That article was a very negative view by someone who from the sounds of him seems to be an endworlder. It could be the sunniest day of the year and an endworlder will find someway to predict the end of civilization. In any case, the UK still doesn't have to import oil although that will end sometime in the next few years. Compare that to the US which has to import more than half of its oil, and the UK is hardly in a terrible position. In addition, they also believe there is more oil to be had off their northern coast although it will be harder to get to than earlier finds. If they are successful, it will buy them more time. Its the US and Europe I am most worried about with regards to this issue.
Here's another article on the same subject........its a wee bit more optimistic:
CAN WE AVOID FUTURE
ENERGY SHORTAGES?
by Hugh Ebbutt
Contributor, World Energy Source
World Energy Monthly Review, Vol. 2, No. 3, March 2006
March 16, 2006
As I worked in London on a cold afternoon late February, enjoying an unplanned local power cut and drafting this editorial by candlelight, I had to wonder: Could we soon be facing serious and devastating energy shortages? In countries with large, energy-dependent economies, both developed and developing, people are more and more waking up to this issue.
In London, the government was worried enough to launch, on Jan. 23, a major review of the United Kingdom’s energy options to "secure clean, affordable energy for the long term" – less than three years after its last energy strategy white paper. The United Kingdom has become a net importer of gas sooner than expected, and the nation will probably be a net importer of oil in two years. By the year 2020, 30 percent of its existing old coal and nuclear power-generating capacity will have closed, and without other sources of energy, the country may well need to import 80 percent of its gas, whether from Russia or elsewhere. The United Kingdom could face a supply gap of 20 percent of peak demand as soon as 2015, and up to 60 percent by 2020.
Eight days after this announcement, U.S. President George W. Bush confessed that "America is addicted to oil" and that this "dependence is a serious problem." This is perhaps a mild understatement, given that the country’s population of 300 million – around 4.6 percent of the planet’s total – uses nearly 25 percent of the planet’s oil. The Bush administration is looking for ways "to break this addiction" and reduce U.S. dependence on Middle East oil.
Both governments are reacting to sharply higher energy prices, increasing dependence on politically risky sources of supply, more competition for scarcer new supplies of readily producible oil and gas, relentless growth in demand and, to differing degrees, the growing Green lobby. These are global drivers of a global energy market, and they are not easily addressed by any one nation on its own.
Global Market Fundamentals
Higher prices – that is, distinctly higher than the levels at the start of 2004 – look like they are here to stay. With higher expected volatility, driven by both natural disaster and politics, these prices are inflicting pain on many consumers, particularly big industrial users.
It has taken a surprisingly long time for this price signal to come through to users. For example, the U.K.’s biggest energy supplier, Centrica’s British Gas, announced in February a 22 percent increase in domestic gas and electricity prices (on top of a 14 percent increase a few months ago), blaming wholesale gas prices up 63 percent from 2005 and more than triple 2003 levels. In contrast, large industrial and commercial users are now already paying 72 percent more for gas and 52 percent more for electricity than a year ago, depending on their needs and flexibility. Perhaps low interest rates, and thus cheap money, have so far insulated economies from the full effect of higher energy prices. But the steep rise in costs will progressively filter through to the buyers of energy-intensive products.
The available supplies of both conventional light oil and accessible gas are getting tighter. Some producing countries’ reserves may be overstated (perhaps by as much as 50 percent or more); additionally, spare production capacity is much reduced, and producers have some strong incentives to keep it that way. Large, growing economies like China and India are chasing the same resources as large, developed nations. Peak oil production may not be so far away. Most alternatives are long term, and they need big, up-front investments and investor confidence in attractive returns over that time.
Many countries of the Organization for Economic Cooperation and Development (OECD) already import a significant share (60 to 90 percent) of their energy supply. But political instability and risks have increased. Highlighting the need to strengthen energy security through diversity of supply are recent events in Ukraine, Georgia and even Italy, where the energy company ENI recently faced a 5.4 percent daily gas delivery shortfall, amounting to 4 million cubic meters of the 74 million requested from the Russian gas monopoly Gazprom, most of which it was able to make up from gas storage.
The consequences of a supply shortfall are significant. Certain events have shown how precarious the energy system can be, including the rolling blackouts in California in 2001, the blackouts spanning in the northeast United States and Canada in 2003, affecting an estimated 50 million people, and those in London and Italy in 2003.
