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BP CEO: Oil markets will save us
Posted by Jerome a Paris on June 13, 2008 - 8:55am in The Oil Drum: Europe
Topic: Supply/Production
Tags: bp, tony hayward [list all tags]
Basically his arguments boil down to 3 points: there is no speculation (prices are justified by fundamentals, markets work fine), renewable energy is not serious (too small, mostly), and there is no peak oil (plenty of reserves around). and of course, his solution is simple: oil majors are ready to invest and let market forces solve the supply problem, but political obstacles prevent them, and governments must therefore help by removing these.
What is true is that speculation is not to blame, and that there are political obstacles to investment today. The rest is not quite so true. And that mix, which I expect is deliberate, has one main subtext: "don't worry" (and don't try to move off oil).
When I became BP chief executive just over a year ago, I warned that the supply and demand balance for energy was very tight. But, in common with most people, I never expected to see the oil price go quite as high, quite as rapidly, as it has in the past few months.
Ah, "most people." This could be seen as yet another indictment of the common wisdom of the "serious" people (I don't think he includes anybody else amongst "people") that pontificate day in and day out in newspapers, think tanks and industry fora and, somehow, still have more credibility than those that have forecast current events with a lot more success.
Of course, short term movements cannot be predicted easily, but long term trends, especially such momentous ones as the irresistible increase in oil prices over the past 5 years, can and have been announced by many commentators, which have been too easily dismissed.
While it's easy to crow now, a call for accountability of the pundits would still seem to be appropriate.
Unsurprisingly, with consumers and businesses everywhere facing much higher fuel costs, emotions are running high. I understand those feelings. Governments and the energy industry are urgently looking for solutions. But if we are to act sensibly, we must start with the facts. We must accept the world as it is, not as we hope for it to be.
In other words: "we know you're suffering, and are unhappy about it, but please be certain it's not our fault" [ED - sentence reworded to eliminate profanity]
On Wednesday, BP is launching the latest edition of the BP Statistical Review of World Energy. This is the 57th year of its existence and during that time the review has established a reputation as one of the most reliable sources for objective energy data worldwide. At times such as these it is a useful analytical tool for those both inside and outside the industry.
Yes, let's not mention that OPEC (and a few other) country reserves have not been independently verified for more than 20 years, and that BP uses official national data from these countries without questioning them. Let others quote them as authoritative, and let the lies be repeated and disseminated unquestioned.
(From an earlier Oil Drum story, using BP numbers from 2 years ago)
It also exposes some myths that need to be put to rest if we are to find the right solutions to big global problems such as energy security and climate change.
While it is welcome to see climate change mentioned, it is more interesting to note that the energy side of the equation is framed in terms of security and not in terms of scarcity. Hawyard will remain within that "safe" frame for the rest of the article.
The first myth is that high prices are caused by technical factors, such as speculation. While these factors may have an impact on the margins, the data clearly show that high prices are really caused by economic fundamentals.Global energy demand growth in 2007 was above average for the fifth year in a row, driven by the fastest period of economic growth since the early 1970s. Demand growth is concentrated in those emerging nations that also subsidise fuel prices, such as China, India and - increasingly - the oil-producing nations themselves.
It is only natural that speculation would come near the top of issues touched upon by Hayward, given the cries we hear around the world, and while oil majors are not the main culprits (financiers enjoy that "honor"), they are not far behind. And of course, given that this is an issue where he is on strong ground (speculation is at best a distraction, at worse a scapegoat) he can score some easy points.
But he actually makes a convincing case, in line with what the IEA has stated yesterday (even if it seems to have been spinned very differently in most media outlets):
Yet energy supply has struggled to respond. Production by the Organisation of the Petroleum Exporting Countries fell by 350,000 barrels of oil a day last year. The production situation is even more challenging in the market-oriented nations of the Organisation for Economic Co-operation and Development, where many existing basins are maturing fast. In Britain, for instance, North Sea gas production recorded the world's lar-gest decline for the second year in a row, falling by 10 per cent in 2007. UK oil output rose very slightly, but this is a one-off, based on a single big new field. Production remains on a downward trend.The last time oil prices surged to this kind of level, 30 years ago, new production from the North Sea helped bring prices down. This time, new OECD production will have to come from frontier provinces such as the Canadian oil sands, the Arctic and the deep waters of the Gulf of Mexico.
