Libya, energy and Peak Oil…

I don’t normally need an excuse to start going on about energy production and climate change but…

Have you seen the cost of petrol? In our general area (SW England), the price now roughly stands at £1.30 per litre, which has gone up from the £1 per litre level roughly 4 years ago. In 4 years, the price has gone up by 23%. This is very important not just for running your family car but for everything which a large part of our human civilisation needs to survive, including energy and food production.

This is a bit of a jumbled post, but i’m trying to bring together a few related, but also different subjects. I’m trying to comment on the things going on in Libya right now (without launching into a full-on analysis of Middle-Eastern politics – i’ll save that for another post!), energy supply and demand, and a pinch of Peak Oil!

A “bumpy plateau” with a downward trend in extraction.

This is how The UK Energy Research Council described the pattern of oil production in the coming years. This ‘bumpy plateaux’ is describing the upcoming period of activity where we enter the period of oil production known as Peak Oil, where the level of extraction starts to level off. The human population is growing fast (this year the world population will hit 7 Billion) and our dependence on mechanised transport, food production etc is also growing fast. This creates a large and increasing demand for oil to power and sustain the human population. The supply of easily extractable oil is levelling off, and will start to fall in the short-term. This means demand will outstrip supply.

Peak oil is not a “theory.” Because oil is a finite resource, it is an inevitability. The debate is all about its timing.

From the report: ‘Reserve estimates are uncertain, reporting is restricted, auditing is insufficient, harmonisation is limited, distortions are likely.’

The ‘bumpy plateaux’ also refers to the process of needing to find harder to reach supplies of oil than we previously needed to, just to stay at the same level of supply. These new supplies will be harder to find and extract and it will cost more. This will lead to price fluctuations and supply problems, which will have a massive impact on our society. It has emerged recently that the Saudi oil reserves have been over-estimated by maybe 40%! This is the world’s top oil producer saying it has nearly half the reserves of oil that it claimed to. This is part of the bumpy ride which will contribute to the ever-increasing price of oil.

Spanish Government intervention…

A frankly amazing example of what will need to start to happen is being provided by Spain (this is where Libya comes in!). A Guardian article recently, talked about the connection between Libya and Spain, via oil production (see pdf below if the link doesn’t work anymore).

PDF document: Spain to lower speed limit as oil prices rise

The Spanish Government is proposing to reduce the maximum motorway speed limit, a 5% reduction of train fares and an increase in the amount of biofuel added to the petrol that the oil companies produce.

It’s a really interesting article, particularly in terms of the reaction to the crisis in Libya and in terms of the scale of change that can be brought about in response to a perceived threat. The key financial thing here is the 15% less cost of running a vehicle at less than 10 mph reduced speed. This is a large shift.

After reading this article, I did a little test while driving to West Brom yesterday: I checked what the rev counts were at 65 mph and 75 mph. Well, there were 2700 revs at 65 mph and 3300 revs at 75 mph. This is a 500 revs difference, or 15% less revs at 65 mph.

At £1.30 per litre for petrol, it now costs us £50 to fill up the car! Maybe one side effect of the unrest in a number of key oil producing countries will be to wake people up a bit to how totally dependent we are on this vital and diminishing resource.