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Page added on February 10, 2010

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Leggett: Society ignores the oil crunch at its peril

In the years approaching the credit crunch, whistleblowers were limited to a few insightful economists and financial journalists. Now whistles are blowing again about another grave threat to the global economy and the security of nations. They warn of an oil crunch: an unexpected crash in global production such that supply can no longer meet demand, even if China and India throttle back.

This time the warning is not limited to a prescient few individuals.
Major British companies, led by Virgin, Scottish and Southern and Stagecoach, are flagging the danger, in today’s report from the UK industry taskforce on peak oil and energy security . So too are the CEOs of oil companies themselves, in the case of Total and Petrobras, and growing numbers of other senior oil industry figures, usually recently retired. Even the International Energy Agency is sounding the alert, in a coded sort of way.

With modern economies geared to their rivets on just-in-time supply of copious amounts of affordable oil, society surely ignores this risk issue at its massive peril.

But that is what BP, Exxon, Saudi Aramco and many other institutions of the hydrocarbon era would have us do. And theirs is the perceived wisdom. I do not know of a single company, outside the taskforce group, where peak oil is on the agenda as a serious risk issue. As for government, Whitehall’s official line is typical, as things stand: there is 40 years of oil supply, no need to worry, and certainly no crisis. To be fair, that view may be in the process of changing, in the light of recent events in the energy markets.

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During the financial crash the world went within weeks from a received wisdom that investment banks had squeezed risk out of complex derivatives, to a spiralling doubt, to a tipping point of disbelief and panic. With peak oil, officials around the world, corporate and governmental, would experience exactly the same collapse of confidence in their cosy cultural assumptions. A second giant industry would have been found to have its asset assessment systemically and ruinously wrong. The net impact would be that oil-producing nations would begin to husband their own resources: keeping exports back for use in their own oil-hungry multi-hundred-billion dollar-and-rouble infrastructure programmes.

This is a scenario that could lead to food delivery lorries failing to reach Tesco in time for Friday-night shopping.

Guardian

Guardian



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