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As names go, the First Exploitation Company sounds like an inspired slight dreamed up by an angry anti-oil campaigner. In fact, it was the original title, coined in 1903, of the troubled company we now know as BP. But then, public relations have never been its strong point.
Over the course of a century BP, in its various guises, has managed to outrage everyone from revolutionary nationalist leaders in the Middle East to Britain’s supposedly closest ally. Now Barack Obama has ensured that BP is Public Enemy No 1 in the United States (tonight, he will make his first address to the nation direct from the White House to stress the point).
In the aftermath of the Deepwater Horizon disaster, BP is being freely compared in the US to those poster boys of corporate malfeasance, Enron and Worldcom. Beleaguered chief-executive Tony Hayward may not be Bernie Madoff, but hate mail and threatening phone calls have been directed at him and his family. Hayward is now reportedly undergoing training in front of a so-called “murder board” of legal experts to prepare him for the aggressive questioning he will face from the Congressional Oversight and Investigations Subcommittee in Washington on Thursday.
BP’s share price is tumbling, as its expected liabilities from the spill – estimated at anywhere up to $40bn (£27bn) – climb so high that the financial markets are giving the company’s debt a “junk” rating. Speculation over BP’s future has ranged from filing for Chapter 11 bankruptcy protection to a possible takeover by one of its giant rivals, Exxon Mobil or Chevron.
The word spill doesn’t really do justice to the unfolding disaster in the Gulf of Mexico, brought to you by oil giant BP. A spill, as Sophie Elmhirst has pointed out, is what happens to milk: “There’s no point crying over it, as the saying goes”.
But before you start wondering whether to call it a slick, a disaster, a catastrophe, be sure to pay a visit to IfItWasMyHome.com. Enter your home town and watch as the big black blot of oil is superimposed on where you live. Here’s what it looks like dumped on nef HQ in London, engulfing most of East Anglia, and stretching right across to the Breacon Beacons.
At this point, most words feels like an understatement.
(Hat-tip to @JohnHitchin for the link)
We may be in the grip of the worst economic upheaval for half a century, but the UK is still at heart a forward-looking, modern economy, isn’t it? Smogs and satanic mills are things of the past and we have a model that is resource-light and service driven, don’t we?
Perhaps not. In the UK for the first quarter of this year, £1 in every £4 paid in dividends to shareholders came from a single industry: oil and gas. And, from that sector, just two companies – BP and Shell – accounted for the vast majority.
If the banking crisis taught us one thing, it is that putting too many of your economic eggs in one sector’s basket is a very bad idea. In banking it was a bad idea because they practised Narnia-nomics (which is probably a slur on Narnia). With the oil and gas sector it is a bad idea for two reasons, which may seem contradictory: the products are both very damaging and have no long-term future. Unfortunately, however, there’s still enough oil and gas left to cause more damage than the planet can handle (and an awful lot of coal, which people may turn to as the other fossil fuels become more expensive and harder to get).
Where the damage is concerned emissions continue to drive the loss of a climate system conducive to stable, flourishing societies. A combination of steadily rising greenhouse gas concentrations and temperatures suggest that in around 78 months we will enter a new, more dangerous category of risk for creeping climatic instability, reason enough perhaps, to disinvest in fossil fuels.
The second reason is that an economy so hard-wired to the oil and gas sector is hitching its future to a long-term loser. We are already decades past the point of peak global oil discoveries, and on the cusp of the peak of oil production.
A new assessment of 14 forecasts of global oil supply underlines how the short-lived empire of oil is already well into its dotage, with the end in sight during our own lifetimes.
Some speculate that the moment at which production levels-off and begins its inexorable decline is already with us. If so, it may be only the recession, which temporarily reduces demand, that is hiding it. Several more forecasts suggest it will happen over the course of this decade – mere seconds away in the calibration of economic planning. Crucially, the study concluded that no credible forecast could put the date more than 20 years away.
Expect to see repeats of BP’s disaster at its Deepwater Horizon rig as companies seek to extend their lives of by exploiting ever-more marginal and hard-to-get reserves. Accidents happen when limits get pushed and an industry becomes increasingly desperate.
While companies like Shell, BP and Exxon may dominate the current economic landscape like leviathans, it is a feature of the end of empires that they seem permanent (especially from within) until, suddenly, they are gone.
All the more important, then, to plan for the inevitable. This is starting to happen. As the peak, plateau and decline of oil production approaches, its price will rise dramatically. Companies that are heavily exposed or, in other words, dependent on the old oil economy, will be at risk. Thinking back to the oil price spike of 2008, the ratings agency Fitch recently reassessed a range of industrial sectors for how vulnerable they will be when oil again knocks on the door of $150 per barrel. Airlines, trucking, chemicals and various consumer goods sectors look to be in big trouble. But railways and renewable energy cash-in.
