Wednesday, 19 March 2008
New Article for Mediacat (comments?)
LIFE AFTER OIL
For the last year I have mostly been writing about business and marketing’s response to climate change. But there is another agenda that has been steadily gaining ground as the key thing to focus on: Peak Oil.
In the fortunate circumstance of historians looking back on today (as opposed to our entering a dark age, and much of that heritage being lost) they will call the last 100 years “The Oil Age”. Oil (and natural gas) are the energy source which built the modern economy. They fuel our vehicles, and hence the movement of goods, our agriculture, our modern materials, our heating. The entire modern economic miracle was built upon the cheapest (in terms of energy expended to get it) and most transportable fuel ever.
I say ‘was’ because oil is not an inexhaustible supply. In fact we are almost at the peak, after which the oil that is left will get harder and more expensive to extract. That’s not the end of oil, but it is the end of affordable oil. Which is tantamount to the same thing. Expensive oil changes everything. Most industries' business models are built on the assumption that goods are cheap to make, to transport and so on.
So how close to this mythical peak are we? Until quite recently, the oil industry used to date it towards the end of this century. But recently it has become apparent that it is much closer. Although experts disagree how much closer: The OECD’s expert body, the International Energy Agency, says the peak will come somewhere between 2020 and 2030. BP (British Petroleum) believes it will occur in the period 2015-2020. The expert group ASPO, the Association for the Study of Peak Oil and Gas expects a peak before 2010!
The recognition that we have hit peak oil would trigger hoarding and instant shortages. As a matter of fact the price is so high at the moment (over $100 a barrel) because there were difficulties matching current demand, when oil production dropped slightly in the last few years. A city like Los Angeles would literally grind to a halt. Not only that but LA has only two days’ food supply in its warehouses, everything else arriving on a constant stream of trucks.
No wonder politicians are worried about peak oil. Sweden already (since 2006) has a national plan to be oil independent by 2020. The French Prime minister François Fillon made also announcements on this issue last week: “Speaking of gas, we have to get in our minds that there is no other solution to this question than to move to other energy sources because we are facing a forewarned shortage. If we tell the French: 'don't worry, we'll find artificial ways to lower the price of gas and you can continue to use gasoline as before', it's a lie. We have to put all available money on alternative energy R&D."
This whole issue pulls largely in the same direction as climate change. On either view: we have find ways to reduce energy dependent activity, to ensure energy is used efficiently and to transition as fast as possible to renewable (non oil, non coal) forms of energy generation.
The difference between the two issues lies more in the psychological impact on people, organizations and governments. Climate change has proved rather disabling, it is so global, diffuse and hard to grasp and it plays on feelings of guilt as most of our daily activities seem to do some harm. It just isn’t entirely credible that little things we can do to make a difference will really affect something on the scale of the planetary ecosystem. It’s true by the way that light bulbs do make a difference; just one incandescent bulb, used 4 hours a day, uses over $8 worth of electricity a year. But it doesn’t feel like actions in areas like this can make any difference. Whereas we seem to know immediately where we are with peak oil. It is much easier to integrate with the way we see the world now, and acts as a much more direct spur to action: There is a crisis looming a readily understandable one, almost like a countdown. We are not yet resilient ie ready to withstand the shocks that this crisis will bring. Hence there is an immediate response; we need to make preparations and we need to do it urgently.
In the UK our government has been slightly slower to act on peak oil, although the insecurity of energy supply (our gas coming increasingly from Russia) has been a factor in energy policy for some years. But instead we have a flourishing movement of small (and some large) towns, which have chosen to act independently. It’s called the Transition Towns movement and it is a remarkable exercise in citizens taking the initiative. It’s well worth reading the book by the founder of this movement (“The Transition Handbook”, by Rob Hopkins) because it has many valuable lessons on how to mobilize any community – including a company – around the issue of what they call ‘energy descent’.
What does this mean for your business? I’d recommend that you do what they did in the 1970s when they saw a global energy crisis coming; educate yourself about what this means, and make plans now; so that you are ready. This will mean rethinking everything; where your factories are, how people get to them, what they make, how they are powered, how you bring goods to market and so on. It’s a huge challenge but many have already risen to it. It would actually be rather negligent to know this was coming and not to have prepared. But those who have been preparing – like Timberland which is taking its factories off the electricity grid – are already seeing cost benefits, not to mention the galvanizing effect on the culture and sense of mission in the organization.