October 2016

“Brexit, Oil and the World Economy”

A TBI talk by Dr Alister Hamilton of Edinburgh University

Dr Hamilton opened his talk to a full Tore Village Hall on 26 October with a memory of a holiday in Cromarty in the ‘60s and seeing the milk delivered by horse and cart [that’ll be Gracie, with Patsy the horse see a picture here] and wondered if we might need the old ways again quite soon.  

He started off by showing how UK coal production peaked in 1913, UK oil and gas production both peaked in around 2000; and that we’re now net importers of these three key resources for transport and energy.  Since 2000, UK energy production fell by 60%; so we import more, we have less income and we’re more exposed to outside risks.  We’re poorer, maybe part of why folk voted for Brexit?

Well that’s all right – we’ll just import more.   Well no…the world oil production plateaued in 2005 and appears to be in decline since then.

Okay, so we’ll get stuck into these shale oils and start fracking for gas then.  Well no…there’s plenty of oil and gas in the ground, it’s just becoming ever more expensive to get it out.  The first ever oil well was a 60 foot deep hole in a field.  We’re now drilling in 2km deep water plus 5km of rock.  And the oil we’re extracting from existing oil fields is of poorer and poorer quality.  Shale oil and fracked gas are only viable when prices are very high.

So we’ll just have to pay more for it then.  Well...simple arithmetic tells us that the more money it costs to get the oil out, then it should be more expensive to buy.  But people and businesses and the whole economy can only afford to pay up to a certain level.  The oil price peaked in 2007, just before the most recent financial crash…did the high price of energy expose the fragility of the housing/sub-prime mortgage bubble (aka pyramid scheme) and cause it all to fall apart? 

And the harder the oil is to find, the more energy it takes to get it out. Oil extraction costs have been shooting up and can only become higher and higher as all the ‘easy oil’ has already been found. When you use more energy to get the oil than you gain, the point of exploring and producing oil falls apart.  Dr Hamilton talked us through the arguments that show – for the average barrel of oil - this could happen in about 2022.  Which is only 6 years away.   After then, regardless of the price of oil, it will always take more energy to extract oil than you get back.

And if there’s a limit to what society can afford to pay (especially if also paying for climate damage and wars and mass migration), the oil companies will never get the money back they have to spend to get the oil out. The oil industry globally has been running at a loss since 2012 but Producer Countries are pretending things are okay for political reasons.  The ironic thing is that oil prices could fall dramatically, as producers pump away to get any income to offset their losses, so speeding their decline.
So the oil industry begins to die from lack of funds; and oil and gas stop becoming fuels for transport, and energy.  

Are we doomed then?  The world will not end in 2022.  Governments and Oil Exporters will subsidise the losses (from other social spending maybe?) and oil and gas may retain more localised and specialist uses that cost less to make.

And what about farming?  Modern intensive farming uses 10 units of energy (tractors, diesel, fertilizer, weedkiller and insecticides, processing, transport, packaging etc) for every one unit of food energy produced.  That system is only possible with unlimited oil supplies.

So the world will change, and it could start to change much sooner that many of us thought.   The potential for disaster is huge.   Maybe we could quibble with some of the detail of Dr Hamilton’s arguments, but we’ve known for decades that the oil age will end sometime in the first third of the 21st century.  The choice is to pretend that ‘something will turn up’ and so we don’t have to change how society works; or to accept the hard reality and make the changes now to make the best of things.

TBI is about doing what we can locally to make and do and grow more of our own food and energy and transport and so strengthen our communities.  Blaming others for the troubles facing all of us doesn’t make the problems go away.

Dr Hamilton's talk was filmed and can be viewed  here  on YouTube. 

Report by Sheila Currie.

Dr Hamilton's pessimistic predictions are based on a 2013 report by the Hills Group, 'an association of consulting engineers and professional project managers' - 
Depletion: A determination for the world's petroleum reserve
Here are some related links:

About the Hills Group
Report overview
Oil depletion graphs and notes
First ten pages of the 67-page report (rather technical)



Latest News...

Cycle Routes Blackisle.
Highland Liftshare. Sign up for free now

TBI Business Directory

Add Your Business

Do you run a sustainable business on or near the Black Isle? Add it to the TBI business directory

Spread The Word...

We are part of the rapidly expanding worldwide Transition Towns movement. The Black Isle is a peninsula of about 100 sq miles ENE of Inverness in Scotland, UK.