It’s not just the coasts of the Gulf of Mexico that have fallen victim to our economic dependence on oil, its the climate that we depend on, for example, to grow our food, and will soon also be huge chunks of the economy.
The quicker we arrange a separation between society, the economy and the oil and gas sector, the better. This era-defining problem falls on the watch of the new coalition government. They could start by substantially capitalising the proposed new green investment bank and turning the taxpayer-owned Royal Bank of Scotland – that once proudly called itself the “oil and gas bank” and is still up to its neck in fossil-fuel financing – into a Royal Bank of Sustainability. More or less we have just the lifetime of this parliament to get money out of oil and into renewables and low-energy infrastructure.
After the bank bailout, we were left with the question, “where did the money go?”. At least if we put our resources into the great transition away from fossil fuels there would be tangible results. We would be looking at a great wave of new employment opportunities, more energy security, a less vulnerable economy and the chance for a better future.
78 months and counting …
We used to get along well with oil, in a lonely sort of way. It has played a major role in the advancement of much of our civilisation, providing energy and materials. But now our progress does not have to depend on it. Emerging from the recession provides the ideal time to redirect our progress.
Over 4000 years ago we used asphalt, present in most crude petroleums, as a fairly benign glue to build the walls of Babylon. And the industrial revolution was a bright spark in the history of human innovation: our technological advances have revolutionised how, where- and even when- we live. It wasn’t long before Thomas Midgley, Jr. developed both leaded gasoline and CFCs, certainly in the top five recent environmental disasters. We learned to use oil to provide energy, fuelling our cars, and help in the creating of plastics, pesticides, fertilisers and solvents. But, despite our addiction, we now need to use the alternatives.
Taxing the Bad
This month the Office of National Statistics posted employment figures (the lowest in over ten years; see below) and an estimate that the UK has, behind the other G7 countries, emerged from the recession with growth of 0.1%.
The graph above, from the Office of National Statistics, shows the employment rate for September to November 2009 was 72.4%, the “lowest since winter 1996-97 and is down 0.1 on the quarter”. Average regular pay (excluding bonuses) was up 1.1% over the same period to £424/week. This was the lowest annual growth rate since records began in 2001.
The 0.1% growth of the economy has been used for two opposite viewpoints on fiscal policy: that the government should cut our budgetary deficit by slimming our net spending, and that our spending levels should be maintained in order to secure the economy’s recovery. Neither addresses our addiction to oil and fossil fuel-based consumerism. Fiscal stimulus should be ploughed into building clean and renewable energy sources, creating ‘green’ jobs and preserving our natural environment. As many have advocated, including the economist Paul Krugman, the tax system would be an effective way to transition our economy to a cleaner future that would actually help the economy and the environment. Tax the ‘bads’ (fossil fuels, aviation, environmental degradation) and nurture the ‘goods’ (employment tax credits, subsidise renewable energy).
In times of darkness and uncertainty we should turn to someone who knows better. So, I close with some help from the Tick: “Everybody was a baby once, Arthur. Oh, sure, maybe not today, or even yesterday. But once. Babies, chum: tiny, dimpled, fleshy mirrors of our us-ness, that we parents hurl into the future, like leathery footballs of hope. And you’ve got to get a good spiral on that baby, or evil will make an interception.”
Many people forget that the basic principles for the Copenhagen negotiations were set long ago at the Earth Summit in 1992. Rich countries were supposed to go first, fastest and furthest, and pay to help others follow in the footsteps. They failed in every single aspect. Consequently, all they can do now is beg, grovel and implore the major low income countries – the likes of Brazil, India and China – to participate willingly, and in good faith.
Of course, it’s not that simple. The “Why should we, when you didn’t and still aren’t?” position may feel smugly strong to negotiators from the global south. But, it needs to be used with extreme caution. Played with too much zeal, while living on the frontline of climate change, they might find that the house of economic development which they hope to move into has burned down long before they get there.
Without a genuine, global commitment to prevent an accumulation of greenhouse gases that is likely to push us over a 2C temperature rise, we could be giving a whole new meaning to the idea of a “scorched earth” policy.
It’s all too easy to imagine a carbon stand-off that has tragic, violent consequences. Western consumers are repeatedly told by their politicians that little matters if China doesn’t play ball. Meanwhile, China views the nihilistic inaction of western societies with a shrug, and keeps building coal-fired power stations. Small behaviour changes happen in the United States, a bit more renewable energy comes on tap, but the bigger policy stays in place: the real fireworks of using the world’s largest military to control declining oil supplies.
The latter gets sustained by its own weirdly self-supporting logic. Since becoming oil-dependent in the early 20th century, the dominant superpower’s military might is used to ensure the fuel supplies that, in turn, keep its own military functioning and mobile. Up to the first world war, it was the British and their navy. Afterwards, it was the US with its air, land and naval forces.
