LLoyd’s adds its voice to dire ‘peak oil’ warnings

 

The report the world is heading for a global oil supply crunch and high prices owing to insufficient investment in oil production plus a rebound in global demand following recession. It repeats warning from Professor Paul Stevens, a former economist from Dundee University, at an earlier Chatham House conference that lack of oil by 2013 could force the price of crude above $200 (£130) a barrel.

It also quotes from a US department of energy report highlighting the economic chaos that would result from declining oil production as global demand continued to rise, recommending a crash programme to overhaul the transport system. “Even before we reach peak oil,” says the Lloyd’s report, “we could witness an oil supply crunch because of increased Asian demand. Major new investment in energy takes 10-15 years from the initial investment to first production, and to date we have not seen the amount of new projects that would supply the projected increase in demand.”

And while the world is gradually moving to new kinds of clean energy technologies the insurance market warns that there could be shortages of earth metals and other raw materials needed to help them thrive.

Lloyd’s also calls on manufacturers, retailers and the wider business community to reassess global supply chains and their just-in time models because the “current system is increasingly vulnerable to disruption.”

The report says government needs to do much more to bring additional price stability and transparency if the global carbon market is to become a reality.

Richard Ward, chief executive of Lloyd’s, said the failure of the Copenhagen climate change talks last December has helped lull many business leaders into a false sense of security about the challenges ahead. “We are in a period akin to a phony war. We keep hearing of difficulties to come, but with oil, gas and coal still broadly accessible – and largely capable of being distributed where they are needed – the bad times have not yet hit … all businesses … will be affected by energy supplies which are less reliable and more expensive.”

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