Sunday, February 27, 2011
SURVIVING THE TRIPLE CRUNCH
An interview with Jeremy Leggett, by Alex Smith. From the Radio Ecoshock Show Feb. 25, 2011.
Alex Smith: This civilization uses oil for its blood. Almost everything we make, buy, and use has oil in it's food chain. You know that.
Never mind that we are bleeding carbon into the sky and the ocean, or the developing climate shift. Even if oil was lily white, we are still running out of the cheap stuff - that we need for a global economy feeding billions of humans.
And we are determined to drive right off that cliff, without a Plan B.
Here to discuss all that, we have a long-term energy watcher, Dr. Jeremy Leggett.
He was a geologist writing reports for big oil, like BP and Shell, before becoming a climate campaigner for Greenpeace International, from 1989 to 1996. Leggett told insurance companies they could never cover the costs of climate damage. He advised governments to leave the remaining oil and coal in the ground.
Now he's Executive Chairman of the British for-profit company SolarCentury, with several books to his credit, including "Half Gone: Oil, Gas, Hot Air and the Global Energy Crisis", which was published in the US as "The Empty Tank."
Jeremy Leggett, welcome to Radio Ecoshock.
JL: Thank you.
AS: You publish a running digest of news called "The Triple Crunch Log" - can you briefly describe that for us?
JL: I'm Chairman of the company I founded now, so I have a few hours every day to keep up with the dramas of what I think of as “the triple crunch” - the financial crisis, the climate crisis, and the energy crisis. They are all interrelated in different ways.
I just post that on my personal web site, hoping that it will help folk who are much busier than me, and don't have the amount of time that I do, to keep up with these dramas that are so important to us as a species.
AS: Yes, we live in fascinating times. I've just grabbed a couple of from that log. I wanted to start with this headline. It says:
Rising oil price threatens fragile recovery in OECD, IEA warns.
If I may summarize this item:
The developed world is spending 33% more to import oil in 2010 - more than the combined budget deficits of Greece and Portugal. Fatih Birol, of the International Energy Agency, says rising oil prices in 2011 could bring us to another financial crisis.
Jeremy, are we going broke trying to keep the fossil economy going?
JL: Yeah, I think we are. It's just a matter of time before it breaks us.
Because the conventional narrative that the oil industry can keep on producing rising supplies to stay ahead of demand in our oil dependent civilization, is just a narrative that more and more of us can't believe. And we think global oil production is going to drop. It's going to drop sometime soon, on our watch, in the next few years.
The oil price will become very volatile. Basically it will go through the roof. We just simply won't be able to afford to run oil based economies, the way we are at the moment.
AS: Another analyst, Jeff Rubin with the Canadian Imperial Bank of Commerce analyst, has suggested that rising oil costs could even lead to countries going bankrupt. Is that a fringe idea?
JL: No. That's basically.... I do believe that before that we'll face a crunch because oil producing countries will come to realize that their narrative, the narrative that they are told – that there's plenty of oil, that they can keep on pumping – that too is flawed.
There will be this kind of sweeping wave of realization in the world – the same way that there was in the credit crunch.
You know we went in a matter of weeks with banks assuring us there was no risk with complex derivatives, to a situation where everyone was panicking that the whole damn lot might be toxic.
I think the Peak Oil story at some point is going to play out the same way.
When that happens, the oil producing countries will be husbanding their own resources. They will start keeping it for themselves, in ever-growing quantities. And that will cause not just an energy crisis, for many, perhaps most oi importing countries. It will actually produce something more akin to a an energy famine.
We really will be tested, if that scenario plays out the way I fear.
AS: I think one of the answers to that is to have some alternative energy. I want to get to that a little later in this interview.
But meanwhile, let's talk about Saudi Arabia. Really the big news, that's come out partly due to Wikileaks, is that they may not have the reserves that they have been talking about, to help us out if we need more oil.
We are using … well the oil demand rose by 2.5 million barrels a day last year.
JL: Yes, they are burning more and more oil in electric power plants, a million and a quarter barrels a day at that moment. That's going up by 8 percent a year.
Senior officials are stating ever more openly that … you know if they keep going at that rate, the exports are already dropping, and they will drop still further, notwithstanding peak oil.
So I think what the Wikileaks cables show … you know this wasn't news ot people who follow the drama closely. The gentleman who was quoted, Mr. al-Husseini, he's issued these kind of warnings before.
But what I think was new and interesting, was the way that these American diplomats, obviously very clever professional people, were reporting back in some state of alarm to the Mother ship in Washington, that 'Crikey, we don't believe that Saudi Arabia can keep pumping at the rates that would be needed to control the global oil price any longer.
And that was new, because that's a narrative that is not on the Mantra sheets of the Press Officers in Washington, or indeed in any other capital.
AS: I suppose it's old news to people who have followed peak oil, that are in those circles, that all of the Middle East countries appear to have grossly overstated their reserves. Why does that matter to us?
JL: It matters to the extent – and let's discount climate change for the moment – but if you are living in oil dependent, nay, oil addicted economies, and those economies are growing on the whole (and we are talking about the global picture here) you've got to keep oil supply in pace with demand.
