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Davos delegates warned of imminent oil crisis

Some of the planet’s richest nations are to hear a warning that a global oil crisis could happen as early as next year

(Pic: Shell)

(Pic: Shell)

By Alex Kirby

A British businessman will tell world leaders meeting in Switzerland today that it is dangerous to argue that fracking for shale oil and gas can help to avert a global energy crisis.

Jeremy Leggett, a former Greenpeace staff member who founded a successful solar energy company, has been invited to the annual World Economic Forum meeting in Davos from 22 to 25 January. The theme of the meeting is The Reshaping of the World: Consequences for Society, Politics and Business.

Leggett told the Climate News Network: “The WEF likes to deal in big ideas, and last year one of its ideas was to argue that the world can frack its way to prosperity. There are large numbers of would-be frackers in Davos.

“I’m a squeaky wheel within the system. I’m in Davos to put the counter-arguments to Big Energy, and I’ll tell them: ‘You’re in grave danger of repeating the mistakes of the financial services industry in pushing a hyped narrative.”

This refers to the way in which banking leaders had “their particular comforting narrative catastrophically wrong, until the proof came along in the shape of the financial crash”.

Leggett founded Solarcentury, the UK’s fastest-growing solar electric company since 2000. He also established the charity SolarAid which aims to eradicate the kerosene lamp from Africa by 2020, and chairs the Carbon Tracker Initiative.

His book Half Gone: Oil, Gas, Hot Air and the Global Energy Crisis was published in 2005, and his latest, The Energy of Nations: Risk blindness and the road to renaissance, in 2013.

‘Sunset industry’

Leggett says the conventional oil industry is facing an imminent crisis, because existing crude oil reserves are declining fast, it is having to find the money for soaring capital expenditure, and the amount of oil available for export is falling.

“Big Oil is still extremely powerful and well-capitalised”, he says, “but it is fast approaching sunset. The profitability of the big international groups – like Exxon, Shell and BP – is a real worry for investors, and they’ve been largely locked out of the easy oil controlled by national companies – just look at BP and Russia.

“Gas? Unless the price goes up, the whole US shale gas industry is in danger of becoming a bubble, even a Ponzi scheme. All but one of the biggest production regions have peaked already, and losses are piling up. This is an industry that’s in grave danger of committing financial suicide.”

A linked message that Leggett will deliver is that there is a growing danger of a carbon bubble building up in the capital markets. He says investors who think governments may agree stringent and strictly-enforced limits on greenhouse gas emissions might decide their investments in oil and gas are at risk of becoming worthless.

Crunch next year?

There is little sign yet that such limits are likely any time soon. But Leggett says that is to miss the point: “You don’t have to wait until agreement is close, or even probable. You have to believe only that there’s a realistic chance of policymaking which means assets might be stranded.”

He will also tell his audience “to take out insurance on the risk of an oil crisis, by accelerating the very things we need to deal with climate change”. Chief among these, he says, is the need to channel funds withdrawn from oil, gas, and coal into clean energy instead – though he acknowledges that, as a renewable energy entrepreneur himself, he may be accused of self-interest.

Leggett fears a world oil crisis could occur as early as 2015. And when it comes, it will certainly mean “ruinously high prices”, for a start. But it will mean something more, he says.

Last December he worked with a US national security expert, Lt-Colonel Daniel Davis, to organise the Transatlantic Energy Security Dialogue. Leggett has a regard for the views of people like Davis. “The military are better than your average politician or consultant to Big Energy at spotting systemic risk”, he says.

Leggett says military think-tanks have tended to side with those who distrust “the cornucopian narrative” of the oil industry.

One 2008 study, by the German army, says: “Psychological barriers cause indisputable facts to be blanked out and lead to almost instinctively refusing to look into this difficult subject in detail. Peak oil, however, is unavoidable.”

This article was produced by the Climate News Network

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  • salome riingen

    Big oil corporations will invest to more oil supplier countries if oil is on demand. It’s just that simple because oil is natural resources that they can find somewhere. Many countries are rich in oil but not yet discovered. U.S . can find it here if these laws stay “friendly!”

    • Dan H

      That’s not true, not factual. Big oil has some of the most advanced engineering solutions/technologies on earth. They’ve already mapped out all the giant oil reserves. They did this years ago. The planet has been scanned/mapped out. Geologists know where they’re likely to find huge reserves. The problem is they need to find a NEW Saudi sized oil giant every 3 or so years just to keep production level. Every year with massive deflationary forces that plateau gets harder and harder to maintain. With a massive increase in investment/technology drive/fracking/shale/tar sands etc that’s the best they can do. Keep things level. In addition western oil firms are being locked out by Iran, Russia, China, India, Brazil et al. No longer can America/Europe call the shots. America is having to withdraw from the Middle East. Europe is in massive decline. America has placed its desperate bets on fracking which we know will end with horrific declines in a matter of months making the decline even worse. Since 2008 total global conventional liquid fuels production has been declining at a rate of 6% pa. Central banks have been printing like crazy, sovereign debt is skyrocketing, interest rates in the West are near zero. All of this and we’re still finding REAL growth impossible. Collapse is coming for the West. It will be an energy consumption collapse and given the economy is a physics energy equation it’s GAME OVER.

      You state “your opinion” that (western) big oil firms will invest more in oil suppliers. Well yes this is what they’ve been desperately trying to do. They’re having to “invest” greater amounts of capital for less and less oil. Oil is a natural (finite) resource so that means exporting nations will seek to limit exports to the West to serve their own markets. India, Russia, Iran, China, Brazil etc.

      The West is facing an imminent energy crisis and I think any intelligent rational human being can see that.

      Denial is dangerous.

      • Ben Dover

        Infinite growth with finite resources and no one sees a problem?! Capitalism is not dying, it is death.

    • Brian Kern

      HA! This must be the narrative you tell yourself to help you sleep at night. Nothing you said here is true.

  • Reality check

    The Bakken Shale oil fields have maybe two years in them. As it is they are a short term stop gap. As one oil industry engineer put it. Shale and fracking are like wringing a wet towel. The first time you wring it. A lot comes out. The second time, only a few drops. We are heading for a world of sh*t the likes of which mankind has never seem. I estimate two years before the fun really starts. Having analysed this problem for years now I can say this. There is no solution with 7 Billion people. We are the problem and unfortunately getting rid of 80% of us solves problem. Essentially we have to step back to pre-coal/Oil populations and life styles. When you look at the timeline of oil overlapped with population levels you quickly realise that we really are living in a blip on time line. We are now on the down hill side of the blip.

  • John

    If you are looking for a time line of our imminent demise this 417 page extremely detailed in depth report by the Australian Government published in 2009 is a real eye opener. If you want to get right to it, read the executive summary and the conclusion. Even more worrying the report was pulled from the bitre.gov.au website within days of publication although it was clearly a very expensive and comprehensive report. It is available though. Here is one link http://www.manicore.com/fichiers/Australian_Govt_Oil_supply_trends.pdf
    They are quite specific about what year things are going to start going pear shaped. The report has been very accurate to date…. forewarned is forearmed. The timeline coincides with the comment by “Reality check”