From the editor
Rising oil prices should help stimulate alternatives
A
high street bookmaker has cut the odds on the price of a barrel of oil
risingto $200 by the end of this year to ‘just 3/1’ – citing unrest in the Middle East as the likely cause. Paddy Power is lookingto make some money. At the time of writing, the international price of crude is hoveringaround $101 – a two-year high. Meanwhile,
Energy
Secretary Chris Huhne has also been speculatingabout oil prices. In a confer- ence speech delivered on 3 March, he quoted Department of Energy and Climate Change (DECC) data which sug- gests that a doubling of the price of oil from last year’s $80 per barrel, to $160 this year, would lead to a cumulative loss of UK GDP of around £45bn over two years. Huhne was illustratingthe point that, while the costs of converting Britain’s electricity system to a low car- bon model was certainly going to be expensive for customers, continuingto rely of fossil fuels would be considerably more expensive. The break-even point, DECC suggests, is an oil price of $100. Huhne added that a significantly
higher oil price is: ‘not just far-off specu- lation: it is a threat here and now. And the faster we move to a low carbon economy, the more secure and stable our economy will be.’ Oil major Shell has joined Paddy Power
and DECC in foreseeingrisingoil prices. In its Signals and Signposts report on future energy scenarios published in February, Shell reaches some dramatic conclusions. Its summary points suggest that: ‘the world is enteringan era of volatile transitions and intensified eco-
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2
nomic cycles’ with a step change in energy use as China and India enter their most energy-intensive phase of economic growth. Further, ‘a tighter market will continue to put pressure on prices and generate volatility. And, while demand pressures will stimulate alternative supplies and energy efficiency, these may not be enough to offset growing demand tensions
completely. Put another way: ‘Supply will struggle
to keep pace with demand. By the end of the comingdecade, growth in the production of easily accessible oil and gas will not match the projected rate of demand growth.’ The enormous gap between business-as-usual supply and business-as-usual demand projects for 2050 ‘will have to be bridged by some combination of extraordinary demand moderation and extraordinary produc- tion acceleration.’ So, everyone is forecastingrising oil
prices, even from today’s relatively high mark. Whereas Huhne is usingthe data and predictions optimistically to suggest an alternative course of action, Shell is suggesting a gloomier picture: that if fossil fuel use continues as it is today, then carbon dioxide emissions ‘could severely threaten human well-being.’ Alternatively, with moderation of fossil fuel use and effective carbon dioxide management ‘the path forward is still highly challenging... remaining within desirable levels of carbon dioxide in the atmosphere will become increasingly dif-
ficult.’ At the time of writing, a group of around 50 Tokyo Electric Power
Company (Tepco) staff were battling to contain damage to and emissions from four units of the Fukushima nuclear power plant in northern Japan – at very considerable risks to their own safety. At this point, the situation still seems to be getting worse by the hour. This does not seem to be the time to be consideringthe wider picture, particularly any global effects of the disaster at Fukushima, but that hasn’t stopped a whole range of organisations getting onto their soap- boxes to declare anythingfrom an end to plans for new nuclear power sta- tions, to the assertion that it is only the seismic risk in Japan that counts. In particular, China has reportedly sus- pended approvals for proposed new nuclear plants and is makinga comprehensive safety check of its existingones, as a result of the Japanese crisis. Two things do seem clear: that the accident in Japan will rate amongthe very worst in the his- tory of nuclear power, and that the 40-year-old Fukushima plant will never generate electricity again.
Steve Hodgson
Theviewsandopinions expressed in this article are strictly those of the editor only and are not necessarily given or endorsed by or on behalf of the Energy institute.
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