Otherwise, you get a shock. You get prices going through the roof, and all the other thing's I've talked about. That is why it matters.
It is a failing we have, as human beings, more and more. We have some sort of blindness to depletion of natural resources, collectively. And this particular one is going to hit us very hard.
AS: And here is a frightening way that these problems interweave. Though the press hardly reported it, as you noted, 2010 tied with the year 2005 as the hottest year on record. As a result there is more and more open water in the Arctic. That leaves the far North more open for oil drilling, as we see in that BP-Rosneft deal.
How signficant is that BP move into oil drilling in the Russian Arctic?
JL: You know, what it shows you is just how desperate these companies are becoming. They are having to go ever further into far-flung frontiers. And they are having to hook up with... what is the word I want to use that's polite here ... ah, potentially unreliable partners.
The very fact that I think a few days after they announced their deal with Rosneft, which is a Kremlin owned oil company, making the Kremlin the single biggest shareholder in BP. Can you imagine?
The day after that happened, they then get sued by the Oligarchs who own the TNK share of TNK-BP, which is the big joint venture elsewhere in Russia looking for oil. And these business partners announce that they are taking BP to court, for breach of contract, etc., etc.
So what a mess! I mean, that shows how desperate they are. It blows a clear whistle on the dangers of keeping going with this oil-addicted global economy.
AS: It's pretty strange. We've seen that Putin can order the takeover of an oil company at any time. And yet BP is the single biggest supplier of oil to the U.S. Military. So the Kremlin has control of the military supplies for America!
JL: Yes, it is a world of paradoxes, is it not?
AS: It is. And despite that, we continue to burn more and more oil. You note in your log that it's up 2.8 million barrels a day in 2010 from just the year before. It's like a big river of new carbon dioxide pouring into the atmosphere.
Doesn't it seem like our green initiatives are really going nowhere?
JL: No, I don't think 'nowhere.' It's certainly not happening fast enough, but there are all sorts of grains of hope around.
It's important for people who care about these issues to keep fighting, because I think there are fundamental non-linearities in the system. By which I mean just to use an example: None of us saw the collapse of Communism. It just happened so quickly. Once it started to go, it was upon us and Crikey! There were no experts standing up and saying 'The Berlin Wall is about to come down' – even days before it did.
So I think that the clean-tech revolution, the ability we have with current technologies to power our economies without producing emissions, and without relying on overseas oil, and gas, and coal. All that is there. And many of these markets growing as I know from my day job – because I set up the solar company, SolarCentury because I'm so worried about fossil fuel dependency. Look, people like me who are on this front line, we see how quickly this stuff can go. I believe if we can just mix a bit of shall we say residual cleverness with a bit of luck, we might surprise ourselves.
AS: This is Radio Ecoshock. I'm Alex Smith with guest Dr. Jeremy Leggett, the campaigning geologist who founded his own solar company in Britain, SolarCentury.
Jeremy, we talk about the possibilies of solar. But I also noticed that as the rising price of oil hurts world economies, and the tax revenues to governments goes down, and perhaps as a reaction to this, and more fossil fuel lobby pressures – governments from the UK right through Europe to Australia have cut subsidies to solar energy, one of the few viable solutions. What is going on there?
JL: You know, the most popular subsidy is the feed-in tariff, which is a levy on all energy bills to pay a little bit of a premium price for solar.
They are supposed to be cut. I mean they are designed to come down in tandem with the decent of cost and price in solar equipment. Which is happening. Between 2008 and 2010, in that three year period, the average installed price of solar systems around the world came down 40 percent.
So, you don't want to keep your subsidies at the same level when you are dealing with that kind of cost down systemically within an industry.
So all this is good news. It points to the time – the inevitable time – when in every country solar electricity is going to be produced cheaper than electricity can be produced from 'brown' sources, from fossil fuel sources, and in fact from nuclear.
In my own country, in the UK, the average price of conventional electricity in that same period, 2008 to 2010, has gone UP 38 percent. Against solar prices going down 40 percent.
This is another reason to be cautiously optimistic, that if we can get our act together, we can soften the damage from these triple crunch problems.
AS: Let's talk about Australia for just a minute. Some scientists suggest rising sea temperatures are adding both moisture and power to those weather systems that hit Australia time and again. In fact, there is another one right now, coming on.
The coal ports had to be shut for a while, and mines were flooded. I'm guessing as the world economy is hit over and over again, we may be able to do less and less about it. What are your thoughts?
JL: That's the worrying scenario. That we leave ourselves in such a mess, with escalating damage from the increasing effects of climate change, with debilitated economies because we are incapable of keeping our financial institutions under control, when they go back into the casino and gamble our money away on our behalf, and then bring the world economy almost to its knees again, as they did with the credit crunch. And on top of that, you have oil depletion causing the oil price to go through the roof.
Yeah, you can stitch together a really gruesome triple whammy that would make it incredibly difficult for us to mobilize the survival technologies, even if we had finally the will to do so.
