On 10 February 2010 at the Royal Society, six UK companies – Arup, Foster + Partners, Scottish and Southern Energy, Solarcentury, Stagecoach Group and Virgin – joined together to launch the second report of the UK Industry Task-Force on Peak Oil and Energy Security (ITPOES).
The report, titled “The Oil Crunch – a wake-up call for the UK economy”, finds that oil shortages, insecurity of supply and price volatility will destabilize economic, political and social activity within five years. The Task-Force warns that the UK must not be caught out by the oil crunch in the same way it was with the credit crunch and states that policies to address Peak Oil must be a priority for the new government formed after the 2010 election.
The report tackles the issue head on: “For the UK, ‘peak oil’ is no longer a matter of theoretical debate.”
“As we reach maximum oil extraction rates, the era of cheap oil is behind us. We must plan for a world in which oil prices are likely to be both higher and more volatile and where oil price shocks have the potential to destabilise economic, political and social activity.
Virtually every sector of our economy is still dependent on oil. This is why it is vital that whichever party forms the next government, they have a coherent set of policies to help the UK adapt. This is especially important for the UK, and other developed economies, which have been so reliant on low-cost oil for decades.
There are two challenges for government and policy-makers. Firstly, to recognise the situation we face, and secondly to take action to mitigate the worst implications of the crunch.
Unless we do so, we face a situation during the term of the next government where fuel price unrest could lead to shortages in consumer products and the UK’s energy security will be significantly compromised. This has the potential to hit UK business and commerce as well as the most disadvantaged in society with yet another crisis.”
The report goes on to thoroughly analyze the situation and clearly states:
“Based on the foregoing arguments, it seems inevitable that global demand will move to a point where it consistently exceeds supply. The effect must be a structural increase in oil prices, coupled with the prospects of oil shortages and a consequent increase in market volatility. The only questions are “how soon, and by how much?”
EFFECTS of Peak Oil – The report concisely lays out the following effects:
“Based on this assessment, we might expect to see the following effects reflected in our economy within the term of the next government:
• Markedly higher prices for all forms of travel (air, sea, rail and road)
• Increased food prices
• Increased general retail prices
• Increased domestic utility bills for heating and power
It is an unfortunate by-product of these factors that the disadvantaged members of society are likely to be hit first, and hardest. Our concern, therefore, centres around a situation on which it seems that future oil prices will be significantly higher, in real terms, than they have ever been in the past, and in which disruptions to oil supply cannot be ruled out.”
While this was written for Britain, it applies equally here too. Bottom line: everything will get more expensive AT PRECISELY THE SAME MOMEMENT that our wages are declining. We will be forced to spend more on the basics simply because all of our basics are so infused with oil. This will leave little room for discretionary spending, which hurts the consumer economy, which leads to continued recession, and the cycle goes on and on. What I see now is a decade long recession, which ultimately becomes the new normal.
Only by decoupling from the consumer economy and the oil based system and becoming relocalized will we be truly recession proof. Either that, or we have declining standards of living for all but the wealthiest among us. Folks, that’s what we are facing.