Get Red Pepper's email newsletter. Enter your email address to receive our latest articles, updates and news.

×

The end of the oil age

Fossil fuel companies are about to become industrial dinosaurs. Efforts to postpone their extinction would only accelerate the overheating of the planet.

May 1, 2004
4 min read

The oil company Shell has had a rocky time this year, downgrading its estimate of its reserve levels not once but twice, losing its chairman and financial director and being investigated by authorities on both sides of the Atlantic. Shell then followed that all up by taking the unprecedented step of delaying its annual shareholders’ meeting and report. Yet a meeting that starts late is the least of the company’s problems. Shell’s reserves revisions have shaken an industry that is in denial over its dependence on a limited product. And it’s not just the oil industry that’s facing problems: the revisions are a reminder that broader society, with energy use and policy structured largely around oil, has some serious thinking to do.

The size of their reserves is extremely important to energy companies: they define future production, and production is a key factor in determining share price – and success. No wonder Shell apparently ignored alleged internal warnings that it had overestimated its reserves. This “oversight’ is now under investigation by the Financial Services Authority, for UK stock market rules state that companies must warn shareholders about developments that could affect share price.

The Shell downgrades were made so as to comply with the rules of the US financial regulator the Securities and Exchange Commission (SEC), which has tightened up its guidelines in the wake of corporate accounting scandals such as the Enron affair. A Deutsche Bank analyst has criticised the SEC’s crackdown, claiming that stricter guidelines for reserve accounting undermine oil firms’ abilities to raise investment, for that investment depends on the size of reserves.

Yet oil companies’ future finances are threatened by a structural problem that dwarfs the significance of accounting guidelines: the fossil fuel on which these firms depend is a finite resource; contrary to oil industry orthodoxy, reserves cannot be refilled indefinitely.

Shell’s reserve revisions have meant a massive drop from 105 per cent to 57 per cent in its replacement figures for 1997 to 2002. The revisions come against a background of claims from scientists and petroleum geologists that the peak for global oil production is coming approximately in the next 10 years. Crucially, this does not mean that oil will be scarce in this time; it means that oil companies will find it increasingly difficult to renew reserves.

There will, of course, be further exploration attempts, but when the energy expended on extraction and production is greater than that yielded by the oilfield, oil will have ceased to be a viable energy source. Indeed, a spate of oil mergers at the end of the 1990s was described by Goldman Sachs as “nothing more than a scaling-down of a dying industry in recognition that 90 per cent of global conventional oil has already been found’.

However, there is an even bigger structural problem than this; one that gives a bittersweet edge to the industry’s refusal to admit an approaching production peak. For, even in the unlikely scenario of enough reserves being found to drive society in its current form for an indefinite time, the emissions from the use of that oil and gas would accelerate climate change and overheat the planet that much more. We simply cannot use that extra oil and gas. We need to use what can only be a limited allocation in more intelligent ways – developing an energy transition strategy, for example.

And Shell? Well, staff and accounting changes will not be enough to deal with the challenges the oil industry will face as it struggles to deny that it has had its day. May I be so bold as to suggest that the company’s delayed annual report includes the following paragraph:

“We recognise that ours is a dying industry. We also recognise that our industry causes devastation on a scale that will only increase as the impacts of climate change intensify. Therefore as a company we will cease trading. We will put our embarrassingly extensive profits into clean-up projects in lands we have violated, and into community-defined and community-led initiatives in places that we have exploited. We will provide generous redundancy and re-training packages for our staff. We encourage the rest of the industry to follow suit.’

Would that really be so much more painful than the position Shell is in anyway?

For further analysis on Shell, BP and the oil industry overall, see www.platformlondon.org.Melanie Jarman is a writer and activist on environmental and social justice issues. She lives in Manchester, but gets around a lot (in a geographical way)

Red Pepper is an independent, non-profit magazine that puts left politics and culture at the heart of its stories. We think publications should embrace the values of a movement that is unafraid to take a stand, radical yet not dogmatic, and focus on amplifying the voices of the people and activists that make up our movement. If you think so too, please support Red Pepper in continuing our work by becoming a subscriber today.
Why not try our new pay as you feel subscription? You decide how much to pay.

