The age of cheap oil is over

There is no time for denial. Governments and communities need to start adapting now.

We are now inhabiting a 'post-peak' world. That is the implication of the International Energy Agency's (IEA) new report, World Energy Outlook 2001, which in its 25-year 'New Policies Scenario' projects that it is most probable that conventional crude oil production "never regains its all-time peak of 70 million barrels per day reached in 2006." In this scenario, crude oil production is most likely to stay on a plateau of around 68-69 million barrels per day.

The IEA blames a number of factors for this - a combination of supply constraints due to below-ground geological resource limits, and above-ground factors such as political obstacles to fully exploiting existing reserves (such as in Iraq), as well as international commitments to reducing fossil fuel emissions to meet climate targets.

So is this the end of industrial civilization as we know it? Not quite. Or perhaps, not yet. Despite the peak of conventional oil production, the IEA concludes that total growth in liquid fuels from other unconventional sources - such as tar sands, oil shale and natural gas liquids - will continue to make-up for the short-fall in crude until around 2035. But while this means there will be no imminent fuel shortages as such, it also means, in the words of IEA chief economist Fatih Birol, "The age of cheap oil is over."

The problem is that unconventional sources of oil and gas are far more expensive to get out of the ground and process into usable petroleum, and environmentally problematic. This means that over the next decade, oil prices are likely to become more expensive. Driven largely by industrial growth in places like China and India demand is projected to grow by 36 per cent up to 2035 - at which point, the price of oil will rise beyond $200 a barrel. On the way, by around 2015, we could see price hikes above $100 a barrel.

Even if the 'post-peak' world by no means implies the End of the World, it will nevertheless be an extremely volatile one if business-as-usual continues. The convergence of food and financial crises we saw in 2008 was one of the first signs of a strained system. Oil price volatility due to peak oil was a major factor that induced the 2008 banking crash. The collapse of the mortgage house of cards was triggered by 'post-peak' oil price shocks, which escalated costs of living and led to a cascade of debt-defaults. A study by US economist James Hamilton for the US Congress Joint Economic Committee confirmed there would have been no recession without the oil price shocks.

The oil shocks also impacted on food prices. The global industrial food system is heavily dependent on fossil fuels, consuming ten calories of fossil fuel energy for every one calorie of food energy produced. As noted by Australian agricultural expert Julian Cribb in his book The Coming Famine (2010), the six-fold rise in food prices between 2003 and mid-2008 was triggered by escalating oil prices (among other factors), and impacting severely on "farmers' fuel, fertilizer, pesticide, and transportation costs." While "financial pain was high" in developed countries, in the less developed world - from where the developed countries import much of their food - "farmers simply could not afford to buy fertilizer, and crop yields began to slip."

All this was exacerbated by a debt-dependent economic system that systematized the very kinds of dodgy derivatives trading which generated subprime mortgage blowback - with speculators throwing money into futures markets for oil and staple food commodities, rocketing prices even higher. The recession that such price hikes partially inflicted, leading consumption and production to drastically contract, allowed prices to drop. But as economies tentatively recover, as populations grow, as demand rises, the danger that we once again hit the ceiling of the world's oil capacity limits will remain.

So if the IEA is anywhere near right, we are in for a rather rough ride. The volatility of the 'post-peak' world will be difficult to predict. It is a world not of easy abundance, but of declining - and increasingly expensive - carbon-based resources. If we are to develop sufficient resilience to the various price shocks and converging crises of the 'post-peak' world, we will need to recognize that they are symptomatic of an inevitable civilizational transition toward an emerging post-carbon age. There is no time for denial. Governments and communities need to start adapting now.

Dr. Nafeez Mosaddeq Ahmed is Executive Director of the Institute for Policy Research & Development. His latest book is A User's Guide to the Crisis of Civilization: And How to Save It (Pluto, 2010). He blogs at The Cutting Edge.

Getty
Show Hide image

To the Commonwealth, "Global Britain" sounds like nostalgia for something else

And the former colonial subjects have a less rose-tinted view of the past. 

Earlier this month, Boris Johnson became the first British foreign secretary to visit the Gambia since independence. His visit came a few days before the inauguration of the Gambia's new President, Adama Barrow, who has signalled his intention to re-join the Commonwealth - an institution that his dictatorial predecessor had left in protest at its apparent "neo-colonialism".

