Page last updated at 00:02 GMT, Thursday, 11 February 2010

Oil crunch 'just five years away'

By Shanaz Musafer
Business reporter, BBC News

Sir Richard Branson at the launch of the taskforce's report
Sir Richard says an oil crunch can be avoided if action is taken now

Business leaders, including Sir Richard Branson, have criticised ministers for not doing enough to avoid a potential oil crunch and are calling on the next government to take action.

"Governments need to urgently, urgently wake up," insists Sir Richard in an interview with the BBC News website.

His Virgin Group is one of six companies that have formed a coalition called the UK Industry Taskforce on Peak Oil and Energy Security.

The taskforce - made up of engineering group Arup, architects Foster and Partners, Scottish and Southern Energy, Solar Century and Stagecoach, as well as Virgin - has launched its second report looking at the oil crunch, just months before the next general election.

It warns that Britain is unprepared for the oil shortages and price volatility that it predicts will become a reality in the next five years.

As a result, British businesses and consumers will face higher travel costs, increased food prices and higher utility bills.


The taskforce hopes that the new government will heed its warnings and seek to reduce the UK's dependence on oil.

Petrol pump
The taskforce wants to see a shift away from oil-consuming cars

"If somebody had been able to warn the world five years before the credit crunch, the credit crunch could have been avoided. The same thing could be said for the oil crunch," says Sir Richard, whose airline and train companies are affected by volatility in the oil price.

"We suggest there should be a workforce for government and industry to work [together] on addressing this problem.

"We have to move from coal and oil to gas and nuclear. We need to move our cars from oil-consuming cars to electric cars and clean-fuel cars."

He even suggests that targets should be set for the car industry: "The government should say, 'For 2020 there should be no more oil cars running in this country and for 2015 no new cars can be sold using oil,' just to force people to move over to clean energy."

'Peak oil'

The group believes that "peak oil" - the point where global oil production reaches its highest practicable rate - will occur in the next decade, potentially by 2015, with production levels of 95 million barrels per day. In 2008, 85 million barrels per day were produced.

Philip Dilley, Arup chairman
Mr Dilley says the recession pushed back the issue of oil supply

Once peak oil is reached, experts are divided as to whether oil production will then plateau or decline. The taskforce believes it will decline and with demand for oil in developing countries increasing, that would lead to potential shortages in supply and thus rising prices.

Oil is currently trading at about $75 a barrel but is predicted to rise above $100 by 2014-15.

"The days of cheap and easy oil in the quantities that the world needs it are over," warns Ian Marchant, chief executive of Scottish and Southern Energy.

But how much sway does the group have? Mr Marchant admits that the response it got to its first report, released in October 2008, was "lukewarm at best".

That was largely because its release coincided with the credit crunch, says Arup chairman Philip Dilley. "I think because of that [the report] got lost a little bit," he says.

'Breathing space'

But the drop in demand for oil, in the West at least, brought on by the credit crunch, pushed back the group's forecast for when peak oil will occur.

We don't have a firm view on what the future holds for oil supply and demand but we do recognise the risks
Chris Barton, DECC

"The recession bought us two years of time. So it bought us a little breathing space," Mr Dilley says.

However, even if demand in the West falls, the real concern is about increased demand in developing countries.

If the economies of emerging countries continue to grow at the rate they are, demand for oil will far outstrip supply.

Mitigating risks

The government has denied that it is ignoring the issue but said it was unsure as to when peak oil may occur.

"We don't have a firm view on what the future holds for oil supply and demand but we do recognise the risks," Chris Barton from the Department of Energy and Climate Change (DECC) responded.

"We are taking action to mitigate those risks and we plan to do more."

But one member of the taskforce at least would like to see more.

Ministers must take this warning seriously and wean the UK off its addiction to oil
Andy Atkins, Friends of the Earth

One of the things highlighted in the report is the fact that a rising oil price would lead to higher transport costs, food prices and energy bills, and the poorest in society would be the ones who feel it the most.

Brian Souter, chief executive of Stagecoach, says: "I think we could do with a more radical approach to this from all the political parties. I think we should take the poor out of the lower rate of [income] tax altogether and move to a carbon tax."

The report was welcomed by Friends of the Earth.

"Ministers must take this warning seriously and wean the UK off its addiction to oil - because ordinary people will experience the withdrawal symptoms when the wells run dry," the organisation's executive director Andy Atkins said.

"The government has been dithering for too long. We need bold political action to rapidly build a safe, clean and prosperous future for us all."

One thing is for sure - whoever emerges triumphant from this year's general election will be under pressure to address the issue of oil supply.

Print Sponsor

The BBC is not responsible for the content of external internet sites

Has China's housing bubble burst?
How the world's oldest clove tree defied an empire
Why Royal Ballet principal Sergei Polunin quit


Americas Africa Europe Middle East South Asia Asia Pacific