in the 1980s. Given the way oil prices and unrest are going, this could suddenly be reversed. Knowing Chris Huhne - a very shrewd operator - he's fully aware of the political risks and opportunities. In my opinion he's singing the right tune, but he's got the Herculean task of getting the Treasury to listen if he's going to succeed.

Tags: low carbon economy, oil prices, peak oil, politics

Posted by Gareth Kane no responses

23 February 2011

Are you prepared for an oil shock?

Yesterday I was writing a piece on major problems in the oil industry for The Sustainability Forum (it should go up today or tomorrow it's here). I was listing the various problems - the price hitting $108 a barrel, oil companies fleeing Libya, the IEA saying the price of oil was hitting global recovery etc, etc. This on top of the wikileaks revelation that Saudi oil reserves had been overstated by 40%, the BP oil spill, continuing debate about the onset of peak oil and suggestions that coal may stay so cheap for long.

What is pertinent for this blog is how should individual companies respond?

The first questions to ask concern your exposure. Are you dependent on logistics, business travel or commodities from overseas? Do you use oil based raw materials? Are you an energy intensive business? If oil prices stay above $100 a barrel, how does that affect the your long term viability? What about $150?

Once you have an idea of the risk, you can look for solutions: eg avoiding travel through teleworking, sourcing local or bio-based raw materials, alternatively fuelled vehicles, more efficient vehicles, smarter distribution and route planning, backloading of freight vehicles, eco-driving lessons for drivers, swapping to sea and/or train and electronic distribution (eg MP3s).

Don't stick your head in the sand here - even if a huge new source of cheap oil is found, most of the measures above will still cut your cost base, making you more competitive. You really can't lose.

Tags: low carbon economy, oil prices, peak oil, risk, transport

Posted by Gareth Kane no responses

9 February 2011

Is the peak oil cat out of the bag?

Interesting article buried in the Guardian this morning - one of the Wikileaks cables concerned a 'reliable source' at Aramco, the Saudi national oil company, who reportedly said that Saudi Arabia would struggle to maintain current levels of oil production.

I was surprised that this was in the business pages as it is a potentially explosive political and economic issue - after all, oil is the lifeblood of our modern economy. The current situation is:

Oil production outside the Middle East has 'peaked';

The Middle East countries claim they can maintain production, but the transparency of their reporting leaves much to be desired.

So, if the cable's source is correct, and Saudi Arabia has 40% less reserves than it claims it has, then we really could be at the end of the age of oil as a dominant energy source. If global production has peaked - as many believe - or will peak in 2012 - as the cables suggest - then oil prices will surge. Recent research has suggested that coal won't remain a cheap alternative for long either.

The risk of peak oil/coal is fast becoming another compelling reason for organisations and individuals to aggressively cut their dependence on fossil fuels.

Tags: coal, peak oil

Posted by Gareth Kane no responses

7 June 2010

We all must go Beyond Petroleum, not just BP

Finally BP seem to be getting a grip, quite literally, on the source of the Gulf of Mexico oil spill. But with its stock value plunging by a third, the threat of multi-billion pound clean up operation and talk of criminal charges, the company must be wishing that they'd lived up to their ill-fated "Beyond Petroleum" slogan from the turn of the millennium.

For the question remains, what on earth were they doing drilling almost a mile below the waves, anyway? Why, for that matter, are vast tracts of Canadian sands being dug up and squeezed for a few drops of oil? Is it because oil is becoming an increasingly scarce resource? Is this peak oil writ large?

And let's not forget climate change. I always say that in any environmental debate the laws of physics always win. And so, despite the relative disappointment of Copenhagen, the fuss of the UEA e-mail leak and a single rogue statement on glaciers in an IPCC report, the world keeps warming. In fact, the 12 months to April 2010 were the warmest 12 months as far back as we can reliably measure. This puts paid to all the nonsense talk of global cooling in the 'denialosphere' and puts carbon cuts back on the urgent section of the to do list.

The answer is obvious. We've got to wean ourselves off fossil fuels and onto clean, safe and reliable renewable energy. This will require efficiencies to deliver, and a whole new way of thinking about energy: smart grids, anaerobic digestion of organic wastes, wind farms, solar energy, and whole new ways of living and working: teleworking, teleconferencing, buying quality rather than quantity, buying services rather than 'stuff'.

There is a growing belief that business should not only respond to this agenda, but drive it forward. The opportunities for innovation are immense: new products, new services, new technologies, new business models. Those that grasp this will prosper, those that cling to the old certainties will flounder. It's decision time.

