PEAK OIL PRODUCTION
Policy Official :
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MCU Contact :
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Matrix File :
01.08.01.02/
Approved by Mike O’Brien 25 March 2009
Standard introduction, about peak oil production.
As part of the Government’s goal to deliver affordable, secure and clean
energy to UK businesses and citizens, DECC looks at a wide range of
academic and industry studies that analyse future world oil supplies.
DECC also meets with experts to discuss this and other oil market issues,
including investment and exploitation of new reserves.
One of the more thorough analyses in the area of global oil reserves is
conducted by the International Energy Agency (IEA), which published its
World Energy Outlook (WEO ‘08) in November 2008. Based on its
extensive analysis of oil reserves, demand trends and field decline rates,
the WEO ‘08 states that, “[the] world is far from running short of oil” and
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”. This is based on a
detailed analysis of, among other things, 800 of the world’s largest oilfields.
The UK is an active member of the IEA and also looks to other sources,
but sees no compelling evidence that runs counter to the IEA’s
assessment. We agree with the IEA that the risk to supply is not one of
resources but of converting these reserves into production. Thus,
additional investment will be required to meet oil demand in the future and
the challenge lies in bringing these resources to market in a way that
ensures sustainable, timely, reliable, and affordable supplies of energy.
We need to ensure that there is a well-functioning oil market that helps
market participants have the confidence to make these necessary
investments and respond in a timely manner.
The risks of underinvestment, which could imply higher fossil fuel prices in
the future, are also a key reason why we are already putting in place
policies that will reduce the energy intensity of the UK economy and help
increase its resilience to shocks in energy supplies. Indeed, many of our
climate change policies, such as the Renewable Energy Strategy, that will
promote more renewable heat and transport, and the Government's energy
efficiency policies, have the added benefit, in addition to reducing carbon
emissions, of increasing the diversity and hence resilience of our energy
system.
In summary, with sufficient investment, the Government does not believe that
global oil production will peak between now and 2020 and we are actively
encouraging investment in the oil market to ensure secure, competitively
priced supplies.
