The customer foots the bill while the government looks at ways to put a brake on consumpion, writes Roland Gribben of the Daily Telegraph
Panic has not quite gripped the oil market but the return of $100-a-barrel oil has sent alarm bells ringing a little louder.
The traditional mixture of politics, supply, demand, speculation and fear is again providing the ingredients for a surge in prices that does nothing for the health of a world economy struggling to come to terms with a credit crunch.
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Price is being propelled by the uncertainty created by the Middle East crisis, the increasing oil appetite of China and India, the concern about the behaviour of Opec and more than a little touch of greed.
The customer is footing the bill while governments around the world attempt to take yet another look at ways to put a brake on consumption, reduce dependence on oil in the economic chain and make more noise about accelerating the drive for substitutes, whether renewable sources such as wind and solar or the more contentious nuclear route.
The more pressing issue is just when does the oil run out?
There are a variety of answers apart from "sooner than you think".
BP’s latest look into its crystal ball suggests the age of oil may last for another 40 years, longer of course if there are more meaningful attempts made to find substitutes or Mother Nature produces more surprises in the shape of vast new oil basins – the scramble for Arctic territory for example – but too close for comfort.
In Paris, the International Energy Agency – the club of rich nations – has produced a depressing assessment of the outlook.
Its latest world energy report estimates the world’s remaining oil resources are only sufficient to meet rising demand over the next 25 years. The clock seems to be ticking faster.
In short, the IEA says, the world is facing an unsustainable energy future unless its energy appetite is curbed.
China and India, the twin super powers in the world growth league, are the nations driving demand. The IEA says that their unprecedented pace of growth will require ever more energy and will transform the global energy system by the sheer size of their growing weight in the international fossil fuel trade. Transport remains the fastestgrowing sector.
The current world vehicle population of 900m cars and trucks is projected to top 2.1bn by 2030. Some growth. Some traffic jam. The upshot is that energy policy with all its implications has a higher priority on Gordon Brown’s economic and political agenda. It all adds to the pressure on the Government to produce a strategy or programme capable of meeting the challenges.
The challenges are formidable. Balancing energy security with supply, demand, conservation and global warming smacks of mission impossible. Policy is being bundled into compartments.
The revival of nuclear power is seen as underpinning the growth in generating capacity to meet power demand. The efforts being made to encourage a late surge in North Sea oil and gas exploration to squeeze the last drop into the tank may help offset the need to increase imports but the contribution will be modest.
Britain’s oil age is ending all too quickly. Oil and gas self sufficiency and a spell as one of the world’s top five producers has lasted for less than 20 years. Could it have been extended?
Only by government intervention that would have provided the wrong signals for oil company investment and resulted in a less attractive climate. The private sector is continuing to invest heavily in resources to offset the rundown in domestic production through overseas exploration, investment and purchasing contracts.
A pipeline network linking Britain with Norway and the continent has filled some of the gaps in the supply chain while an expansion of liquefied natural gas storage capacity will provide reinforcement. Substitution in the shape of renewable energy is still in its infancy despite the arrival of wind farms dotting the landscape, obligations placed on electricity generators and considerable huffing and puffing.
The Prime Minister attempted to force the pace with this week’s commitment to increase the contribution of renewables to 30-40pc, exceeding the 20pc target set by the EU and overruling opposition from John Hutton’s Department for Business and Enterprise in the process.
Considerable private sector investment will be needed to meet the objective along with incentives.
The scale of them will determine just how fast renewable capacity comes on stream and the price the consumer has to pay to foot the bill. Conservation in carrot-andstick mode will play an increasingly important part in the “greening” of energy.
Carrot in the form of incentives or tax relief. Stick in the shape of price increases or tougher regulations, largely aimed at transport.
There will be no shortage of advice. Ofgem, the gas and electricity industry watchdog, yesterday made another attempt to end customer confusion over “green energy” by providing another set of guidelines, two in fact, aimed at making it easier to choose the best option. One covers tariffs for energy produced from renewable sources.
The second embraces tariffs for energy sources with low carbon dioxide emissions. Customers complain they find it difficult to compare the environmental benefits of deals on offer. Under the new set-up, low carbon offerings will be rated according to their “carbon intensity” based on a similar A to F rating system used to assess the energy efficiency of household appliances.
Ofgem says it wants to ensure that customers who buy “green tariffs” know if they are paying for the amount of renewable energy suppliers are legally required to supply or whether they are funding additional green supplies.
There will be more guidelines and guidance as energy’s strategic dimension assumes a more coherent shape but the uncomfortable message inherent in both energy fundamentals and policy is that living standards will suffer.
