You Don’t Need to Be a Rockefeller
In a pond where the lily pad population doubles every week, the philosopher/environmentalist David Suzuki once told us, the week before the lily pads smother the whole pond, half the water is still open, so choking from overcrowding still seems a long way off.
I thought of this when no less an institution than the insurance underwriter Lloydâs of London released a report titled âSustainable Energy Security: Strategic Risks and Opportunities for Business.â It made me wonder how close we were getting to choking in the energy world.
I had already started to imagine that we are getting pretty close. The New York Times recently ran a report saying that there are 74 deep water wells in the Gulf of Mexico, and 3,333 shallow water wells. But when you look at the oil produced, we got 140 million barrels from the shallow water wells, but more than twice as much - 348 million barrels - from the deep water wells. The article itself states that nearly all the shallow wells are owned by small scale operators, while the deep water wells are owned by the big internationals.
What these numbers tell us is that the closer-in wells are about spent. The oil is now found almost exclusively in the deep water wells where it is more expensive and risky to extract. This conclusion is borne out by the fact that those who can afford it are out there in the deep water. So â and this is the important point â regardless of how much oil one may think is actually left, itâs clear that the CHEAP oil is gone. And this is important because our society is not just structured to run on oil. It is structured to run on CHEAP oil. The risk of disruption is not just that we will run out of oil. The risk is that oil will get increasingly expensive very rapidly once economic activity picks up, and our systems are as yet unprepared for that shock.
That to some extent is what the Lloydâs of London report is all about. They took a look at the high cost, high risk sources of oil today. They estimated the insatiable demand from the developing countries (China and India mostly). And they compounded it all with the realization that, despite the dismal failure of our own Senate to act, countries around the world would be putting systems in place to discourage carbon emissions from fossil fuels. They concluded that trouble was afoot, and urged, âboth business strategists and government policy-makers to take into account a range of encroaching risks and be bold in making plans for a more resilient and low carbon energy future.â
Now when Lloydâs of London, a storied firm that makes money from prudent risk-taking, starts telling people to be bold, something serious is going on, and we ought to figure out what it is. The 3,407 facts in the Gulf of Mexico give us a pretty good indication. You donât need to be a Rockefeller to see which way the tide is turning.
Paul Birkeland lives in Seattle, WA, US, and develops Strategic Energy Management Systems for government, commercial, and industrial organizations through Integrated Renewable Energy.