BP “did not have the tools” to contain a deep-water oil leak, as they now admit. Their failure with that risk must now raise profound questions about how they handle other risks, in particular the threat that global oil production will fall prematurely, ambushing an oil-addicted world economy. That risk, “peak oil” as it is known, worries growing numbers of people, not least in and around the oil industry. But BP’s approach to it, until now, has been to pour scorn on the worriers. The company is a cheerleader in the global oil industry’s effort to persuade society not to be concerned about peak oil.
Every year BP produces a report that is effectively a risk assessment on peak oil. Their Annual Statistical Review of World Energy, due to be published this Wednesday, pushes the view each year that there are 40 years of proved reserves of oil, that technology improvement will enable much more oil to be found and produced, that rising oil prices can finance the necessary exploration and new infrastructure, and that global oil supply can go on rising for years to come. Every year, peak-oil worriers say they doubt the OPEC reserve statistics that the BP Review in large part relies on, that technology can only slow depletion not reverse it, that rising oil prices do not help when it takes so long to produce new oil in the increasing exotic locations the oil industry has to go for it, and that global supply is heading for an imminent fall.
The economic stakes with the peak-oil risk-assessment could not be higher. With worse to come, the BP’s deepwater-production risk-assessment disaster in the Gulf of Mexico has already collapsed the value of the company’s shares, dragged down the value of the entire FTSE, and endangered British pensions. A failure with the peak-oil risk-assessment issue would make this look insignificant. Leaders of companies in the UK Industry Taskforce on Peak Oil and Energy Security – Brian Souter of Stagecoach, Ian Marchant of SSE, Philip Dilley of Arup, Richard Branson of Virgin, and myself – argue that the premature peak-oil would be quite as bad as the credit crunch. In our report published in February we urged the British government to “act now ….don’t let the oil crunch catch us out in the way the credit crunch did.” On the day BP found itself facing a criminal investigation its mishandling of deepwater-production risk-management, 2nd June, CEO Tony Hayward admitted the company had to find entirely new ways of handling “low-probability, high-impact” risks. On Wednesday, with the publication of their review of world energy statistics, will BP find entirely new ways of handling the high-impact risk that is peak oil?
Also, the Triple Crunch Log on www.jeremyleggett.net is now updated through today . If you have missed any of the drama/analysis in recent weeks, its a quick way to catch up (at least insofar as my reading covers it). As ever, if this an e-mail too many for busy folk, just reply “drop me”.
Best to all
Jeremy Leggett, Executive Chairman, Solarcentury
http://www.jeremyleggett.net for a log of the energy crunch as it unfolds
UPDATE: June 10th