Other issues: developing economies, peak
oil, and the future
Emissions from developing economies
141. Recent press headlines such as "India is
on the road to a transport revolution"[202]
and "Fears for environment as China plans 48 new airports"[203]
highlight the upward trajectory of emissions from transport in
developing economies. Indeed, the International Energy Agency
(IEA) is predicting an increase in demand for oil in China and
India of almost 3% per year for the next 25 years.[204]
We note
that while CCP 2006 cites several examples of international co-operation
with developing economies, designed to help them make carbon reductions
- for instance, work
to accelerate the deployment of renewable energy and to improve
energy efficiency in China through the Renewable Energy and Energy
Efficiency Partnership (REEEP)—it
does not mention any projects designed to help other countries
reduce their emissions from transport. The Government must work
with international partners to develop such projects on a wide
scale, and for two reasons.
First, this will play a part in curbing emissions from developing
economies which would otherwise threaten to more than cancel out
any reductions made by policies in the UK. Second, by doing so
it would help to overcome the argument made within the UK that
any such domestic action was futile, due to the growth in emissions
elsewhere.
Future price and availability
of oil
142. In assessing future demand for transport, the
Department uses assumptions of future oil prices which are established,
and periodically updated, by the DTI. In the 2003 Future of
Aviation White Paper, the Department's assumption was that
aviation fuel prices would remain at $25 dollars per barrel in
real terms (2000 prices) until 2030.[205]
In the 2004 Future of Transport White Paper, the Department
referred to the DTI's May 2004 projections of the price of crude
oil standing at $23 a barrel (2003 prices) in 2010, and rising
to almost $28 a barrel by 2020.[206]
143. Since those White Papers were published, the
price of oil has risen markedly; as of 11 July 2006 a barrel of
brent crude stood at $74.16.[207]
In our first session, Transport 2000 discussed their concerns
about the Department's projections, arguing that if a higher level
of oil prices were to continue it would undermine the case for
an expansion in oil- and carbon-intensive transport infrastructure,
such as roads and airports, and strengthen the case for investment
in fuel-efficient programmes and modes of transport.[208]
As the following Parliamentary Question (from 14 March 2006) illustrates,
such concerns are not confined to NGOs:
Chris Grayling:
To ask the Secretary of State for Transport what assumptions of
(a) prices and (b) range of prices for crude oil in (i) 2010,
(ii) 2015, (iii) 2020, (iv) 2025, (v) 2030 and (vi) 2050 are being
used by his Department in (A) the National Transport Model, (B)
the forthcoming review of the aviation White Paper and (C) the
draft guidance on railway closures; when the Department last reviewed
these prices; and whether these price assumptions have been subject
to independent external review. [58326]
Ms Buck: The Department's
National Transport Model uses fuel prices that are based upon
DTI crude oil price projections. […] Their latest projections
are for crude oil to fall from its current high levels to $35
(in 2004 prices) in 2010 and then remain at that level in real
terms through to 2020—the end of their projection.
The Aviation White Paper published in December 2003
says that DfT will continue to update forecasts in the light of
trends. Movements in the oil price since publication of the White
Paper are clearly one material factor; any further forecasts would
need to take into account up-to-date departmental assumptions.
The draft guidance on rail closures is not itself
based on any particular assumption about crude oil prices. Prevailing
and anticipated future fuel costs are one of a range of issues
which we will expect to be taken into account at the time a specific
proposal is made.[209]
144. The then Transport Minister's response was not
quite correct. The $35 figure she cited was in fact one of three
price projections given by the DTI,[210]
based on different investment and world events scenarios
(Figure 7).
Figure 7 - February 2006 DTI projections for oil
prices up to 2020
| Scenario
| 2010
| 2015
| 2020
|
| High |
$50 | $50
| $50 |
| Central
| $35 |
$35 | $35
|
| Low |
$20 | $20
| $20 |
Indeed, in the 2006 Energy Review, published in July
2006, the DTI has updated these figures again (Figure 8): "Since
the previous CO2 projections were published in February 2006,
[…. t]here has […] been a re-assessment of fossil fuel
prices. Generally, fossil fuel prices in 2010 are assumed to be
higher than previously and to rise further between 2010 and 2020.
