An LSE academic has joined leading business figures to call on the Government to take action to minimise the damage caused by a future 'oil crunch' - the result of an imminent peak in world oil production combined with continuously rising energy demand especially in emerging economies.
A new report out this week, 'The Oil Crunch - a wake up call for the UK economy' produced by the UK Industry Taskforce on Peak Oil and Energy Security, includes an expert opinion from Dr Robert Falkner, a Senior Lecturer in international relations at LSE.
The taskforce, made up of the heads of private British companies including Virgin's Sir Richard Branson, has said that an 'oil crunch' could emerge within five years. It calls on the Government to acknowledge that the era of cheap oil is over, and that we must plan for a world in which oil prices are likely to be both higher and more volatile. The UK needs to prepare itself by further raising energy efficiency and promoting renewable energy, but also protecting the poorest members of society from increased energy costs.
In the report Dr Falkner said that although a restriction in oil supply is unlikely to produce 'sudden and catastrophic effects' in the short to medium term, there are still serious implications for the UK.
For example, the transport sector's continuing reliance on oil means that higher and more volatile oil prices would lead to significant cost increases and disruption to trade and industry. The UK would face an increase in the cost of living, which would inevitably have the biggest impact on the poorest parts of society.
Commenting on the last time the UK experienced a fuel shortage -during the 2000 fuel protest – Dr Falkner said:
'Even if the UK continues to gradually move away from energy-intensive manufacturing, the central importance of oil-dependent transport to the economy will tie its economic fortunes to the future of the 'black gold.'
'Air travel and road haulage are now the key reasons behind our dangerous addiction to oil.'
Commenting on the tension between climate change policy and ensuring energy security, Dr Falkner added:
'Climate change policy is driving investment in renewable energy sources and energy efficiency measures… But there are important conflicts between these two objectives that cannot be ignored.'
'Replacing dwindling reserves of conventional oil with more expensive and carbon-intensive alternative fuels (e.g. tar sands and coal-to-liquids) will be an environmentally damaging course. And banking on renewable resources (e.g. biofuels) alone simply won't provide an adequate solution.'
To resolve this tension Dr Falkner calls on the next Government to adopt a twin approach of investing in oil production to 'keep the lights on', but also taking innovative and decisive steps to improve energy efficiency and develop low carbon technologies.
The full report is available here: http://peakoiltaskforce.net/ For further information please contact ITPOES@epochpr.com
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12 February 2010