Global energy demand still appears to be rising at around 2 percent annually (after 3.8 percent in 2004), driven by both economic and population growth every year, despite higher prices and some improved efficiency in use. And it is expected to rise further, on top of the big unexpected increases seen in 2004 from countries like China and India. Despite lags and a lack of transparency in the numbers, it is evident that recent demand growth from China is now lower, although oil and gas demand in both countries is expected to double by 2030 (Figure 1). The International Energy Agency (IEA) predicts global energy demand growth of over 50 percent from 2003 levels by 2030. If oil maintains most of its share, as the IEA forecasts, the world will need another 33 million barrels on top of our current daily 85 million barrels.
So the appetite for oil may rise from the current 31 billion barrels to more than 43 billion a year. Even current demand is close to the expected remaining undiscovered oil reserves of two world-class basins each year! With only perhaps 15 to 20 of these superbasins available, even with the buffer of current discoveries, sooner or later conventional oil supply will clearly not be able to keep pace with demand on its present track.
Politicians Address Demand in the U.K. and U.S.
Both Trade and Industry Secretary Alan Johnson and Energy Minister Malcolm Wicks of the United Kingdom, building on the strategy set out two to three years ago, believe more focus on demand and energy efficiency is now crucial.
Wicks stated in January, "Thirty percent of [all U.K.] energy is used in our homes, and the plasma TV generation is increasingly packing those homes with consumer electronics, domestic appliances and gadgets, often left needlessly on standby." Wicks said this alone wasted more than £740 million worth of energy, resulting in the creation of 4 million tons of carbon dioxide. While industrial use has fallen, transport now takes 36 percent of U.K. energy – double the level of 30 years ago (Figure 2). But so far, apart from continuing high gasoline taxes, there appears to have been less focus on transport. Indeed, recently most U.K. ministers seemed still to prefer the status, security and comfort of driving their traditional Jaguars rather than more energy-efficient hybrid cars.
In launching the government’s three-month consultation on the U.K.’s future energy needs, Wicks said, "I am determined that we make the connection between this review and the energy we consume in our everyday lives. We are all part of the problem and we need to become part of the solution."
But observers recognize that such changes in behavior would need a strong catalyst, perhaps like the 10-pence-pergallon tax saving in the U.K. that led to widespread switching to unleaded petrol. The prospect of local blackouts – and concern about reliable power supply for the 2012 London Olympic Games – may well provide the needed stimulus.
Many people, particularly in Europe and perhaps along parts of the North American Pacific and Atlantic coastlines, see the unnecessary waste of gas-guzzling SUVs, cooled or heated buildings with doors wide open, and airplanes indirectly routed or delayed by poor air-traffic planning as opportunities to improve energy efficiency. The British energy review’s introduction states that if every household turned down its heating by one degree, the U.K. would save enough energy to power all the hospitals and health facilities in the country. It is estimated that one-third of U.K. heating demand could be saved by better insulation, and recent thermal images of the heat leaking from the Houses of Parliament and Buckingham Palace’s clearly leaky windows highlight the waste (Figure 3).
The United States uses 50 percent more energy per dollar of gross domestic product than Europe does, perhaps because consumers pay less, and so leaves itself more vulnerable than
Europe to supply shocks. With enough courage to put in place the right tax and investment incentives, many of these inefficiencies could be substantially reduced. Changes in patterns of consumption, once triggered, will necessitate changes in distribution infrastructure, and owners of this will need time to make the adjustments. The U.K. economy has in fact become more energy efficient since 1997, using only 2 percent more energy to fuel 21 percent economic growth. Overall, if the world’s major consumers could save just 20 percent of the energy they currently consume, they would reduce both energy costs and demand, thereby potentially lowering unit prices. At a global scale, this could perhaps delay the likely shortfalls for up to 10 years or more – enough time to put in place the much-needed long-term energy planning.
The Green Perspective
The evidence of irreversible adverse impacts of dangerous climate change is mounting from the Antarctic to the Greenland ice caps, which are apparently melting and will eventually flood many coastal cities. Most scientists now agree this is at least in part caused by our ever-higher carbon emissions over the last 60 years. Lee Raymond of ExxonMobil commissioned university- and industry-led studies of this in 2004. Others, like John Browne of BP, have commented that some of the causes of the unusual and increasingly intense weather patterns in the Gulf of Mexico and elsewhere may be man-made.