Another big impact on supply is Russia, where production has begun to decline. It is a little-known fact that, until now, the growing demand for oil from China and India in recent years has been met almost barrel for barrel by rising supply from Russia.
His diagnosis here is spot on, and it is very important that it be made by him (and the IEA) rather than only by pesky bloggers, and that it include a number of points that have yet to make it into the "common wisdom":
- demand growth is still very strong, and it is not just coming from China, it is also increasingly coming from oil-producing countries themselves;
- production is stagnating overall, and declining in a number of regions: OPEC (despite its apparently plentiful reserves, Russia and, more significantly, in regions that "we" control, like the North Sea and the US (no explanation given);
- incremental production can only come from "frontier" areas, ie expensive and low EROEI (although Hayward does not touch that concept, of course). There is no sivler bullet or quick fix like Alaska and North Sea were 30 years ago.
Access to resources for international oil companies such as BP remains very restricted. Resource nationalism is on the rise. That is important because it is the oil majors that have some of the best technology for bringing difficult resources on-stream.
which sets the stage for the bigger point:
Myth number two is that the world is running out of hydrocarbons. Not so. The world has ample resources, with more than 40 years of proven oil reserves, 60 years of natural gas and 130 years of coal. The problems in bringing on new production are not so much below ground as above it, and not geological but political.
The standard "we're not running out of oil, it's just those pesky governments blocking us" argument, ie the claim that this is just a temporary problem that has an easy fix if a few selfish bureaucrats/nationalists could only get out of the way. This is dangerous on two levels:
- one is to think that political obstacles are minor, ie that it will be easy to force Russia or Saudi Arabia (or Venezuela or Iran or even US politicians) to open their door or the spigot. This perpetuates the narrative that other countries in the planet are here to provide us with the necessary goods or services, independently of their own priorities or needs; it conveys that their sovereignty is a fiction that we tolerate with just a bit too much patience, but that we could push out of the way if it really became necessary; more generally, it dismisses completely the notion that our economies are acutely vulnerable to political events in these places and that, even if oil were plentiful in the long term, such events can create a lot of pain and disrtutpion in the short term that we are not planning for;
- it is of course more dangerous in that it hides the fact that there IS a long term problem; by focusing (in an artifically theatrical way) on short term issues, it prevents us from doing anything about the long term crisis - which is quite scary when you think that this is an industry where investment decisions commit us to infrastructure and patterns of activity for many decades.
Myth number three is that we can switch quickly to a low-carbon economy. While biofuels, wind and solar energy are growing rapidly, they comprise a tiny share - less than 2 per cent - of global energy production. Humankind remains dependent on fossil fuels and coal is the fastest-growing of all the main fuel types. Carbon emissions continue to rise. We clearly all need to work harder if we are to tackle the threat of climate change.
The usual silly argument that renewables are still small and therefore will remain so. We have not tried yet to make them big. To a large extent, renewables are still being developed against the common wisdom of the serious people and against ferocious lobbying by traditional sectors (both the coal and nuclear industry spend a lot of effort lobbying against wind) and prominent NIMBYs, and they have never been a priority of policy (there are policies in place, and they work, but they are still seen in Washington, Brussels and other capitals like London or Paris as something that you do to look green rather than because it makes sense). As I've argued many times, wind is cheap, understood, and able to provide a lot more of our energy than generally admitted, but that idea has yet to sink in, and Hayward's argument is typical of that.
Sure, coal is growing fast, but that's because policies push that way, and because policies that would make things different are dismissed and/or fought tooth and nail by industry.
So how are we to secure the energy needs of the world in the 21st century? The evidence is that where markets are allowed to operate, they do work. That is what the data in the review show. And that is the real source of hope for the future. Consumers in Europe and north America are already responding to high prices by moderating demand. They are also beginning to embrace energy efficiency. Where investment is allowed to take place, energy production responds positively. Last year, US oil and natural gas production increased - in the case of oil, for the first time since 1991.