This is to reflect the signs that demand for oil appears more
robust to higher prices than previously assumed and supply is
still expected to remain relatively tight even after expected
increases in supply in the next few years."[211]
Figure 8 - July 2006 DTI projections for oil prices
up to 2020
| Scenario
| 2010
| 2015
| 2020
|
| High |
$67 | $69.5
| $72 |
| Central
| $40 |
$42.5 |
$45 |
| Low |
$20 | $20
| $20 |
145. The important question is whether the recent
rise in oil price is merely a temporary spike, reflecting bottlenecks
in refining capacity and current political uncertainty in oil
producing areas in the Middle East, Africa, Russia, and Latin
America,[212] or whether
it is due to continue or rise even higher. This brings us onto
the "peak oil" debate. A vocal minority of oil analysts
argue, against the projections of bodies such as the International
Energy Agency, that the global production of oil will peak in
the short-term future, and that this will create extremely profound
convulsions to the global economy and to international relations.
We received three submissions which discussed this theory and
argued that it needed to be taken into account in the Department's
policies;[213] and
heard evidence from a prominent speaker on peak oil, Chris Skrebowski,
editor of the Energy Institute publication, Petroleum Review.
In his view, "in 2010-11 the numbers cease to add up and
you start getting less oil at the end of the year than you had
at the beginning on a global scale. That is when peak oil occurs.
In my view, it is really quite imminent."[214]
By contrast, the UK Petroleum Industries Association (UKPIA) told
us: "We as an industry are seeing something like 40 to 100
years of oil supply left. If we look at the production profiles
that are produced by our industry, when they look ahead they do
not show a peak in global oil production up to 2030, the limit
of the forecasts."[215]
146. The Government's view of this debate is given
in the following Parliamentary Question and answer (to date, the
only one that has been asked on this subject):
John Hemming:
To ask the Secretary of State for Trade and Industry what estimate
the Department has made of when global production of conventional
crude oil will peak. [11302]
Malcolm Wicks: The Government's
assessment of the remaining lifespan of global oil reserves is
set out in the Energy White Paper 2003 "Our energy future—creating
a low carbon economy" (http://www.dti.gov.uk/energy/whitepaper/index.shtml).
Paragraph 6.15 of the White Paper notes that
"Globally, conventional oil reserves are sufficient
to meet projected demand for around 30 years, although new discoveries
will be needed to renew reserves. Together with non-conventional
reserves such as oil shales and improvements in technology, there
is the potential for oil reserves to last twice as long".
This is consistent with the latest assessment by
the International Energy Agency (IEA) in its 2004 World Energy
Outlook. The IEA concludes that
". . . global production of conventional oil
will not peak before 2030 if the necessary investments are made."
The Government remain committed to working with producers,
consumers and the international community to improve the conditions
for investment in the international oil sector, as well as implementing
policies to maximise the economic recovery of the UK's own oil
(and gas) reserves and to ease the UK economy away from power
supplied primarily through fossil fuel supply. We are also supporting
efforts to promote greater transparency in reporting of global
oil reserves.[216]
147. It should be noted that in this statement the
Minister is only really citing one source rather than two: the
source given in Paragraph 6.15 of the 2003 Energy White Paper
is also the IEA's World Energy Outlook, albeit from 2002.
In his session with us, the Secretary of State said:
Mr Alexander:
Our view is that global oil production will not peak before 2030,
but again that is a cross-governmental view rather than simply
the view of the Department for Transport. That is contingent
on sufficient investments being made. This is consistent […]
with the view of the IEA, most other governments round the world
and, indeed, the oil industry itself, and reflects what we have
judged to be several flaws in the argument that was put to this
Committee by one individual who clearly takes a very different
view in terms of the timing at which peak oil will be reached.[217]
148. While, as the Secretary of State himself suggested,
this could be said to represent the broad consensus of governments
worldwide, it is notable that the Swedish government has announced
a policy of reducing oil dependency as much as possible by 2020,
and has held a public hearing on when peak oil will be reached.
Meanwhile, in 2005, a report sponsored by the US Department of
Energy (Peaking of World Oil Production, known as the Hirsch
Report) found that, although it was difficult to predict when
peak oil would occur, when it did it would result in an unprecedented
transport fuels crisis that would cause protracted economic hardship.