Although President Bush recognizes that his "country could dramatically improve its environment," the U.S. government has so far done little to encourage conservation, increase fuel efficiency in cars or slow the growth of consumption. Its U.K. counterpart has made some perhaps unrealistic commitments to reduce carbon emissions: originally by 20 percent by 2010, and now with more focus on a 60 percent reduction by 2050. These may be watered down as the deadlines get closer, but they provide some incentive, at least locally, to head in a globally sustainable direction. Will proposed carbon taxes make the U.K. (or indeed the United States) significantly less attractive for investment? For these to work, other big users will need to do the same on a global scale.
Supply Options
On the supply side, there are a number of possible solutions. Some of the supply shortfall could be made up from a mix of more nuclear power, cleaner-coal-fired power and various renewable sources, as well as more natural gas. Each of these has pros and cons, from different viewpoints, and a good balance needs to be struck.
Nuclear energy is clearly rising rapidly up the agenda as a strong, clean, mid-term solution, and regulatory barriers are being lowered despite the safety and waste concerns. It takes around 10 years to build a new reactor, and after the initial high capital cost, a reactor gives security of supply and stable pricing. While uranium supplies are also finite, they are expected to last for decades, and the share prices are rising for companies with good access to those supplies. Some are focusing on the new, advanced-design pebble bed reactor, which eliminates complex steam and water management and claims dramatically higher safety and efficiency.
The IEA estimates that around $200 billion will be spent on new nuclear generation over the next 25 years, particularly in the Far East. Meanwhile, the U.K. government’s British Nuclear Fuels Ltd. might be ready to sell Westinghouse, with its pressurized water-reactor technology, to Toshiba for around four times the $1.2 billion it paid for it. Is this a good move if nuclear energy is just about to take off again?
Coal is still relatively abundant, and coal-fired power is getting cleaner with new burning technologies. This, too, is likely to see a strong and perhaps surprising resurgence not only in the U.K. and the United States, but especially in China and India. The IEA already projects global coal use will grow by 1.4 percent a year through 2030.
In the U.K., gas currently provides 40 percent of the country’s power, coal 33 percent, and nuclear 19 percent, with renewables and other sources at 4 percent each (Figure 4). Gas with fewer carbon emissions was expected in the 2003 Energy White Paper to grow to around 80 percent by 2012. But clean-coal-burning plants can be built in four to six years, without difficulty, and they offer greater supply security and price stability. There is also an opportunity to develop and learn how best to apply this new technology and export its use to others with large coal deposits.
Only eight countries, including the U.K., generate as much as 500 megawatts from renewables – mainly wind and hydro. Even at that amount, renewables are unlikely to have a big impact on the total mix for the next 10 to 15 years. "It is not a question of renewables versus nuclear; we need both,"according to Trade Secretary Johnson. The U.K. targets to make renewables 10 percent of the energy mix by 2010 and 20 percent by 2020 may well be optimistic.
Technology to the Rescue – in Time?
President Bush has stated "the best way forward to break U.S. oil addiction is through technology." Certainly technology will continue to advance in exciting and sometimes unexpected ways, perhaps offering cost breakthroughs or new energy substitutes over time. Plug-in battery hybrid or hydrogenpowered cars, although potentially greener at the location of use, only change the fuel or energy-storage medium. Since they still need a primary energy source to make the electricity or hydrogen, their energy efficiency will be key, and they may do little to reduce the overall energy needed.
President Bush has said that alternative energy could be produced to compete with gasoline within six years. Options range from nuclear energy to ethanol made from wood and grass, perhaps taking a leaf out of Brazil’s book, where flex-fuel cars, which run on combinations of ethanol and petrol, took 53.6 percent of their market in 2005. He has also set as a goal the replacement of 75 percent of U.S. oil imports from the Middle East with alternative energy over the next 20 years.
Meeting the latter goal will certainly take more than pledging to increase the limited funding for clean-energy research by a mere 22 percent. Indeed, these Middle East imports currently amount to only around 1.6 million barrels per day. Or perhaps President Bush meant replacing some Middle East imports with production from other current, but risky, suppliers, like Venezuela, Russia or Nigeria – but in any case, still at the same globally set prices. Canadian oil sands or Mexican deepwater oil and gas might then be better options. One should also remember that the Middle East is still thought to hold up to two-thirds of the world’s remaining oil reserves. One way or another, therefore, the United States is likely to continue to need oil from this dominant supplier.
The signal sent by a significant customer to a major and long-term supplier will hardly improve relations or encourage needed new investment in production capacity. Even if the United States buys less, others in the global market, like China and India, will buy more. It may be better to work with OPEC as a partner rather than regard the organization as an enemy.
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