Using the small drops in demand in the US and Europe ignores the fact noted earlier in the article, ie that demand growth is coming mostly from other countries. And it conveniently ignores the fact that the West is the only part of the world where demand could shrink (given that in many parts of the world, especially the big new consumers in Asia and oil-rich countries, energy is subsidized and consumers have yet to feel the prices hikes in full) - and it took a five-fold increase in oil prices to cut demand by a couple percent!
Pointing to a small increase in US production (why not repeat here the note and the similar hike in UK production last year?) suggests that oil production could be increased by significant amounts at home, with investment. but there are effectively no restraints on investment in the areas already opened to production, and as he noted above "the trend is downwards." Opening up new areas like ANWR or offshore for drilling would certainly create a lot of profits for the oil industry in the short term, but would be highly unlikely to reverse the production decline. and the volumes at stake are insignificant on the global scale (total US reserves, including those in all the closed off areas, are currently equal to about one year of world consumption, or 5 years of US consumption).
But pointing that things are moving (or could move) in the right direction on both the demand and supply fronts suggests that, again, the oil crisis is temporary and easily fixable.
The conclusion is therefore simple. Producers and consumers should be encouraged to respond to the market's signals. High prices are saying that we need more investment - in energy efficiency, new production, new technology and new energy sources such as wind, solar and nuclear.
Huh? High prices are the signal. What more encouragement people need? Either they respond to the signal, or they don't. That's what markets are about, isn't it?
Of course, he wants more. The solution is always more, not less. Never. and somehow wind and solar deserve a line here, despite having been dismissed as irrelevant just a paragraph above. But it's so politically correct to mention them, alongside the things we really care about: more drilling (and more nuclear too).
In order for that to happen, businesses and governments must act together. Companies know that they need to invest more, which is why BP and its peers have been raising capital expenditure substantially. But governments must do their bit too, by removing the barriers to that investment, improving access to resources and modernising the tax structures we work in.
No mention, of course, that BP's investments have been going up because its costs have been goign up, rather than because it is exploring or developing more fields. No mention of the fact that, other than the bump from adding TNK production to its own production, BP's output has been declining over the past 5 years. No mention that majors barely control a few per cent of world oil reserves and have becoming increasingly irrelevant, despite the headlines and hate they generate with their huge profits.
And a conclusion that encapsulates the spirit of our times: there is no problem, however momentous, that cannot be resolved with lower taxes (I presume that's what he means by "modernising" tax structures, right?).
After 30 years of voodoo economics, we get this sad "all is well, we'll save you if you lower our taxes" gambit and it will be seen as the height of seriousness.
But maybe this is a good thing, because this is certainly not going to slow the relentless rise of oil prices, and its very real consequences on our economies. and maybe, maybe, at that point, our politicians, keen to save their sorry asses, will stop listening to "serious" people and their unctuous, don't-rock-the-boat talk, and will actually go for policies that work.
Well, I believe that markets will help to solve the problem, but government can help accelerate us towards a solution through the use of sound policy.
Here are a few ideas I proposed on my blog on immediate steps the presidential candidates could announce to reduce oil demand:
http://truecost.wordpress.com/2008/06/06/obama-mccain-heres-a-real-way-t...
Basically, Obama and McCain should consider providing a hefty tax credit to replace oil heating systems (to reduce diesel demand), and they should also consider buying out old gas guzzling cars and crushing them.
These simple steps could quickly eliminate 500,000 bpd in demand. That won't solve the problem, but it's a concrete step in the right direction - efficiency.
I'd welcome comments on the proposals - while many have suggested raising gas taxes and other Pigovian solutions, I think the steps I've proposed might have a slightly better reception, since they don't involve "penalties".
Buying people gas guzzling cars might sound good but where is the money going to come from to pay for it all? There has to be a "penalty" for people who have been stupid enough to buy these monsters in the first place otherwise you are shifting the cost from the stupid to the broader taxpayer base and penalising everyone. Its a quaintly socialist idea that surely has no place in capitalist America , oh wait... farm subsidies have a similar ring to them so maybe it would get up.
The stupid need to be hurt or they won't learn the lesson.
Markets can solve the problem in some areas, if all things remain relatively equal to today. Yet I suspect that it's not going to unfold in such a simple way that will allow it. The roller coaster economic times are going to cause constant disequilibrium. Good luck finding stability other than at a much lower standard of living...
