Peak Stupidity

Why was the Labour government telling two different stories about peak oil?

By George Monbiot. Published on the Guardian’s website, 16th June 2011

In public, the last government shrugged off the prospect of peak oil. In private, we know now that it had a different view.

A powerpoint presentation released at last by the Department of Energy and Climate Change, in response to freedom of information requests by the indefatigable Lionel Badal, shows that in 2007 the government spent six months secretly gaming the likely impacts of declining global oil supplies. The results were not pretty.

The officials who conducted the assessment found that “it is not possible to predict with any accuracy exactly when or why oil production will peak”. They believed that “a permanent decline in global oil production – i.e. peak oil – is unlikely to take place before 2020. However, if it were to happen, the consequences for economic prosperity and security are likely to be serious”. Among these consequences were:

– “Impacts on UK security of oil supply”

– “Disruption of the UK economy especially the transport sector”

– “Possible geopolitical implications”.

If peak oil hit the UK economy, the officials found, it could take “several years or even decades” for the government and the economy to adjust.

I find these revelations deeply puzzling, not least because, in 2008 and 2009 – after the officials had submitted their confidential report – I made a series of FoI requests of my own. I asked the government what contingency plans it had made for the eventuality that global supplies of crude oil might peak by 2020.

It replied that it agreed with the analysis by the International Energy Agency, that “global oil (and gas) reserves are sufficient to sustain economic growth for the foreseeable future”. As a result “the Government does not feel the need to hold contingency plans specifically for the eventuality of crude oil supplies peaking between now and 2020.” Its existing policies already put the UK “in a good position to deal with the longer-term challenge of declining global oil reserves.”

There are three inconsistencies between what the department told me and what it knew:

1. The civil servants charged with investigating this issue for the government concluded that it was “not possible to predict with any accuracy” when peak oil would occur. This statement clashes with the confident prediction – there was nothing to worry about – with which I was fobbed off.

2. That confident prediction was based on International Energy Agency (IEA) projections. But the powerpoint presentation shows that the IEA’s predictions were an extreme outlier. All the other assessments the officials examined in compiling their report were more pessimistic. So why had the government chosen – in public at any rate – to rely primarily on the IEA?

3. The government had been warned by its officials that peak oil could cause major problems for the UK, and a long and “potentially painful” period of transition. In public it maintained that the country was already in “a good position” to deal with it.

It gets worse. At the end of 2008, the IEA radically changed its own assessment. Rather than relying on guesswork, as it had done until then, it had just conducted the world’s first comprehensive study of the annual rate of decline in output from the world’s 800 largest oilfields. The results forced the agency radically to reassess its optimistic assumptions. It raised its estimate of the annual decline rate from 3.7% to 6.7%. For the first time in one of its World Energy Outlook reports, it mentioned the word “peak”.

(International Energy Agency, World Energy Outlook 2008.)

On the day of the report’s publication, I interviewed the IEA’s chief economist, Fatih Birol, and asked him to be more specific about when the decline in global oil supplies might begin. This is what he told me:

“in terms of non-OPEC, we are expecting that in three, four years’ time the production of conventional oil will come to a plateau, and start to decline. … In terms of the global picture, assuming that OPEC will invest in a timely manner, global conventional oil can still continue, but we still expect that it will come around 2020 to a plateau as well … I think time is not on our side here.”

So I sent the government another request: in the light of what the IEA has revealed, what contingency plans has the UK now made? The response amazed me: “With sufficient investment, the government does not believe that global oil production will peak between now and 2020 and consequently we do not have any contingency plans specific to a peak in oil production.”

The organisation on which the British government claimed to be relying had now pulled the rug from under its feet. Yet still the government maintained that there was nothing to worry about, despite the fact that its own officials were telling a different story. Either their warnings had been brushed aside by ministers or the government was knowingly misleading the public.

All this is further complicated by the remarkable claim Fatih Birol made, out of the blue, a few weeks ago:

“We think that the crude oil production has already peaked, in 2006.”

This is all the more surprising in view of the fact that until 2008 (two years after the IEA now says it happened), the agency continued to dismiss the possibility that peak oil would occur before 2030, if at all.

In public, the last government claimed to be relying on assessments which, with good reason, its own officials did not trust, and which, by the end of 2008, it already knew were wrong. What on earth was going on?