Big names warn of danger of UK's 'addiction' to oil

Published on Tuesday 16 November 2010 21:28

A NUMBER of senior business leaders have joined forces to warn that rising oil prices could be as dangerous to the UK economy as the bank crisis unless the government makes concerted efforts to reduce the country's "addiction" to oil.

• The Gulf oil spill could see oil prices topping $100 a barrel within five years. Picture: AP

The Industry Taskforce on Peak Oil and Energy Security (ITPOES), which counts Sir Richard Branson and Stagecoach chief executive Brian Souter as members, has called on the coalition government to develop a contingency plan to combat the dangers of oil price volatility brought on by "peak oil" - the situation when rising global demand for oil surpasses supply.

In a paper published today, the task force warns that increasing demand for oil and delays in supply driven by the Gulf oil spill could see the cost of a barrel of oil soar to $100 within the next five years - with devastating impacts on the economies of the US and the UK.

The taskforce wants to see the government accelerate investment in green energy technologies that will serve to reduce the country's dependence on oil faster than current green energy policies driven by climate change targets.

In its report, entitled Peak Oil - implications of the Gulf of Mexico oil spill, the task force warns that the Gulf of Mexico spill has increased the danger of increasing oil prices. Although the loss of five million barrels spilled into the ocean was "inconsequential" in terms of depleting oil reserves, the accident will serve to delay new oil projects as much as six months adding further pressure to the world's oil supplies.

Branson, founder of Virgin Group, said: "This year's Gulf of Mexico disaster has increased the chances of an 'oil crunch' in the coming decade. This will lead to much higher sustained prices which will in many ways rival the impact of the credit crunch of 2007 on UK growth, jobs and stability.

"The time to take out our insurance policies against such an outcome is now. We must do this to avoid the horrible shocks to the UK economy which will be mirrored in many other parts of the world."

Although the Gulf disaster was worsened, if not caused, by the unprecedented depth of the water in which the drill was being done, the group warns that deep water drilling will only become more prevalent in the next five years.

The partners warn that drilling in deeper waters will make up nearly 30 per cent of new capacity by 2015.Currently only 5 per cent of new oil finds come from deep water wells.

Ian Marchant, chief executive of energy group Scottish & Southern Energy, another member of the group, said: "The energy sector faces major challenges over the next decade with the need to green the energy mix and maintain security of supply.

"SSE are investing in renewable generation and decarbonising electricity production partly so the UK is less exposed to volatile fuel prices from incidents like the Gulf of Mexico oil spill."

Souter added: "Huge amounts of UK infrastructure, including almost our entire transport system, are dependent on oil. The Gulf of Mexico spill makes addressing this threat to our economy and society ever more urgent. Even in this age of austerity, the country cannot afford to delay action to support alternative technologies and incentivise behavioural change to protect business, consumers and our environment."