Here in Texas we have a program that lets you turn in a car for a dealership credit. Theoretically it can work if it's something that you apply to cars that are 10+ years old below a certain fuel efficiency. Our program has to do with emissions rather than fuel efficiency. However, few people have fuel efficient cars [in the US] because mainly the gas guzzlers have been selling for years.
Here in Houston I think we would need to replace 90% - 95% of the vehicles out of maybe 4-6 million. I can't imagine the government footing that kind of bill. Then consider that on a nationwide basis, the numbers get insane very quickly. We're talking multiple trillions to make some real progress. Not realistic. We need to change the way we live, travel, work, and play.
Many of the commercials now are touting 23mpg as "fuel efficient"... give me a break. I'm relatively happy with 32/28, but going forward we need 40-60 minimum. Allow people to get gas hogs but include a progressive luxury tax to kill the incentive to buy crap vehicles.
Suddenly my choice of a Corolla back in 01 seems very wise. We're a few years away from "every man for himself." The governments have passed the buck for too many election cycles.
Thanks for putting contributing a plan. I'm not smart enough to offer my own, but I did have a couple of musings on your proposals.
Our government come up with a sound policy? The only way this can happen is if this "sound policy" benefited the _________ (insert your favorite corporate lobby here) industry. If Boeing, GE, et al decided to get out of the weapons business and start building smart cars, it might garner support for your plan in Congress. Unless a majority of Americans pay attention to the political process and work to influence positive outcomes, nothing will change. Even if they do, they are fed so much misinformation that many (most) will support the wrong thing anyways.
From your blog:
Natural gas prices have been rising faster than oil. Shifting demand from heating oil to natural gas is sure to drive the price of it even higher. Natural gas is needed to make fertilizers which are also experiencing dramatic up ticks in price. We can always carpool, ride bikes, drive slower, downsize vehicles, etc. but we're always going to need fertilizer unless there is some type of shift to less industrial farming and more permaculture. Either way, I doubt we'll be supporting 9 billion people in 2050 as is commonly forecasted. If we are, it will only be at disastrous cost to the ecosystem.
I know it's a tired cliche, but the thought of deck chairs on a sinking cruise liner come to mind...
The "carrot" only approach only reinforces the idea that BAU can continue ad infinitum. The first step to solving a crisis is admitting that one exists. We have not reached that point yet. I fear that once people start to grasp the seriousness of the situation, the sucking sound you hear will be the global economy going down the toilet.
Thanks for trying to make positive suggestions, we can use more of that around here. I hope my comments can help refine your proposals. Cheers.
It's not only that. If you map local natural gas availability against use of oil for heat in New England (where most of the oil heating occurs) you'll note that natural gas isn't even an option without a local NG infrastructure build out first. So what's going to happen in short order is this: Once heating oil passes about $5 a gallon (that is, about 40 cents from now) it will be more expensive in New England than passive electric heat (heat pumps not being efficient in New England's cold winters). Those who can least afford the oil will quickly switch to space heaters, not just to save money, but because electricity, unlike oil, is generally billed after you use it, not before.
There are also a lot of wood pellet systems - both stoves and furnaces - being installed in New England. Unfortunately, pellets are in large part a byproduct of lumber production. Lumber production is way down. There will be pellet shortages this winter, driving prices up. And pellet prices historically have risen to near-parity with oil. Regular wood stoves can be fed more cheaply, if you don't count the labor involved even in stacking wood and building the fire.
Still, there will be a large switch to electric heat. That will (1) fry the mains - most of New England is already close to electrical infrastructure capacity even at last year's loads; (2) start fires in badly-wired older houses; (3) cause the utilities to buy more power. As for the last, wholesale electricity prices are largely determined by the price of NG, since nationally many of the newest generators burn that. So this will in that indirect way be a move to NG, pushing its cost up more, pushing electricity's cost up more. If that goes up enough, those of us who can afford it in New England will fire up our oil furnaces again.
What we really need is massive investment in wind, nuclear and electrical infrastructure. Unfortunately there are too many retirees in New England who can't stand the sight of wind mills, and hippies who can't stand the thought of radiation.
Hi, I don't suppose that it will save your grid getting fried, but air heat pumps are now being built which can cope with New England Temperatures.