Tags: bp, climate change, green business, oilspill, peak oil, renewable energy, sustainability

Posted by Gareth Kane one response

26 November 2009

M King Hubbert & Peak Oil Theory

If anyone is interested in the background to the concept of peak oil, I've just posted a profile of the godfather of peak oil, M King Hubbert, on Green Gurus. The profile covers recent controversies.

A future edition of The Low Carbon Agenda will look at peak oil and its implications for the industry of the future.

Tags: green gurus, m king hubbert, peak oil

Posted by Gareth Kane no responses

11 November 2009

Is there a peak oil cover up?

Until recently I've been agnostic about 'peak oil' - I've been in the "we'll only know when it happens" camp, but as the issue has moved steadily from the fringe to centre stage, I've started siding with the peak oil brigade. Last year International Energy Agency Chief Economist Fatih Birol stated that production could "plateau" by 2020 and a recent report by the UK Energy Research Centre concluded that a peak could occur before 2020. But then yesterday The Guardian reported allegations that the IEA has been exaggerating the future reserves of oil under pressure from "the US". One insider stated "we've already entered the peak oil zone".

There is one good reason for this cover-up (if that's what it is) - to stop panic buying and even resource related conflict, but I suspect that denial and inertia are the dominant drivers. In particular, the oil industry has a massive vested interest in avoiding talk of a peak. If reserves are seen to be depleting then shareholders will dump their shares - the 2004 reserves scandal nearly did for Shell. The sensible thing to do would be to diversify quickly into new energy technologies. The sort of cash that Big Oil could pump into renewables and efficient technology could drive us quickly to a low carbon economy, resilient to both climate change and peak oil, but instead they seem wedded to pursuing expensive and destructive forms of oil extraction like tar sands. If I were an investor, I'd start backing a different horse - and indeed investment in renewables exceeded that of fossil fuel exploration in 2008.

There's a great political opportunity here. The resistance to cutting carbon emissions in the US and elsewhere is mainly based on a suspicion of the political motives of the green lobby ("an excuse to raise taxes", "eco-communism", "red-green alliance" etc). If the world wants to maintain its standard of living once oil has peaked, we'll need those low carbon technologies anyway, irrespective of your views on climate change evidence. John Kerry has been promoting the business opportunities green innovation to persuade reluctant US politicians to sign up to President Obama's climate change bill. Maybe he should ask them "what will your voters say if you let the pumps run dry?" instead.

Tags: barack obama, climate change, iea, peak oil

Posted by Gareth Kane no responses

23 October 2009

The risk of oil price rises

Very interesting speech this week by John B Hess of oil exploration company Hess Corporation at the somewhat unsubtly titled "Oil and Money" conference in London. He caught the attention of the audience by declaring "The price of $140 per barrel oil was not an aberration; it was a warning." He went on to say that demand was outstripping supply and while production had either peaked or plateau'd ouside OPEC, it was still unlikely that we would hit a target of keeping global warming below 2°C while oil prices soar. Bleak indeed.

The oil price risk is one I communicate to my clients - if if you can handle current energy prices - what happens if they soar? Oil going above $100 a barrel was unthinkable a few years ago, but it went way over in the spring of 2008 and appears to be on its way back. This is a serious risk for many businesses and organisations - are you ready for it? Resilience is a term I'm pinching from the Transition movement - is your organisation resilient to the risks ahead?

Tags: oil prices, peak oil, risk

Posted by Gareth Kane no responses

12 October 2007

Oil price at record high - is this the beginning of the end?

With the BBC reporting that oil prices are staying near the record high set in September, the 'peak oil' debate has started again.

'Peak Oil' is the theory that we are nearing the economic limit of oil exploration and extraction, beyond which the cost of extracting the fuel will soar. Estimates of when the peak will occur range from now (Association for the Study of Peak Oil and Gas) to 2037 (US Govt advisors). Others reject the idea that peak oil is happening at all, such as Deborah White, senior energy analyst at Societe Generale in Paris (quoted by the BBC) who said "We don't endorse the idea at all."

The difficulty is that the oil & gas supply is a function of many different factors: politics (see Russia switching off Ukraine's gas supply in 2005), economics, geology (where the gas & oil is and in what quantities) and technology (what was uneconomic last year could be economic today). Apart from the geology, these factors are interrelated, unpredictable and may combine in unexpected and sudden ways.

If it is happening, we will be forced to decarbonise our economies swiftly. The only problem is, we won't probably know until long after it has started. If it isn't, then we should do it anyway for climate change and security of supply reasons.

Tags: climate change, oil prices, peak oil

Posted by Gareth Kane one response

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