It recommended that oil depletion deserves immediate and serious
attention, if the risks are to be fully understood and mitigation
begun on a timely basis.[218]
149. There are
conflicting views in the "peak oil" debate,
and we have not examined them closely enough to take an informed
view ourselves. We would
observe, however, that even if the Government's projections of
conventional reserves extending to 2030 are correct, this is still
quite a short time, given transport's current 99% reliance on
oil, and the lifetime of major infrastructure projects. While
the Government also projects that improved technology and unconventional
reserves could extend this period by another 30 years, we are
concerned that the recovery and refining of such reserves could
itself (given the extra energy required
to process them) lead to
higher "well-to-wheels" emissions. All this speaks of
an extra imperative for the Department to make a step-change in
funding and policies to wean the UK off the use of fossil fuel
oil. To appraise the
risks, inform priorities, and raise public awareness, the
Government should commission its own equivalent to the US Hirsch
Report, and study the example of the Swedish policy to reduce
oil use by 2020.
Looking to the future
150. Since 2004 the Foresight project, run by the
DTI's Office of Science and Innovation (OSI),[219]
has been carrying out a research programme entitled "Intelligent
Infrastructure Systems", which has concentrated on anticipating
the future shape of transport in the UK up to 2050. Drawing on
the work of more than 300 science experts and key stakeholders,
the programme developed four scenarios—intended
to help guide current policy making—of
how the future might develop, based around different projections
of the availability of oil, the pace of alternative technologies,
and the outcome of political debate on climate change. Despite
their differences, these four visions of the future hold some
consistent messages. Most of all they argue that the next 45 years
are not going to see a simple continuation of trends experienced
since 1960. Growing
political pressures over the need to reduce carbon emissions,
the possibility of a sharp and prolonged fuel shock following
peak oil, the complications caused by the development and rolling
out of new fuels and technologies, and the potential divergent
economic outcomes that follow rapid change to transport and communications,
are projected to put transport at the very heart of public policy.
The Department should closely examine the findings of the Intelligent
Infrastructure Systems programme, in terms of both measures that
could be taken to reduce carbon emissions, and ways of winning
public support for them.
151. As this
report sets out, transport is both the most technically difficult
sector in which to reduce carbon emissions and also the most politically
difficult. Indeed, the latter is a result of the former
because neither technological progress
nor centralised efficiency improvements by themselves result in
the same speed or scale of reductions as in other sectors. Significant
cuts in emissions from transport also require widespread behavioural
change. Such change challenges one of the very keystones of modern
society - the deeply cherished and ever-expanding sense of personal
freedom and mobility that has followed the increasing affordability
of both driving and flying but which involves profligate consumption
of energy.
152. Governments
at home and abroad must urgently inform the public about the reality
and dangers of climate change, and the measures we can all take
to avert it. We do not underestimate the problem which this poses
for any elected politicians. This underlines the need, as this
Committee has consistently argued, for a cross-party approach
to the important and difficult measures necessary to tackle climate
change. In taking forward the recent Energy Review and switching
the focus of transport policy, we urge the Government to show
courage in challenging popular preconceptions in order to serve
the people's long term interests.
202 "India is on the road to a transport revolution",
The Guardian, 2 May 2006. Back
203
"Fears for environment as China plans 48 new airports",
The Guardian, 10 May 2006 Back
204
International Energy Agency, World Energy Outlook 2005,
November 2005, p 83 Back
205
DfT, The Future of Air Transport, Cm 6046, December 2003,
p 150 Back
206
HC Deb, 23 June 2005, col 1129W Back
207
International Energy Agency figure for "NYMEX WTI",
www.iea.org. Back
208
Q54 [Mr Joseph] Back
209
HC Deb, 14 March 2006 ,col 2056W Back
210
In fact, overall DTI uses four scenarios. Its "Central"
scenario is divided into two, one in which gas prices are favourable
to coal, and one in which coal prices are favourable to gas. However,
in both cases the oil price is the same. DTI, UK Energy and
CO2 Emissions Projections: Updated Projections to 2020, February
2006. Back
211
Cm 6887, p 201 Back
212
Claude Mandil interview in Nikkei, 24 April 2006, http://www.iea.org/journalists/headlines.asp
Back
213
Ev175, Ev240, Ev370 Back
214
Q443 Back
215
Q371 [Mr Watson] Back
216
HC Deb, 18 July 2005, col 1338W Back
217
Q 668 Back
218
Robert L Hirsch, Roger Bezdek, and Robert Wendling, Peaking
of World Oil Production: Impacts, Mitigation, and Risk Management,
February 2005, pp 4-7 Back
219
The OSI was formed on 3 April 2006, following a merger of the
DTI's Innovation Group (IG) into the Office of Science and Technology
(OST). Foresight was first established in 1994, and formerly belonged
within OST.
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