Here is a Canadian company:
http://www.gotohallowell.com/technical.html
Hallowell International: Technical Data
The Japanese, surprise surprise, are also moving fast on this with pumps using carbon dioxide:
http://www.r744.com/news/news_ida210.php
Coming soon: ITOMIC Eco-cute heat pump - R744.com News
I believe that it may be some time before those are available in the States though.
If you think of getting one the guy to talk to is Here in Halifax - I think he recommends a Fuji model.
Hi Dave,
Just so they don't go moving the international boundary markers on our account, Hallowell is an American company based in Bangor, Maine. And you were close -- Fujitsu is the manufacturer of ductless heat pumps I consider to be among the very best in the industry.
Cheers,
Paul
Darn! You've uncovered our nefarious British Imperialist plot to 'readjust' the boundary!
Dup post
Hi whit,
Can you elaborate on this point for me? I'm curious because I live in an area that is at least as cold if not colder than New England and my heat pump has slashed my heating costs by some 75 per cent.
Cheers,
Paul
Hi praveen,
A couple things I'll run past you, if I may. I suspect those of us who still heat with oil do so because we cannot be economically served by the natural gas network and it would seem unwise to invest large amounts of capital expanding this network if load densities cannot ensure a reasonable return on this investment. Secondly, with falling domestic production and increasing reliance on LNG imports at the end of the day are we any further ahead? Would it not be better to invest our capital in ways that help us reduce our energy demands rather than simply substituting one [foreign] fuel source for another?
Cheers,
Paul
How about we buy all the big SUV's and shiping them to Russia? They can afford them and the gas they need.
When he says 'modernizing tax structures', perhaps he means that if they invest their profits in solar and wind, the government won't tax them away as he expects them to if they don't.
Give him the benefit of the doubt. He's not a politician. He doesn't have to be an idiot.
I'm sure that they have the same opportunities and writeoffs as everyone else if they wanted to invest in renewables in a serious way. Waht he is really asking for is effectively a tax structure which will socialise the losses of exploration but privatise the profits of production. I don't think he is an idiot, he's a capitalist.
Well in the US, the laws providing the incentives for renewables have lapsed in part (or close to all) from what I understand about some legislation that got blocked recently. He won't have to worry about taxes here forever. When it gets bad enough we will nationalize the petrochem industry... we're running out of countries to invade.
“dangerous on two levels”? How about a third level, building up a case for using force to take over “our” oil supplies which reside in other countries?
I had the same feeling, Dad.
Surely the belief that the only thing standing between my family and a return to the prosperity of the good ole days when oil was plentiful is some "bad regime" headed by a dusky tyrant would provide a useful motivation for "regime change."
'Course it will be dressed up in the useful fluff, just to make us feel better about doing it.
So, yes, dangerous on that level.
Thanks, Jerome,
This is quite sad.
Will the FT publish a point-by-point rebuttal by you? I hope so.
re: "improving access to resources", says Mr. Hayward.
Q: Mr. Hayward: What happens to global industrial economy when the resources are no longer there to be "accessed"?
re: Just a minor point on your excellent commentary:
"it is of course more dangerous in that it hides the fact that there IS a long term problem; by focusing (in an artifically theatrical way) on short term issues, it prevents us from doing anything about the long term crisis"
I know what you mean about "short-term" v. "long-term", but I'm not so sure the issues are really "short term", in a sense.
The overall decline is here, and we all know the prognosis for the time frame means extreme difficulties in the near term.
Mr. Hayward's use of the "40 years of..." type of phrasing serves to direct the reader's attention to the idea that the *real* problem (according to him) is far off in the future - at least a generation or two away.
The use of numbers in this way, without explaining issues such as: 1)rates necessary for industrial economies to function; 2) the uneven receipt of supplies (ELM, along with the shrinking "food chain") - is misleading to the point of...I don't even know the word for it. "Criminality" is too mild.
Mr. Hayward:
The world *is* running out of hydrocarbons.
It has been running out for a hundred years.
And we're about to see what happens
when we cannot talk about
what is right before our eyes.
It amazes me why there is not real panic at the idea that in 40 years time the world will have actually run out of oil. I am just 40 years old and would like to think that I will still be here in 40 years time. The oil industry had been going full tilt for a good century before I was born but it could be completley finished in my lifetime!