Panic has not quite gripped the oil market but the return of $100-a-barrel oil has sent alarm bells ringing a little louder.
The traditional mixture of politics, supply, demand, speculation and fear is again providing the ingredients for a surge in prices that does nothing for the health of a world economy struggling to come to terms with a credit crunch.
advertisement
Price is being propelled by the uncertainty created by the Middle East crisis, the increasing oil appetite of China and India, the concern about the behaviour of Opec and more than a little touch of greed.
The customer is footing the bill while governments around the world attempt to take yet another look at ways to put a brake on consumption, reduce dependence on oil in the economic chain and make more noise about accelerating the drive for substitutes, whether renewable sources such as wind and solar or the more contentious nuclear route.
The more pressing issue is just when does the oil run out?
There are a variety of answers apart from "sooner than you think".
BP’s latest look into its crystal ball suggests the age of oil may last for another 40 years, longer of course if there are more meaningful attempts made to find substitutes or Mother Nature produces more surprises in the shape of vast new oil basins – the scramble for Arctic territory for example – but too close for comfort.
In Paris, the International Energy Agency – the club of rich nations – has produced a depressing assessment of the outlook.
Its latest world energy report estimates the world’s remaining oil resources are only sufficient to meet rising demand over the next 25 years. The clock seems to be ticking faster.
In short, the IEA says, the world is facing an unsustainable energy future unless its energy appetite is curbed.
China and India, the twin super powers in the world growth league, are the nations driving demand. The IEA says that their unprecedented pace of growth will require ever more energy and will transform the global energy system by the sheer size of their growing weight in the international fossil fuel trade. Transport remains the fastestgrowing sector.
The current world vehicle population of 900m cars and trucks is projected to top 2.1bn by 2030. Some growth. Some traffic jam. The upshot is that energy policy with all its implications has a higher priority on Gordon Brown’s economic and political agenda. It all adds to the pressure on the Government to produce a strategy or programme capable of meeting the challenges.
The challenges are formidable. Balancing energy security with supply, demand, conservation and global warming smacks of mission impossible. Policy is being bundled into compartments.
The revival of nuclear power is seen as underpinning the growth in generating capacity to meet power demand. The efforts being made to encourage a late surge in North Sea oil and gas exploration to squeeze the last drop into the tank may help offset the need to increase imports but the contribution will be modest.
Britain’s oil age is ending all too quickly. Oil and gas self sufficiency and a spell as one of the world’s top five producers has lasted for less than 20 years. Could it have been extended?
Only by government intervention that would have provided the wrong signals for oil company investment and resulted in a less attractive climate. The private sector is continuing to invest heavily in resources to offset the rundown in domestic production through overseas exploration, investment and purchasing contracts.
A pipeline network linking Britain with Norway and the continent has filled some of the gaps in the supply chain while an expansion of liquefied natural gas storage capacity will provide reinforcement. Substitution in the shape of renewable energy is still in its infancy despite the arrival of wind farms dotting the landscape, obligations placed on electricity generators and considerable huffing and puffing.
The Prime Minister attempted to force the pace with this week’s commitment to increase the contribution of renewables to 30-40pc, exceeding the 20pc target set by the EU and overruling opposition from John Hutton’s Department for Business and Enterprise in the process.
Considerable private sector investment will be needed to meet the objective along with incentives.
The scale of them will determine just how fast renewable capacity comes on stream and the price the consumer has to pay to foot the bill. Conservation in carrot-andstick mode will play an increasingly important part in the “greening” of energy.
Carrot in the form of incentives or tax relief. Stick in the shape of price increases or tougher regulations, largely aimed at transport.
There will be no shortage of advice. Ofgem, the gas and electricity industry watchdog, yesterday made another attempt to end customer confusion over “green energy” by providing another set of guidelines, two in fact, aimed at making it easier to choose the best option. One covers tariffs for energy produced from renewable sources.
The second embraces tariffs for energy sources with low carbon dioxide emissions. Customers complain they find it difficult to compare the environmental benefits of deals on offer. Under the new set-up, low carbon offerings will be rated according to their “carbon intensity” based on a similar A to F rating system used to assess the energy efficiency of household appliances.
Ofgem says it wants to ensure that customers who buy “green tariffs” know if they are paying for the amount of renewable energy suppliers are legally required to supply or whether they are funding additional green supplies.
There will be more guidelines and guidance as energy’s strategic dimension assumes a more coherent shape but the uncomfortable message inherent in both energy fundamentals and policy is that living standards will suffer.
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