Labour Party laws are being used to quash dissent
Richard Kuper writes that Labour's authorities are more concerned with suppressing pro-Palestine activism than with actually tackling antisemitism

Catalan independence is not just ‘nationalism’ – it’s a rebellion against nationalism
Ignasi Bernat and David Whyte argue that Catalonia's independence movement is driven by solidarity – and resistance to far-right Spanish nationalists

Tabloids do not represent the working class
The tabloid press claims to be an authentic voice of the working class - but it's run by and for the elites, writes Matt Thompson

As London City Airport turns 30, let’s imagine a world without it
London City Airport has faced resistance for its entire lifetime, writes Ali Tamlit – and some day soon we will win

The first world war sowed the seeds of the Russian revolution
An excerpt from 'October', China Mieville's book revisiting the story of the Russian Revolution

Academies run ‘on the basis of fear’
Wakefield City Academies Trust (WCAT) was described in a damning report as an organisation run 'on the basis of fear'. Jon Trickett MP examines an education system in crisis.

‘There is no turning back to a time when there wasn’t migration to Britain’
David Renton reviews the Migration Museum's latest exhibition

#MeToo is necessary – but I’m sick of having to prove my humanity
Women are expected to reveal personal trauma to be taken seriously, writes Eleanor Penny

Meet the digital feminists
We're building new online tools to create a new feminist community and tackle sexism wherever we find it, writes Franziska Grobke

The Marikana women’s fight for justice, five years on
Marienna Pope-Weidemann meets Sikhala Sonke, a grassroots social justice group led by the women of Marikana

Forget ‘Columbus Day’ – this is the Day of Indigenous Resistance
By Leyli Horna, Marcela Terán and Sebastián Ordonez for Wretched of the Earth

Uber and the corporate capture of e-petitions
Steve Andrews looks at a profit-making petition platform's questionable relationship with the cab company

You might be a centrist if…
What does 'centrist' mean? Tom Walker identifies the key markers to help you spot centrism in the wild

Black Journalism Fund Open Editorial Meeting in Leeds
Friday 13th October, 5pm to 7pm, meeting inside the Laidlaw Library, Leeds University

This leadership contest can transform Scottish Labour
Martyn Cook argues that with a new left-wing leader the Scottish Labour Party can make a comeback

Review: No Is Not Enough
Samir Dathi reviews No Is Not Enough: Defeating the New Shock Politics, by Naomi Klein

Building Corbyn’s Labour from the ground up: How ‘the left’ won in Hackney South
Heather Mendick has gone from phone-banker at Corbyn for Leader to Hackney Momentum organiser to secretary of her local party. Here, she shares her top tips on transforming Labour from the bottom up

Five things to know about the independence movement in Catalonia
James O'Nions looks at the underlying dynamics of the Catalan independence movement

‘This building will be a library!’ From referendum to general strike in Catalonia
Ignasi Bernat and David Whyte report from the Catalan general strike, as the movements prepare to build a new republic

Chlorine chickens are just the start: Liam Fox’s Brexit trade free-for-all
A hard-right free marketer is now in charge of our trade policy. We urgently need to develop an alternative vision, writes Nick Dearden

There is no ‘cult of Corbyn’ – this is a movement preparing for power
The pundits still don’t understand that Labour’s new energy is about ‘we’ not ‘me’, writes Hilary Wainwright

Debt relief for the hurricane-hit islands is the least we should do
As the devastation from recent hurricanes in the Caribbean becomes clearer, the calls for debt relief for affected countries grow stronger, writes Tim Jones

‘Your credit score is not sufficient to enter this location’: the risks of the ‘smart city’
Jathan Sadowski explains techno-political trends of exclusion and enforcement in our cities, and how to overcome this new type of digital oppression

Why I’m standing with pregnant women and resisting NHS passport checks
Dr Joanna Dobbin says the government is making migrant women afraid to seek healthcare, increasing their chances of complications or even death

‘Committees in Defence of the Referendum’: update from Catalonia
Ignasi Bernat and David Whyte on developments as the Catalan people resist the Spanish state's crackdown on their independence referendum

The rights and safety of LGBTQ+ people are not guaranteed – we must continue to fight for them
Kennedy Walker looks at the growth in hate attacks at a time when the Tory government is being propped up by homophobes