I've just had a baby and he will grow up and be 40 just as the oil runs out. What will he do after that?
This was the point that most leapt out at me when I read the article - he is saying that 40 years worth of oil makes it no problem. I don't see it that way at all. 40 years is not that far off, and of course what he is NOT saying is that we will have plenty of oil for that period - i.e. more than the demand - so we must expect the shortfall to cause oil prices to reliably be at levels which cause the world economy significant problems throughout that period until it runs out altogether. I am very surprised that someone from one of the oil majors would admit that we have such a small amount of guaranteed supply for the future.
The reason why this doesn't scare anyone is that
1) it sounds like we can produce as much oil as today (or more) without any problems the next 40 years.
2) This was the same thing that was said in the late 1970s. That was 30 years ago. And we still have 40 years!
And it is assumed that in 40 years we'll still have 30-40 years left..
Cheers, Dom
Well, with improved recoveries, we have stretched the amount of oil we have available to us, even from existing fields. The problems with that are:
1: We have gotten very good at maintaining production from large existing fields. But when they go into decline, production drops like a stone, and:
2: We may be able to reopen previously depleted fields and get more oil from them. But peak oil is not as much about amount as it is rate. All these old fields won't produce fast enough to make a difference.
DK
In a post yesterday, I thanked somebody for leading me to the following video;
Arithmetic, Population and Energy (Forgotten Fundamentals of the Emergy Crisis)
I hope this is not construed as having some sort of hidden agenda and I don't benefit in any way from pointing people to this video presentation again. Having said that, I think the professor puts the concept of perpetual exponential growth in entirely new light and illustrates clearly how impossible this is, when dealing with finite systems.
It has made the futility of the growth based economy abundantly clear to me and I cannot imagine that anybody could fail to see the points that are being made. They would have to be incredibly dense or incredibly biased (brainwashed). I would love to see Mr. Tony Hayward forced to watch this video every day for a week and then sent to the blackboard to write a hundred lines of "Perpetual exponential growth in a finite system is impossible".
Alan from the very finite Islands
Islandboy, Thanks for the link.
This presentation is remarkable. I class myself as numerate, but as you say it puts it in a new light. The bottle bacteria analogue puts the situation into context.
If you consider this, Hubbert could have been 50% out in his reserve assumptions and timewise it would make very little difference, which is infact proving to be the case.
If you saw Hayley Millar's recent programme about Scotland's oil, this presentation pinpoints all the problems she failed to address in the programme.
It is clear to me we won't address these problems because it is not politically acceptable.
Hi Alan,
It's a classic and important work. Thanks for bringing it up again.
Ah, if only the average person could grow his or her knowledge at 1% per year for 70 years.
(Dr. Bartlett again at his finest.)
At 25:00 minutes he explains the ANWR fallacy (look for where he finishes talking about the yeast in the petri dish and starts talking about the search for more petri dishes)
Jerome,
Thanks for another insightful analysis.
I especially enjoyed your previous "Anglo Disease" summary.
As for Mr. Hayward, I can't add much to what you have already said, but just the fact that the FT sees fit to publish this tripe--at this late stage--unchallenged, speaks volumes about the "serious people."
It gives me some idea of why people become so cynical, a la cryptogon.com, even if I don't want to go that road myself.
But yes, true to form, the underlying racism and imperial attitudes shine through brightly.
I think what Mr. British Petroleum is really saying is something along the lines of, "Forget about sovereignty and the planet's finite reality, just let us run the show and all will be fine."
And I am sure that his beloved market will provide a jolly fun ride over the next few years.
"Don't panic, Captain Mainwaring!"
- Lance-Corporal Jones
Jerome,
When Tony Hayward became Chief Executive, and his odious predecessor was displaced, I was quite pleased. I thought that we now have a serious guy, a geologist to boot, as head of this gigantic company.
I was very disappointed by this article when I read it in the printed FT. It was clear that, perhaps because of the TNK-BP wrestling match, he was out to emphasize his pro-market credentials.