Accusations of neo-colonialism, regrettably, seem to be of little concern to the foreign secretary. After Johnson committed himself to facilitating the Gambia's Commonwealth re-entry, he declared that "the strength of our partnerships show that Global Britain is growing in influence and activity around the world". 

His comments are the latest example of the government's Brexit mission-creep in its foreign engagements. Theresa May mentioned "Global Britain" no fewer than ten times in her Lancaster House speech last month, reminding us that Britain "has always looked beyond Europe to the wider world" and emphasising the UK's post-referendum desire to "get out into the world". Ministers' repeated subsequent referencing of Global Britain has almost come to the point of re-branding Great Britain itself. But now the government seems to be directly equating Global Britain with the Commonwealth, the organisation comprising most of the former territories of the British Empire. If the Commonwealth is wooing back former members and seemingly growing in stature, that must mean Global Britain is doing the same. The Gambia's proposed re-admission to the Commonwealth is reconfigured as a victory for British clout and prestige in the face of the Brexit naysayers.

But the Commonwealth cannot be a vehicle or front for Global Britain, on either a technical or political level. The Commonwealth emphasises that it is an organisation of 52 equal member states, without any preference in decision-making. India (population 1.26bn) and Tuvalu (10,000) are treated the same. The organisation is headquartered in London, receives the most money from Britain, and its members share elements of history, culture and political systems; but it is not a British organisation and will not take orders from the British government. Commonwealth states, particularly poorer ones, may welcome UK political, financial and developmental support, but will reject the spectre of neo-imperialism. Diplomats remark that their countries did not leave the British Empire only to re-join it through the back door. 

And yet, shorn of influence following the decision to leave the EU, and the single market so instrumental to British jobs and prosperity, the government is desperate to find an alternative source of both power and profit. The members of the Commonwealth, with their links of heritage and administration, have always been touted as the first choice. Leading Brexiter Dan Hannan has long advocated a "union with the other English-speaking democracies", and Liam Fox has been actively pursuing Commonwealth countries for trade deals. But the Commonwealth cannot replace the EU in any respect. While exports to the EU account for just under a half of Britain's total, the Commonwealth receives less than 10 percent of our goods. The decline of UK trade with the Commonwealth was taking place long before Britain joined the EU, and it has in fact revived in recent years while being a member. The notion that Britain is restricted from trading with the Commonwealth on account of its EU membership is demonstrably false.  

The EU, the beloved scapegoat for so many ills, cannot fulfil the role for much longer. Indeed, when it comes to the Commonwealth, 48 of the 52 members have already completed trade deals with the UK, or are in the process of negotiating them, as part of their engagement with the EU. Britain could now be forced to abandon and re-negotiate those agreements, to the great detriment of both itself and the Commonwealth. Brexiters must moreover explain why Germany, with a population just 25 percent larger than ours, exports 133 percent more to India and 250 percent more to South Africa than we do. Even New Zealand, one of Britain's closest allies and a forthcoming trade-deal partner, imports 44 percent more goods and services from Germany, despite enjoying far looser cultural and historical ties with that country. The depth of Britain's traditional bonds with the Commonwealth cannot, in itself, boost the British economy. The empire may fill the imagination, but not a spreadsheet.

The British imperial imagination, however, is the one asset guaranteed to keep growing as Brexit approaches. It is, indeed, one of the root causes of Brexit. Long after the empire fell into history, the British exceptionalism it fostered led us to resent our membership of a European bloc, and resist even limited integration with it. The doctrine of "taking back control" for an "independent Britain" speaks to profound (and unfounded) anxieties about being led by others, when in our minds we should be the ones explicitly leading. The fictional, if enduringly potent victim narrative that we became a colony of someone else's empire, has now taken hold in government. The loss of our own empire remains an unacknowledged national trauma, which we both grieve and fail to accept. The concept of being equal partners with like-minded countries, in a position to exert real, horizontal influence through dialogue, cooperation and shared membership of institutions, is deemed an offence to Britain's history and imperial birthright.

The relentless push for Global Britain is thus both a symptom and cause of our immense global predicament. Through an attempt to increase our power beyond Europe, Brexit has instead deflated it. Britain has, in truth, always been global, and the globe has not always been grateful for it; but now the government preaches internationalism while erecting trade barriers and curbing migration. After empire, Britain found a new role in Europe, but with that now gone, Global Britain risks producing global isolation. Despite the foreign secretary's rhetoric, the Commonwealth, geopolitically and economically, has moved on from its imperial past. It is not waiting to be re-taken.

Jonathan Lis is the deputy director at British Influence.