The True Cost of Oil

The world is watching with collective dismay the environmental nightmare in the Gulf of Mexico following the explosion of the Deepwater Horizon rig on April 20.

Eleven workers were killed outright in the disaster which led to the rig sinking. In the longer term, the lasting consequences are sure to reach far and wide. The immediate concern is how to stop oil spewing out from the burst pipeline at an estimated 24,000 barrels every single day. BP has managed to capture some of the oil with a containment cap but thousands of litres are escaping in any 24 hour period. This has been going on, unabated until recently, for the best part of two months.

The oil spill is already the USA’s biggest ever environmental disaster with the slick having spread towards the Louisiana, Alabama and Florida coastlines. This will have ramifications for the ecology, wildlife, the fishing industry and tourism of such a large strip of America. Some beaches in Florida are already beginning to display warning signs to would-be bathers. It is extremely worrying that the oil may reach Cuba where the economy is so reliant on foreign visitors. If the oil reaches the Cuban shoreline, it could be the tipping point for a country struggling to survive as a result of the damaging trade embargoes America has placed upon it.

This is not the first time BP has suffered an explosion in the United States. The company was fined $87 million last October for failing to correct safety problems at one of their refineries in Texas in 2005 following a blast which killed 15 workers. This hugely wealthy company continues to prioritise their profits above the safety of their employees and the environment.

Now BP is facing a huge clean-up operation which they must surely foot the bill for. The cost of the clean-up has been estimated to date as £1 billion – less than one month’s profit for the company. However, much more damaging has been the £55 billion that has been wiped off BP’s value since the spill began. This will have huge consequences for the pension market in the UK since so many portfolios are invested in the company. Is it not time for the UK Government to start regulating pension funds so that they are invested in ethical companies? The Fair Pensions campaign, supported by trade unions and charities, has long called for the government to regulate pension funds so that people’s future livelihoods are protected from market failure and irresponsible corporate behaviour. The raising of the state pension, which Plaid Cymru has repeatedly called for, could compensate for any losses following on from the collapse in BP's market value.

In an illuminating article, Guardian columnist George Monbiot has argued whether BP actually delivers a profit. Despite pumping billions of pounds every year into the pockets of its shareholders, Monbiot argues this is money which should be set aside for future liabilities, much in the same way that Norway has treated its oil money. Is it ethical for BP to be making a net profit of £17 billion in 2009 without reinvesting those profits in the planet it is benefiting from, yet ulimately wrecking? Its not. Unless oil companies, and BP are by no means the only offender, begin to invest serious money in the environment and prepare for a future where our need for oil does not outstrip supply, then we are in serious trouble.

Despite the projections that the disaster will spell the end for BP, Monbiot also predicts that the company will ride out the storm and still be in business ten years from now. If that is the case, I hope they will have been forced to learn lessons from the Gulf of Mexico.


UPDATE, FRIDAY JUNE 11 - The US Geological Survey has this morning estimated that up to 40,000 barrels of oil could have been escaping from the ruptured pipeline every day before a cap was fitted at the beginning of the month. This is double the amount of oil previously thought to have been escaping.

The wider implications of Iceland's volcanic eruption

The volcanic eruption in Iceland has caused travel chaos over the past week. The unprecedented disruption to flights has left many thousands of Welsh holiday makers stranded abroad, unable to return to their homes and jobs. Now, amid recrimination and blame, the restrictions on flights have been lifted. Lessons need to be learned, but its worth thinking about the wider implications of the flight ban.

The Guardian reported this week that farmers in Kenya had to throw away 50 to 60 tonnes of broccoli, sugar snap peas, runner beans and other fruit and vegetables because of the flights that would normally transport them to the UK were grounded. That huge amount of food was ditched by last Friday alone, at the beginning of the six-day period of disruption. Imagine the many hundreds of tonnes of food that will have been lost in Kenya by the time flights are running as normal.

As regular readers of this blog will know, I have raised concerns about future food security before. We do not grow enough of our own food and therefore rely on too many imports. It is wrong, from an environmental perspective, for Scotland to export potato seeds to Egypt, so that farmers can grow them there and then import the finished, grown product back to Scotland. Similarly, why do we buy large amounts of New Zealand lamb when we have fantastic, world-renowned lamb on our doorstep here in Wales?

The UK's reliance on food imports leaves these islands vulnerable and susceptible to a food crisis sometime in the future, which has been predicted by many with terrifying consequences. The notion and implications of peak oil have to be taken seriously.

Food prices are closely linked to fuel prices. The number of air and road miles most of our food has undertaken before it has reached the supermarket shelves means the price largely reflects fuel costs. With petrol prices looking likely to only increase in the coming years, it is crucial that food price-hikes and shortages are planned and prepared for.