The part that really put the nail into my opinion of him was
To most uninformed readers that would suggest that the economists' supply-demand curve is working, at last. Some readers may even have been fooled into believing that US oil supply went back to where it was in 1991. I mean, most people who read the FT have little time to analyse the structure of each sentence.
It was an attempt to muddy the waters - no more and no less
Don't be too hard on the FT over this - they were after all just printing what he wrote as an opinion piece. Personally I find that of all the UK papers, broadsheet or tabloid, the FT is by far the most politically neutral and objective. They alone seem to try to achieve good journalistic standards. You would expect the paper to come solidly from the right wing capitalist angle since it is a financially oriented paper, but this isn't the case at all. It really does acknowledge and reflect the importance of the stability and interests of society.
ncollingridge,
Sorry if I was misunderstood.
I looked twice through my piece and did not see where I may have criticized the FT. BTW, I have read around half of all FT's since 1973. I learnt a lot, but it has not made me rich.
Jerome, you say,
"And that mix, which I expect is deliberate, has one main subtext: "don't worry" (and don't try to move off oil)."
I have been trying to tell the folks on U.S. TOD exactly that for ages.
Now "Peak Oil" is everywhere. The mainstream media has done what it always does, and moved to what it sees as the story that will sell, and that story is catastrophe, failure, breakdown, and complete hysteria. What people forget about the media is that it really is unbiased and completely amoral. It does not care about which version of events is "true" or correct, it cares about which one will sell. The version of events that seems to have the most drama, that seems to have the most potential for future growth into a full blown movement is the one that will be first co-opted and then pushed outward in a wave to the public as a "movement". Every "movement" since WWII has been peddled just this way, from the hippies to the Sexual Revolution to the Reagan Revolution.
BP knows, as do most oil companies, that they have been cast as the villian in this drama. The largest demographic in the Western world is the baby boomers, and they have resented, distrusted and sometimes even hated the oil companies since the 1960's. Environmental issues alone were basis enough to despise the oil companies in the mind of the boomers, but issues of business practices, pricing, corruption of governments around the world, and outright arrogance only fueled the resentment of the oil companies in the minds of millions.
But, everyone still needs oil. The oil companies know this, and remind us of it everyday, everyday, every damm day, they rub it in, the remind us of it, they propagandize the point until it is like a water torture...you may hate us, but you need the oil, you may hate us, but you need the oil, you must have transportation and airliners and trucks, in the end, YOU WILL PUT UP WITH WHATEVER WE DECIDE YOU WILL.
A half century of this type of servitude, this type of degradation has created a generation desperate for freedom. Much of the peak oil "catastrophist" dream is created by the burning hatred of the oil companies. Many fantasize about the coming collapse, in which millions will die, almost all of what it has taken centuries to build will be destroyed or will simply fall into dis-repair and rot away, and we will live a more primitive life. What will be the reward? No one who describes these catastrophist scenarios expects longer lives, no one expects better medicine, no one expects greater freedom or comfort. What would be the reward for pushing the catastrophist dream? Simple: In the mind fo those who hate the oil companies, it is worth the horrific catastrophe if afterward WE WOULD FINALLY BE FREE OF OIL AND THE BASTARDS WHO PEDDLE IT.
There may be, as the doomers and oil companies seem to agree, NO scalable and workable substitute for oil. The oil companies tell us over and over in a hundred different ways that only oil can act as the fuel for the world, there simply is no choice.
But the one constant in the world is change. I do not have to tell you Mr. Paris, that technology is constantly changing and improving, that alternatives once dismissed as "pie in the sky" is now on the edge of financial viability.
Your observation was very astute:
"To a large extent, renewables are still being developed against the common wisdom of the serious people and against ferocious lobbying by traditional sectors (both the coal and nuclear industry spend a lot of effort lobbying against wind) and prominent NIMBYs, and they have never been a priority of policy (there are policies in place, and they work, but they are still seen in Washington, Brussels and other capitals like London or Paris as something that you do to look green rather than because it makes sense).
The Atlantic Monthly Magazine has a fascinating article on the Chevy Volt plug hybrid concept car:
http://www.theatlantic.com/doc/200807/general-motors
The Atlantic article describes the enormity of the gamble by General Motors in the attempt to build the plug hybrid Chevy Volt, the sheer "Manhattan Project" nature of the time scale they have set for themselves (building and testing components in a month that are normally built in over a year), and enormous risks involved in the whole project. Why would GM tie it's fate to such a risky bet?
