The Oil Drum: Europe

by David Clarke

Introduction

In Part 1 & Part 2 I discussed the possibility that a downturn may occur in the 5+ year timeframe and a serious dislocation to our way of life may occur in the 13+ year timeframe. I am certainly not suggesting that it is certain, or even probable, but as someone who deals in risk management every day this is a risk that I feel needs serious management.

My goal in Part 3 was to examine what, on a personal level, can be done to prepare for these possible risks and guarantee a future for my son. Unfortunately, the answer ran to almost 10,000 words! I am sure that you have better things to do than read 10,000 words, so I have divided it into 3 a and 3b and I have ruthlessly cut the word count.

Part 3a will concentrate mainly on a worst case. Part 3b will try to draw it all together, then look at a best case.

The three most worrying risks that I identified in Part 2 were interactions between Peak Oil and:
- Climate Change
- Massive Economic Downturn
- Pandemic

In 2006, 92% of the primary energy consumed in the UK was derived from fossil solar fuels - oil, natural gas and coal.

Not so long ago the UK was self sufficient in these energy resources but now we are importing increasing amounts of all three.

Dependency upon imported energy undermines UK national security and will have potentially dire consequences for the balance of trade.

This is a guest post by Roger Conner Jr., known on TOD as ThatsItimout.

(Throughout, all headlines in all caps are mine, to help structure the content of the remarks, extracted from the following speeches. Links are provided so that the original remarks and slides can be viewed in entirety by the reader)

Presentation by Dr. Nimat B. Abu Al-Soof, Upstream Oil Industry Analyst, Secretariat, to the OPEC-organized session "The Petroleum Industry: New Realities Ahead?", at the Offshore Technology Conference 2007, Houston, Texas, 30 April - 3 May.

http://www.opec.org/opecna/Speeches/2007/OPECSpareCapacity.htm

If we look at the future, however, the issue of security of demand, which is intrinsically linked to the issue of security of supply, is of very real concern. Without confidence that there will be demand for OPEC oil, the incentive to undertake investment will also be reduced because of concerns that this will lead to large levels of unused capacity and, in turn, to downward pressures on oil prices.

This would result in huge revenue losses and OPEC Member Countries, as developing countries with strong competing needs for financial resources, would be adversely affected in terms of available resources for education, healthcare and infrastructure.

TOD:Canada continues its coverage of the developing credit crunch, looking at how the liqidity crisis is playing out in Canada and how the subprime problem in the UK could be even worse than in the US. The mood of the markets continues to be an important factor, causing risk premiums to skyrocket and liquidity to dry up almost overnight. The US dollar is emerging as a beneficiary of the flight to quality, while the yen appreciates due to the unwinding of the carry trade. A rash of hedge fund redemptions is expected at the end of the third quarter.

On the Canadian energy scene, Peter Lougheed warns that a constitutional showdown appears to be shaping up between Alberta and the federal government over development of the oil patch. Dalton McGuinty's decision to close the coal-fired power plants in Ontario is criticised as bad policy, while one municipality holds a voluntary blackout day.

Water remains an issue round the world, as does the evidence of accelerating climate change. Sovereignty, particularly in the Arctic, and security are also becoming more prominent.

_{Source: Minyanville}

In 2006, 92% of the primary energy consumed in the UK was derived from fossil solar fuels - oil, natural gas and coal.

Not so long ago the UK was self sufficient in these energy resources but now we are importing increasing amounts of all three.

Dependency upon imported energy undermines UK national security and will have potentially dire consequences for the balance of trade.