People will need food growing skills we have lost from past generations. There are plenty of people keen and willing to learn and try food growing, and the growth in demand for allotments in recent years shows this. But provision does not meet this demand, as the Assembly's Environment and Sustainability Committee heard yesterday. Government at all levels must do all that can be done to provide greater access to allotments, as well as think about other ways in which we can plan to avoid a worse case peak-oil scenario.

Peak oil - Western Mail article

Here is the article that I wrote for the Western Mail which appeared this week.

Weathering the storm in uncertain times’ - by Plaid’s Sustainability Spokesperson Leanne Wood AM.

The global economy faces a triple crunch of high oil prices; soaring food and energy bills, which is accelerating climate change. We have had an awful summer and it has been particularly distressing for those who have suffered the flooding of their homes. This summer or lack of it illustrates the need for all of us to take climate change seriously because it is an issue that threatens our planet, our children’s future and our way of life.

Climate change is happening at a faster rate than was first thought by scientists. It is now becoming climate chaos. We must move to a much more sustainable way of living before it is too late.

Across Wales we are all feeling the pinch. Petrol we put in our tanks and the electricity bills dropping through our doors and the amount we have to handover at the supermarket checkout. Ruthless speculators in the City of London are still making a great deal of money during these difficult times. They should however take note that even they cannot insulate themselves from the dire consequences of peak oil.

The problems of climate chaos and peak oil are now affecting our everyday lives here and across the globe. The world’s economy is driven by oil, but soon there will be not enough to go around.

Peak oil does not mean the end of oil, but that about half of the total amount available has been used up. The oil that is left is more difficult and costly to extract. One of the consequences of peak oil is a rapid rise in oil prices.

In the short term Plaid is looking for more fairness on fuel prices. We are putting pressure on the London government to minimise the impact of high fuel prices, particularly people on the lowest incomes. If we don’t regulate the burden of rising fuel costs on working people, then fuel poverty will continue to rise – and that means more people dying this winter.

However regulation alone is not enough. Our children and grandchildren need to inherit a world that they can live in. Without a change in our way of thinking, our way of working and our way of living, we will not be able to provide that for them.

The Centre of Alternative Technology in Machynlleth has shown how the UK could adapt to the challenge of peak oil and create a low carbon economy.
Wales as a nation has so many sources of renewable energy that it is well suited for a future after oil.

A serious shift towards renewable energy has the potential to provide a huge boost to the Welsh economy. We must maximise our energy sources which surround us: waves, wind and the water running in our streams. A community based approach to energy would mean that ordinary people can benefit from the energy that is created around them. Small scale off grid energy installations and micro-generation could provide up to a third of our electricity needs according to the Energy Savings Trust.

We could develop biomass crop production on relatively unproductive pasture land across the nation to supply local combined heating and power plants for villages and towns.

Some would argue that Wales could not survive in a world without oil. Cuba has survived an end to oil supplies and with some planning and changes to our thinking so could we.

When Cuba lost access to its oil supply in the early 1990s, the country faced an immediate crisis feeding the population along with an ongoing challenge: how to create a new low energy society.

Most of Cuba’s oil was used to produce food. Cuba moved from large fossil fuel intensive farming to small less energy intensive community organic farms and urban gardens, and from a highly industrial society to a more sustainable one.

City dwellers were encouraged by government to turn to urban agriculture.
The result was that Cuba had 1,000 kiosks selling local food in cities, 50% of the big city vegetable needs were met through urban agriculture, and 80-100% of small cities’ needs were met with their own supplies.

Cuba provides a good example of how to address the challenge of peak oil. If Wales is to follow this example we need to have a real Parliament to ensure we have the tools to do the job. Only then can we have a Welsh approach to the triple crunch that affects us all.

Postscript - in response to comments

You are right Draig, the only parliament on offer is what is specified in the Government of Wales Act. It will not include new powers over any area that's not currently devolved. Powers for energy consents over 50MW on land will not be devolved. Although a law-making parliament will be a start, we can't transform Wales until we get all powers over everything.
Interesting take on peak oil in that article Tom - thanks. Wouldn't one way of avoiding such a scenario be to switch to renewables? I accept that capitalism is nonsensical for the reasons outlined in the article, but in the here and now we have rocketing fuel prices which are having a greater impact on people on low incomes and the oil reserves are in "politically unfavourable" countries. The price may come down after an economic bust, but what do people do in the meantime?
Peak oil is an interesting and believable theory, supported by many well-respected environmental activists. Oil is finite, so it will run out at some point. If the current price rises can be used to persuade people to demand energy from renewable sources, wouldn't that be a positive in terms of climate change? It is a big risk that the demand will be to find more oil, but surely our challenge is to make sure that we make that switch to renewables?
And I'd like to remind readers that I do not publish anonymous comments.