FREE KIC - NO. 21 JUN  07


In recent years two Irish economists have tended to annoy me. Whenever I have listened to David McWilliams or George Lee I have felt my blood boil and I have not been slow about letting other people know what I think about this pair of “dismal scientists”.

In my second opinion piece of November 2005 I wrote about the Irish economy and although I did not mention George Lee by name, he was one of the people I was referring to when I talked about all the doom and gloom around Irish competitiveness. George always gives the impression that the end of the world is nigh. He will report on every factory closure as if it is a complete and total disaster but he will rarely be found outside an expanding financial services company.

When I heard that George was about to present the second “Future Shock” programme on the subject of “Peak Oil”, I feared that it would be too much for me and my television might be in danger of receiving a shock in the form of a sledgehammer. It was bad enough having to endure the repeat of David McWilliams and his series “The Popes Children” but to have George presenting a whole programme in his usual negative way would surely have me reaching for the anti-depressants. (I am obviously not the only person to feel this way as “Gift Grub” on the Ian Dempsey show has done a skit on George and his depressive ways)

It did occur to me that I should find some excuse not to watch George, but at the end of the day I felt I had to watch him because it is a subject that I have been reading up on in recent years.

Before I talk about the programme I would just like to go back a stage and talk about the central assumptions I made about oil in the past.
For many years when the price of oil was around $30 I had accepted the conventional wisdom that there was plenty of oil. I accepted the idea that there were enormous reserves in countries like Saudi Arabia, Kuwait, Iraq, Iran and Russia. If demand for oil continued to increase I believed that these countries would just increase their production and prevent the price rising to a level that would threaten the global economy. It was during 2005 that I first heard about the whole concept of “Peak Oil”. This was around the time oil first shot up to the $70 a barrel level. It was the people over at Fullermoney ( that first alerted me to the work of Matthew Simmons and the whole idea that oil reserves are less than the International Energy Agency (IEA) is saying.
To summarise the Fullermoney case they have highlighted a group of geologists that believe that some of the biggest oilfields in Saudi Arabia and Kuwait are already in rapid decline. They believe that these major fields are struggling to keep up with existing demand let alone meet any further growth in demand.
Having listened to these very pessimistic voices I have tried to listen to as many opinions as possible. I have listened to the Saudi oil minister say that there have plenty of reserves.

I have listened to presentations given by some of the oil majors like Exxon and BP on the subject. I have even asked the Chief Executives of Sterling Energy and Burren Energy for their views on the issue.

Here is a graph from the Exxon Mobil website suggesting that oil and energy supply is going to increase for years to come. Therefore suggesting that the world will cope with rising energy demand.

Having listened to all these opinions I ended up very confused and so for the last couple of years I have been unsure as to what will happen to the oil price.
Returning to the “Future Shock” programme I felt that it was unlikely that I would learn much from it. To give George some credit I have to accept that he did allow a number of people to express their opinions. He did allow those who believe that we have already seen “Peak” to express that opinion and he did allow the International Energy Agency to say that “Peak” is still 30 years away. Unfortunately there was little in the way of hard evidence. It is all very well to be able to point to the fact that the peak year for discovery was 1964 and that since 1981 we have used more oil each year than we have found but this does not help us in terms of how soon this will become a serious problem. Do we have 30 years or are we already at a crisis point? Whatever the truth is, at least George did not give the impression that he knows. He presented the different points of view and then went on to talk about the challenges that lie ahead for economies that do not start to change the way they do things. In that sense I think George is doing us a service. He is forcing us to think about the issues in relation to oil. He is forcing us to think about power generation and transportation. He is forcing us to think about alternative energy sources and energy conservation.

All I can say with any certainty is that we have to reduce our dependence on fossil fuels. We cannot continue on the way we are going. We have to make changes as fast as possible in the hope that it will be a relatively smooth transition because at the end of the day I do believe that the human race has the ingenuity to find alternatives. I believe that we tend to muddle our way through things. Surely we will find some sort of solution because I do not want to regret having written my August 06 opinion piece entitled “am I mad investing my savings in shares”.

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Directors: Kenneth Power (Managing) B.Comm, MBS, ASIP, Regular Member of the CFA Institute.
Siobhan Power