A low carbon diet

The price of oil is only going one way: up. We literally cannot afford not to invest in renewables

Jeremy Leggett
guardian.co.uk,
Thursday July 10, 2008

The UK government's renewables consultation called for a green revolution in energy. In doing so, it created a perfect tabloid rod for its own back. The proposed cost-to-consumer calculated by the Department of Business were based on the vanishingly unlikely prospect of an oil price as low as $70 a barrel in 2020. Expected additions to UK energy bills, at that oil price, would be 10-13% for electricity and 18-37% for gas, the government said.
Cue outrage. The tabloid press the next morning was full of angry headlines about inflating British energy bills. "Going green will mean five years of rising bills," trumpeted the Daily Express. The adjacent headline read: "Fuel fears: Budget drove my dad of 92 to suicide." The Daily Mail was more specific: "Price of turning green: Labour's wind farm plan will cost every family £260 a year". Neither they nor other similar articles in other tabloid papers mentioned the economic imperative of abating climate change.
Out-of-control climate change is going to land us all with bills that will make today's energy bills look like pocket money. Nobody at all, that I saw, picked up the significance of the oil price, and peak oil, in the size of energy bills. Peak oil is going to send the oil price, high as it is today, through the roof. Gas and coal will go with it. Simply stated, fuel bills will be far higher if we stay with the status quo than if we go for a green renewables revolution.
The government did note that at $150 a barrel for oil 12 years from now, instead of $70, UK energy bills would be 35-40% lower than the figures that outraged the tabloids. But how much lower will they be at $200, $300, $400 and more for a barrel of oil?
On the same day the consultation was released, Gazprom boss Sergei Miller told the FT that OPEC has no control over world oil price and many countries are near peak oil. Prices are heading for "a radically new level" via $250 next year, he believes. As I constantly point out in these blogs, more and more people in and around the oil and gas industry are saying this kind of thing.
Perhaps oil traders are beginning to believe the forecasts of this kind. On the day the consultation was released, oil topped $140 for first time and shares plunged. Reflecting this and other woes, the Dow Jones hit its lowest level since 2006.
Proctor & Gamble gave us a clue, on the same day, as to how far-reaching the response to ever higher oil prices will be in the prescient quarters of the business world. P&G will shift to factories close to customers in order to cut its fuel bills, head of global supply Keith Harrison said. P&G have over 145 manufacturing plants in 80 countries supplying 3.5bn consumers. Their problems are about the cost of powering plants and well as the cost of having 30,000 trucks on the roads every day. By the end of 2009, half the electricity at a P&G nappy plant in Pennsylvania will come from onsite wind power, for example, and other renewables are being trialed, including of course solar. (Cue cynics: an opportunity to suggest once again that selling solar is surely all I care about in airing concerns about climate change and peak oil).
When are people going to get it? Within just a few years, peak oil is going to make them wish desperately that they had invested in renewables and efficiency today, or had a government willing to do so seriously on their behalf. There is no better way to avoid the inevitability of traditional energy-price inflation.