But, you know, it isn't certain to play out that way. There is everything to go for in trying to stop that from happening. By presenting the arguments, and mobilizing the survival technologies. That is why I do the Triple Crunch Log. And that is why I set up a solar energy company.
AS: Meanwhile, there is a lot of backsliding in the United States. I think Americans would have a heart attack reading the British Parliamentary report calling for energy rationing by 2010. Do you think gas and oil rationing is really coming in this decade?
JL: I think it is going to be inescapable. Certainly from the point of view of oil. Gas maybe is a little more uncertain, given some of the recent discoveries.
But my prediction, and people can call me up in 2012 and accuse me of being an irresponsible scare-mongerer if it's wrong, but I don't expect to be wrong here. I think we will live in times of rationing of oil, just as my parents had to do in the run-up to war.
I would say again on the positive side, when we had to mobilize in those years in the late 1930's and '40's, my parents generation, - in the United States and in Britain, people were amazed at how quickly the necessary technologies and strategies and tactics were mobilized, and the way people went along with that.
So, I think we will find the same thing when we are forced to mobilize in the face of the third and final great global oil crisis.
AS: Jeremy Leggett, as you know, Americans pay less than half the price for gas at the pumps, compared to Europeans. How long can this imbalance go on, and what happens if we get some sort of price parity?
JL: I have to admit that I don't think that those of us who believe in Peak Oil are going to win the argument.
The group think on the other side is so strong. The desperation to believe the comforting narrative, and cast aspersions at the uncomfortable narrative – which of course we saw in the run-up to the credit crunch. The way the investment banks poured scorn on people trying to blow whistles, even though history shows who was right in that.
It's the same with oil, and the peak oil story. I fear what is going to happen, I think what is going to happen, is that we are simply going to find out who is right about peak oil.
We are going to find out in a couple of years. And we will be tested then. We will have to mobilize. We will have now choice. We will have to mobilize low carbon technologies much faster than we ever thought we'd have to do, even if we could get our act together on climate change.
I live in a state of cautious optimism that once that happens we will be able to find our way to some sort of renaissance, by dint of the innate civilizing characteristics of renewable energy. When you have local energy production, and clean energy production, a lot of social good can come from that.
AS: Are you pushing for huge giant solar plants that spread over vast areas? Or do you think there is still a market for smaller installations to make a difference?
JL: I don't think it's an 'either/or.' There will for sure be utility scale power plants. They already are under construction. There are reports that those under construction now in Southern California, or planned there, they are going to be generating electricity that is already cheaper than gas. So of course there is a role for those kinds of plants.
But buildings, and this is what I passionately believe, buildings are so perfectly suited to roof-top and facade solar. I think there is a fantastic resource there. Especially when you hook solar technologies up with energy efficient technologies.
AS: If you had to pick an under-reported news story for our audience, what comes to your mind?
JL: I think the state of electricity supply in Saudi Arabia might be near the top of my list.
If people could see the pressure they are under, and read some of the occasional reports of officials speaking out about what they are going to have to do, then I think there would be a lot more concern.
There was a gentleman the other day, I record it in the Log. I forget his name, but he was an ex-Minister in the Saudi government. He said: If Saudi Arabia keeps burning oil domestically, at the growing rate it is at the moment, then within some years, I forget the exact figure, they are going to be burning 8 million barrels a day domestically.
There will be virtually nothing left over for export. If that isn't a warning sign that should be galvanizing us all, I don't know what is.
AS: This is a bit hilarious in a way. The Saudis say 'We have to develop more solar, and even more nuclear energy.' And yet we don't get the message.
JL: No. That's right.
AS: I'd hate to wrap up with total gloom. Can you fix us up with some more hopeful news on the solar front?
JL: Look. I come back to my point about what you can do with existing technology. A couple of weeks ago, with a big utility partner, big energy partner Scottish and Southern, we opened a group of low-income houses here in the UK, that are zero carbon and beyond.
They get all their electricity, and a lot more besides, enough to charge up a communal electric car, from solar roof tiles on the roof. And they get all their heating as well, from any one of four renewable heating technologies: air source heat pumps, ground source heat pumps, wood-chip boiler, and solar thermal.
Of course they are triple glazed. They are airtight. They've got A-Grade lights and appliances. But just imagine, these things are stand-alone power plants. They produce no emissions. They use no oil, no gas, no coal, no nuclear.
And they were put up in 8months, from breaking ground to connection to the grid.
When you see things like this, you sort of think to yourself 'Crikey. If we could just but half get our act together, just imagine what we could do', to change the face of energy use, and hence the global economy, to make it more sustainable.
That's what gets me out of bed every morning. And there are countless more examples like that, of course.
AS: We've been listening to one of the most informed minds on world energy, the green geologist, Dr. Jeremy Leggett. Find his web site at jeremyleggett.net - and there are two gg's and two tt's in Leggett. And check out his Triple Crunch Blog, to find the key news stories your local media seldom reports.
Jeremy, thank you so much for your time with us.
I'm Alex Smith, for Radio Ecoshock.