OPINION: Jeremy Leggett
When the rich and powerful gather in Davos for the World Economic Forum (WEF) every January, they weigh the main global risks for the year ahead. This year, a WEF report listed 31 risks. Energy crisis was not among them.
I was a Davos debutant this year. It was quite an experience to witness this collective blindness to energy risk at work.
In the week before the forum, a commission of former generals had warned that America is still vulnerable to oil shocks. A Saudi who once ran the kingdom’s oilfields said the current global oil supply plateau was unlikely to extend beyond 2020. The former head of energy research at Deutsche Bank warned that the fracked “light tight” oil production that so many people hope will close the gap as existing crude oilfields deplete was in grave danger of failing to do so.
Propping up global oil production requires the investment of ever more enormous sums as companies chase oil into ever more difficult frontiers. Here too, in the run-up to Davos, the writing was clear on the wall, for those with eyes to see. Shell issued a profits warning, instantly wiping £6.5bn ($10.8bn) off the London index of 100 leading stocks. Why? Its “elephant” projects on oil frontiers were not working well.
Responding to investor anguish the week after Davos, Shell’s chief executive announced the cancellation of all oil exploration in the Arctic this year, as part of a wider scale-back of major projects. It wasn’t alone. Chevron, ExxonMobil and Shell together spent more than $120bn in 2013 to boost their oil and gas output — about the same cost in today’s dollars as putting a man on the moon. But “the three oil giants have little to show for all their big spending”, The Wall Street Journal observed. And as Bloomberg reported: “Investors are shunning the world’s biggest oil companies as drilling costs surge, major projects are delayed and energy prices stagnate.”
The Financial Times flagged the core problem people like me fear: “International Energy Agency urges Opec to sustain oil production. The West’s energy watchdog said stronger than expected demand in the US and other industrialised nations had drained oil stocks to the lowest level in five years.”
Can Opec maintain production? It will have its work cut out, as anyone following a little detail in the pattern of oil exports will know. As Citi and others have pointed out, if lead producer Saudi Arabia maintains its recent rate of growth for burning oil in domestic electric power plants, the kingdom won’t have any oil at all left to export by 2030.
Notwithstanding all these portents, shale enthusiasts in the UK persist in their echoing of the energy incumbency’s happy-clappy mantras. Prime Minister David Cameron told Davos that he would be attracting big manufacturers back to the UK with “cheap” shale gas aplenty. True Greens should embrace fracking, his energy and climate change minister added.
Less than a week later, Caudrilla (the lead company fracking for UK gas and oil) had to withdraw applications to frack in northwest England until it solved the problem of radioactivity in its waste water.
The utilities were faring little better. E.ON revealed that it is to shut one gas-fired power station in the UK and expects to reduce output at three others despite warnings that the country faces a capacity crunch and potential blackouts. RWE announced it would be halving its investment in renewables. Hated as these companies are, imagine their fate once the lights start going out.
And how has the energy insurgency been faring this past month? A snippet to give a flavour: in the US, solar jobs have been growing at ten times the national average employment growth rate.
The bottom line? As Amory Lovins, chairman of the Rocky Mountain Institute, a non-profit sustainability organisation, happily told The Guardian, the renewables revolution is in full swing.
All the evidence for this article can be found at www.jeremyleggett.net
Jeremy Leggett is founder and non-executive chairman of international PV company Solarcentury.His latest book, The Energy of Nations: Risk Blindness and the Road to Renaissance, is published by Routledge