The goal set by GM is much more grand and visionary than most people realize:
"Its target range on a single charge increased from “at least” 10 miles to 40—the outer limit of what seemed possible. Not a few outsiders think this decision was misguided; a 20-mile battery, say, would still allow many commuters to drive gas-free most days, and it would be easier and cheaper to build. But Lauckner, always pushing, insisted on a car that the public would perceive not just as saving gasoline (that was Prius territory) but as replacing gasoline. The Volt, as the iCar was eventually renamed, had to be perceived as severing the umbilical cord between the car and the gas pump, and nothing less than the longest feasible gas-free range, he believed, would accomplish that."
With General Motors now vowing to break the automobile's umbilical cord to oil, Toyota now promising a lithium ion plug hybrid to be ready to compete with the coming GM wondercar by 2010, the two largest automobile companies in the world are betting against oil.
The smaller auto companies around the world will be forced to follow. They cannot risk letting the two giants succeed while making no advances themselves on grid based transportation, for there would be no hope of catching up later.
The oil companies have only one weapon left, but it is a powerful one (some would say the most powerful one if handled skillfully) and that is the word. The propaganda tool is being used by experts in the defense of an industry that knows it is entering it's twilight period. Despite gains in efficiencies which would have seemed like science fiction only 10 years ago by battery devleopers, solar cell developers and wind turbine developers, the renewables are dismissed over and over as "marginal players" which will have no real impact in our lifetime. No real evidence is ever given to support these claims, only the power of repetition. If you say it often enough, it must be true.
The newest tool of course is the terror of peak oil by the masses. The core group of long time peak believers were not easy to drive into panic because so many of them dreamed of the catastrophe. They took a similiar line to the pre-WWII architecture critics, who dreamed of the coming war as a way to clean out the old decadent architecture and replace it with the modern. The core peakers often consisted of many who had hated the modern world on purely philosophical grounds, and hated the oil companies even more. When the oil companies said "without us you will revert to pre-industrial primitivism" the core doomers said, "YES! Bring it on!"
But the public at large are terrified of peak. The oil companies can scare them into voting for opeing up Alaskan wildlife recerves, the coasts, the mountains, and maybe even building nukes in the tar sands and the oil shales to try to extract oil. In other words, anything to get the oil.
So, everyone is on the same page. The oil companies are preaching catastrophe unless they get what they want, the financial community is using as grounds to declare force majure and downgrade everyone to sub prime so as to charge them blood sucking rates, and the press is preaching blood in the streets while the Generals are looking at it as a way to get more money to "police" the Persian Gulf. Call it the 2000's version of
"How I Learned To Stop Worrying And Love The Peak"
So what story is being missed in all of this wild hysteria?
The labs. The shops. The technological march. Of course those who pray for the catastrophe laugh at technology, ridicule those who even mention it (ironic given that without technology there would be no need for oil, so how can technology not have a deciding effect on the oil situation? But tautological argument is part of the propaganda tool chest).
The shops and labs are boring. The nerds and dweebs hang out there. The press is fascinated by howls of fear, threats of doom, the over the top lingo of the fear mongers and the virulently anti middle class diatribes of a James Kunstler. The panic mongering, fueled by the oil companies, the press and the financial community, and aided by those who dream of the collapse will only get louder and wilder with each passing day. The "real" story, the story that matters for the long haul will be buried and only a handful will profit by knowing it, because it is actually a very boring little event in the grand scheme of things: Humankind spent over a century burning oil for growth. The burning of oil became more trouble than it was worth and created more problems than it solved. Humankind began to move away from oil, just as it had moved away from wood and peat and whale oil and coal in prior years. After some hysteria and fear, the propagandists of fear were virtually forgotten. The oil producers finally diversified, realising that the age of oil was passing by. Those who were so terrified in thier youth and middle age grew old and died. Some cost themselves the opportunity to retire prosperous by selling out their investments in the panic and laughing at the coming alternative industries. A few historians remember what all the fuss was about.
RC
Rich nations have the ability and the opportunity to use technology to create a viable post-cheap-energy future. But many poor importing