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Peak Oil

I congratulate my hon. Friend the Member for Brent, North (Barry Gardiner) on what was an absolutely fascinating speech. It was wide-ranging, and I can say both that I agree very much with what he said about biodiversity and that my thinking does cross all Departments. I believe that the Government are beginning to accept the imperative of looking at biodiversity and ecosystem services and that value is being placed on them. Perhaps I should also add that I, too, have resisted having a new mobile phone, and for similar reasons—although my phone is now becoming so poor that I have managed to miss a few messages from the Whips Office, so I suspect it will have to be replaced. The objective of our Government energy policy is to deliver affordable, secure and clean energy to UK businesses and consumers. In order to ensure security of supply now and into the future, the Department of Energy and Climate Change monitors potential risks to supply. Clearly, one potential threat to UK energy security is that the global supply of oil is not sufficient to meet future demand. There is a wide range of views as to why oil supplies may become insufficient, including geological constraints, insufficient investment, political instability and resource nationalism. Typically, the risk that oil supplies will run out due to geological constraints is characterised as peak oil. To monitor this risk, DECC looks at a wide range of academic and industry studies that analyse future world oil supplies. DECC also meets experts to discuss this and other oil market issues, including investment in and exploitation of new oil reserves. However, assessing peak oil is extremely complicated due to limited data and the importance of assumptions made about future developments in the energy sector. Consequently, risk assessments vary widely by source. We look at the different sources, but we do not estimate the timing of peak oil production ourselves. We realise that a number of factors influence the balance of supply and demand of crude oil, and that these are not limited to the amount of available recoverable conventional oil resources. They also include the global demand for oil in the future, access to and investment in the development of existing resources, and technological progress that may allow us to extract more oil from current sources. My hon. Friend quoted the International Energy Agency and he is correct, in that its most recent report states that""the immediate risk to supply is not one of a lack of global resources, but rather a lack of investment where it is needed"." The IEA estimates that only about a third of all ultimately recoverable conventional and economically recoverable oil has actually been produced to date. The report also states that""there are reserves to meet demand at least through to 2030 if the investment is there"." This is based on a detailed analysis of, among other things, 580 of the world's largest oil fields, but the IEA also recognises—again, as my hon. Friend has said—that decline rates in maturing fields will increase, and that large investments are needed to make up the decline at existing fields. It estimates that total investment of $6.3 trillion might be needed on oil supply infrastructure between 2007 and 2030. Thus the IEA takes the view that it is not the level of oil reserves but of investment in production that is the more serious risk to future oil supplies. Like the IEA, the Government have always recognised that additional investment will be required to meet oil demand in the future, and that the challenge lies in bringing these resources to market in a way that ensures sustainable, timely, reliable and affordable supplies of energy. We recognise that having oil reserves is only a start, and that converting these reserves into a global energy supply is fraught with challenges. We are aware of the increased need to reduce barriers to timely and adequate investment in the oil sector. Having recognised those barriers, the Government used the London energy meeting in December as an opportunity for consumer and producer nations to discuss these issues. In particular, the transparency of global oil markets, the need for investments in production and the impacts of the financial crisis on future energy supply were discussed. At the meeting, participants emphasised the importance of stable and transparent investment regimes and agreed to work collaboratively to reduce barriers to investment. Participants also discussed the potential for innovative technologies to enable more efficient and effective use of energy resources. So we are not complacent about energy security. The Prime Minister has asked my right hon. Friend the Member for Croydon, North (Malcolm Wicks) to review international energy security, and he may wish to include within his review consideration of supply and demand in the oil markets. Secondly, we are already putting in place policies that will reduce the energy intensity of the UK economy and help to increase its resilience to shocks in energy supplies. It is a fact that the UK is one of the least energy intensive countries in the G7. My hon. Friend raised with me, quite properly, the threat of climate change from continuing use of fossil fuels, so let me address alternative technologies and energy efficiency. Tackling climate change and ensuring a secure supply of affordable energy are the key goals of our energy policy. Increasing our use of renewable energy is an essential part of our strategy for meeting those goals. The UK's policies on climate change, our incentives for the development of renewable energy and our policies for moving to a low-carbon economy are consistent with the need to diversify our energy sources and ultimately increase our resilience to shocks in energy supplies. The Department of Energy and Climate Change will publish a new UK renewable energy strategy later this year, and it will set out the path to meet the UK's share of the EU renewables 2020 target. The heat and energy saving strategy consultation, published on 12 February, sets out the Government's long-term vision for dramatically improving the energy efficiency of our homes and businesses and expanding the provision of low-carbon heat. The measures set out in the consultation could reduce oil consumption in 2020 by 6 per cent. We already have a raft of incentives and constraints in place to tackle the move to a low-carbon economy. We have the EU emissions trading scheme, we are introducing the carbon reduction commitment and we have the renewables obligation certificates and, of course, the feed-in tariffs. They will all increase our potential to employ renewable energy.