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.

Contribute to Conter – the new cross-party platform linking Scottish socialists
Jonathan Rimmer, editor of Conter, says it’s time for a new non-sectarian space for Scottish anti-capitalists and invites you to take part

Editorial: Empire will eat itself
Ashish Ghadiali introduces the June/July issue of Red Pepper

Eddie Chambers: Black artists and the DIY aesthetic
Eddie Chambers, artist and art historian, speaks to Ashish Ghadiali about the cultural strategies that he, as founder of the Black Art Group, helped to define in the 1980s

Despite Erdogan, Turkey is still alive
With this year's referendum consolidating President Erdogan’s autocracy in Turkey, Nazim A argues that the way forward for democrats lies in a more radical approach

Red Pepper Race Section: open editorial meeting – 11 August in Leeds
The next open editorial meeting of the Red Pepper Race Section will take place between 3.30-5.30pm, Friday 11th August in Leeds.

Mogg-mentum? Thatcherite die-hard Jacob Rees-Mogg is no man of the people
Adam Peggs says Rees-Mogg is no joke – he is a living embodiment of Britain's repulsive ruling elite

Power to the renters: Turning the tide on our broken housing system
Heather Kennedy, from the Renters Power Project, argues it’s time to reject Thatcher’s dream of a 'property-owning democracy' and build renters' power instead

Your vote can help Corbyn supporters win these vital Labour Party positions
Left candidate Seema Chandwani speaks to Red Pepper ahead of ballot papers going out to all members for a crucial Labour committee

Join the Rolling Resistance to the frackers
Al Wilson invites you to take part in a month of anti-fracking action in Lancashire with Reclaim the Power

The Grenfell public inquiry must listen to the residents who have been ignored for so long
Councils handed housing over to obscure, unaccountable organisations, writes Anna Minton – now we must hear the voices they silenced

India: Modi’s ‘development model’ is built on violence and theft from the poorest
Development in India is at the expense of minorities and the poor, writes Gargi Battacharya

North Korea is just the start of potentially deadly tensions between the US and China
US-China relations have taken on a disturbing new dimension under Donald Trump, writes Dorothy Guerrero

The feminist army leading the fight against ISIS
Dilar Dirik salutes militant women-organised democracy in action in Rojava

France: The colonial republic
The roots of France’s ascendant racism lie as deep as the origins of the French republic itself, argues Yasser Louati

This is why it’s an important time to support Caroline Lucas
A vital voice of dissent in Parliament: Caroline Lucas explains why she is asking for your help

PLP committee elections: it seems like most Labour backbenchers still haven’t learned their lesson
Corbyn is riding high in the polls - so he can face down the secret malcontents among Labour MPs, writes Michael Calderbank

Going from a top BBC job to Tory spin chief should be banned – it’s that simple
This revolving door between the 'impartial' broadcaster and the Conservatives stinks, writes Louis Mendee – we need a different media

I read Gavin Barwell’s ‘marginal seat’ book and it was incredibly awkward
Gavin Barwell was mocked for writing a book called How to Win a Marginal Seat, then losing his. But what does the book itself reveal about Theresa May’s new top adviser? Matt Thompson reads it so you don’t have to

We can defeat this weak Tory government on the pay cap
With the government in chaos, this is our chance to lift the pay cap for everyone, writes Mark Serwotka, general secretary of public service workers’ union PCS

Corbyn supporters surge in Labour’s internal elections
A big rise in left nominations from constituency Labour parties suggests Corbynites are getting better organised, reports Michael Calderbank

Undercover policing – the need for a public inquiry for Scotland
Tilly Gifford, who exposed police efforts to recruit her as a paid informer, calls for the inquiry into undercover policing to extend to Scotland

Becoming a better ally: how to understand intersectionality
Intersectionality can provide the basis of our solidarity in this new age of empire, writes Peninah Wangari-Jones

The myth of the ‘white working class’ stops us seeing the working class as it really is
The right imagines a socially conservative working class while the left pines for the days of mass workplaces. Neither represent today's reality, argues Gargi Bhattacharyya

The government played the public for fools, and lost
The High Court has ruled that the government cannot veto local council investment decisions. This is a victory for local democracy and the BDS movement, and shows what can happen when we stand together, writes War on Want’s Ross Hemingway.

An ‘obscure’ party? I’m amazed at how little people in Britain know about the DUP
After the Tories' deal with the Democratic Unionists, Denis Burke asks why people in Britain weren't a bit more curious about Northern Ireland before now

The Tories’ deal with the DUP is outright bribery – but this government won’t last
Theresa May’s £1.5 billion bung to the DUP is the last nail in the coffin of the austerity myth, writes Louis Mendee

Brexit, Corbyn and beyond
Clarity of analysis can help the left avoid practical traps, argues Paul O'Connell

Paul Mason vs Progress: ‘Decide whether you want to be part of this party’ – full report
Broadcaster and Corbyn supporter Paul Mason tells the Blairites' annual conference some home truths

Contagion: how the crisis spread
Following on from his essay, How Empire Struck Back, Walden Bello speaks to TNI's Nick Buxton about how the financial crisis spread from the USA to Europe

How empire struck back
Walden Bello dissects the failure of Barack Obama's 'technocratic Keynesianism' and explains why this led to Donald Trump winning the US presidency