The future of fossil fuels look problematic. People keep discussing proven reserves and whether peak oil already has arrived or not. What is most important is the fact that – no matter how much additional oil we can still retrieve – future barrels will be much more difficult to extract relative to the past.
This is expected to result in a rapid increase in oil prices from a decline in the availability of cheap and easily accessible oil sources. Our prices today are artificially constrained by the global recession. When the recession passes, prices of oil can be expected to soar.
Loyd’s of London, the world’s leading insurance market, recently published a report stating that businesses are underestimating the catastrophic consequences of declining oil.
Ron Oxburgh, a former chairman of Shell, wrote that “It is pretty clear that there is not much chance of finding any significant quantity of new cheap oil. Any new or unconventional oil is going to be expensive.” He went on to quote King Abdullah of Saudi Arabia commenting on a new oil find: “Leave it in the ground…our children need it.”
Loyd’s of London warned of “catastrophic consequences” for businesses that fail to prepare for a world of increasing oil scarcity and a lower carbon economy.
The Guardian paper wrote “The Lloyd’s insurance market and the highly regarded Royal Institute of International Affairs, known as Chatham House, says Britain needs to be ready for “peak oil” and disrupted energy supplies at a time of soaring fuel demand in China and India, constraints on production caused by the BP oil spill and political moves to cut CO2 to halt global warming.”
A similar warning was written in an earlier piece by the Wall Street Journal.