It’s possibly the greatest energy inefficiency we have, not to mention the way that this military “oil protection racket” also removes the incentive for energy alternatives to develop.
In a single year (2007) the US military spent over $12bn on fuel, using the equivalent of 363,000 barrels of oil per day. It is thought to be the biggest institutional buyer of oil in the world. To put those numbers into perspective, it means that just one nation’s military fuel use was almost double that another entire nation, Ireland.
With so much locked into the continuing use and extraction of oil and coal, what will it take for everyone to raise their sights?
The European Union’s murky statement that developing countries would need €100bn per year by 2020 to tackle climate change, but without being very clear how much would come from where, was less than inspiring. Those who remember the 1992 Earth Summit might get a sense of déjà vu, as back then the summit concluded that $125bn new money from rich to poor countries would be needed annually to implement its agreements, virtually none of which was forthcoming. And let’s not pretend that, even during the global recession, the money is not out there.
If radical steps are not taken when the climatic conditions on which civilisation depends are under threat, when will they be? Why not, quite seriously, impose a near-100% tax on the profits of the oil majors for the next five years? All the proceeds could then be invested into both beginning the great low-carbon transition at home, and delivering the financial resources without which a meaningful Copenhagen deal will not be agreed. At a stroke, it would generate the vast majority of the funds that most say is essential. We’d also be able to save billions in that other area quite rightly referred to as “unproductive expenditure”, the military.
This was touted as the ‘green budget’, but the commitments on energy efficiency and low-carbon industry are obscured by a cloud of greenhouse gases spewing from the prop-ups given to the car and oil industry. It’s as if the Chancellor wants to ‘have his planet and eat it.’ You could say this is a balanced budget in the sense that any positive environmental action is likely to be cancelled-out by the Government locking-in a fossil fuel intensive infrastructure for transport and energy. As a result the budget turns out to be more beige than green.
Any shoots of recovery will not be green unless they are part of a rapid transition to a low carbon economy. The budget should be solving two problems. First, we need a green economic defibrillator to kick-start the country out of recession, but the Government seem to be just sparking two rusty wires together. Second, if we get the patient on its feet, we still have to cure its chronic fossil-fuel smoking habit.
It’s good to now have a proper, legally binding target for reducing emissions. But, the UK’s continuing dependence on oil, coal and gas, and plans to build more runways and roads, means the target is like setting someone a deadline to give up smoking, and then pushing them into a smoke-filled bar where all the walls are lined with cigarette machines.
Plans for electric cars may sound attractive, but you still need the clean energy to power them. As things are, together with ‘scrappage’ schemes, the initiative could even see total emissions rise rather than fall. More than a low carbon vehicle strategy, if the UK is to improve its own energy security and environment, and tackle climate change we need a low car vehicle strategy.
Today, the newly formed Department of Enertgy and Climate Change published final greenhouse gas emission figures for 2007. According to DECC, emissions had fallen by 1.7 per cent below 2006 figures. Great. Right?
Well it would be if the very foundations of our emissions monitoring weren’t based on voodoo accounting that ‘carbon launder’ the emissions from economies like the UK and the USA.
Under the United Nations Framework Convention on Climate Change (UNFCCC) emissions monitoring guidelines, wealthier nations systematically underestimate their carbon emissions, while poorer countries systematically overestimate their emissions. This is because the UNFCCC requires emissions to be reported from a production-based perspective. In other words, only emissions associated with domestic emissions and exports are counted, while those associated with imports are washed from the national accounts. Because this method does not take into account ’embodied carbon’ of imports; the consumer of the product takes no responsibility for the greenhouse gas emissions associated with its production.
The UK’s consumption levels have risen steadily. And, as our major retailers scour the world for the cheapest production costs, the emissions that we are actually responsible for, have not only risen in line with our additional consumption – our consumption is proportionally more carbon intensive. This is because how much carbon that is in the energy mix (carbon intensity of energy) tends to be lower in developed nations and higher in developing nations. For example, the carbon intensity of energy in India is 20 per cent higher than the UK. This means a policy decision to monitor emissions based on production is more likely to result in an increase in emissions rather than a decrease – as production is driven up in nations with an energy mix that is more dependent on fossil fuels.
Today, if everyone consumed as much as the average UK citizen, we would need more than three planets like Earth to support us. In order to live within our overall environmental means, and to enable all of the world’s population to meet their basic needs, the UK will have to dramatically reduce the burden our high-consuming lifestyles place on the ecosystem. In effect – we have to take steps to reduce our ‘ecological debt’ – the burden our high-consuming lifestyles have placed, and continue to place on the rest of the planet.