Overview

This material has been prepared by Feasta, the Dublin-based Foundation for the Economics of Sustainability, in order to carry out a research contract we have been awarded by the (Irish) Environmental Protection Agency. The contract is to explore the effects that oil and gas depletion, and the very much higher energy prices that might follow from that, could have on where and how people will want to live and also on where and how goods are likely to be produced, and in what quantities.

Rather than making a single prediction, which would inevitably be wrong, we are developing four plausible scenarios which demonstrate a range of possible futures. Our key criteria are when oil and other fossil fuels supplies peak and how we prepare/respond to this.

---

Peak Oil

Apart from occasional blips such as the oil crisis in late 1970s, world oil production has grown steadily since the 1930s. However, at some point, the depletion of reserves will make it impossible for this output growth to be maintained and the supply will level off and then begin to fall. This point at which the supply levels off is "Peak Oil".

There is a growing consensus that the world’s production of ‘conventional’ oil – that is, oil from conventional, relatively cheap-to-extract oil fields – is already at, or near, its peak and that its output will begin a steady decline within as little as five years. A group of experts, the Association for the Study of Peak Oil and Gas (ASPO) (http://www.peakoil.net), thinks that by 2030, annual output will have dropped to around a half of the current level.

If ASPO is right, it will only be possible to carry on increasing oil production by turning to unconventional sources such as the tar sands in Canada and Venezuela, or fields under polar ice caps and in very deep water offshore. As oil from these sources is very much more expensive to produce, prices are going to have to rise to not just to pay the additional costs of production but also to attract and reward the huge amount of capital that will be required. The International Energy Agency (IEA) estimates that $3,000 billion will need to be invested by the oil industry between 2003 and 2030 to keep up with world oil demand if the latter increases by 1.6% a year.

ASPO, however, thinks that it will prove impossible to develop the unconventional sources to keep up with demand. This is because it doubts whether there is enough oil under the very deep oceans to keep up with the IEA projections and, also, whether the amount of energy produced by extracting oil from the tar sands once the energy used to extract it has been deducted will be sufficiently high to make the process viable. At the moment, it claims, extraction is profitable because cheap supplies of natural gas are available to warm and liquefy the heavy tar and to provide hydrogen to turn the tar into a lighter oil. When this gas has been used up, it says, the economics of the process won’t be attractive because, no matter how high oil prices rise, all other prices will go up too.

When the oil peak is reached – and no-one disputes that it will happen one day – it will have profound effects on the world economy unless enough alternative sources of energy have been developed by then. This is because global economic growth has been made possible largely by humanity’s use of more and more energy. If the rate at which we use energy can no longer increase, the rate of growth will become glacially slow. And if energy use has to be cut, our incomes will almost certainly be cut as well.

Find out more...

• What are people saying online about Peak Oil - http://www.technorati.com/tag/peak+oil
• Wikipedia entry on peak oil - http://en.wikipedia.org/wiki/Peak_oil
• Oil Depletion in a Nutshell - http://sustainability.vividlogic.ie/index.php/sustainability/more/oil_depletion_in_a_nutshell
• The Beginners Guide to Oil Depletion - http://wolf.readinglitho.co.uk/index.html
• Association for the Study of Peak Oil - http://www.peakoil.net
• Post Carbon Institute - Learning to live in a low energy world - http://www.postcarbon.org

---

Brief Introduction to Scenario Planning

Scenario Planning is a method for exploring the future that creates several plausible but challenging alternative futures rather than a single prediction. Why do this?

• A prediction is never right - the unexpected always happens and the assumptions, conscious and unconscious that apply today may not apply tomorrow.
• You either agree or disagree with a single prediction so it is difficult to gain consensus. Because scenario planning is not trying to predict the future, but only find plausible futures, consensus becomes possible.
• Good scenarios challenge our thinking and stimulate discussion, helping organisations to create a common language to talk about the future.

The scenarios to develop are chosen because they represent the extremes of uncertainty. It is traditional to choose two areas of uncertainty related to the area of study, giving four scenarios. In our case, considering the impact on Ireland or energy supply and price in the future, we thought the following areas relatively certain:

• Demand for energy is increasing
• Ireland has limited local supplies of fossil fuels and must import an increasing proportion (90% in 2004)
• Fossil fuel supplies are finite

And the following, the key areas of uncertainty:

• Time at which fossil fuel supplies will not be able to meet demand (Peak Oil)
• Whether we will be proactive or reactive in dealing with Peak Oil

Giving us four scenarios:

• Peak Oil distant, Reactive response - Business As Usual
• Peak Oil distant, Proactive response - Enlightened Transition
• Peak Oil soon, Reactive response - Localisation
• Peak Oil soon, Proactive response - Fair Shares

If we develop these scenarios well, they will be:

• Plausible
• Uncomfortable
• Very different from each other
• Very different from today
• Vivid pictures of what the future might be like

Having developed four scenario worlds, normal planning takes place, but can be challenged by looking at the impact of the scenarios on those plans.

Find out more...

• What people are discussing online - http://www.technorati.com/tag/scenario%20planning
• Wikipedia entry for Scenario Planning - http://en.wikipedia.org/wiki/Scenario_planning
• Plotting Your scenarios - an introduction to scenario planning - http://www.gbn.com/ArticleDisplayServlet.srv?aid=34550 (PDF)
• Scenario Planning Research and References - links to scenarios developed elsewhere for different sectors.

---

Assumptions

We have ruled out certain events happening within the 50-year time horizon of the four scenarios, not because we think that some very real threats to our current way of life can be ignored, but purely to simplify matters. We have assumed, for example, that

• Climate change has no impact beyond an increasing frequency of floods and storms. If a major climate change occurs, such as the Gulf Stream ceasing to run, all bets are off.

• Disease or some other catastrophe does not wipe out a significant proportion of humanity.

• Powerful countries do not wage war over oil, water or other supplies leading to a worldwide destabilisation.

Our other major assumptions are:

• Ireland continues to work within the framework of the EU
• Net foreign direct investment in Ireland ceases after 2012. There would still be in inflow of capital but it would be matched by an outflow from Irish residents investing abroad. The effect of this assumption is to require that Ireland’s imports and exports balance each other and that a capital inflow does not make it possible to import more energy than would otherwise be the case.
• The world begins to take climate change more seriously and its actions to control emissions cause fossil energy prices to increase by 3% a year above trend in the post-Kyoto protocol period following 2012. Note that all energy prices are expressed in relation to wages. In other words, to eliminate inflation from the discussion, we assume that wages stay constant and that the price of energy and other goods and services move up and down in relation to them.
• Energy is required for all forms of production. If energy prices rise, we therefore assume that the price of every product rises by the extra cost of the energy used to make it. Of course, technological changes have the potential to reduce energy use and we will be asking panels of people drawn from all sections of Irish life to tell us what such changes might be. We will then use a computer model to calculate what effect the expected technological changes might have on the relative prices of each sector.

Finally, we have assumed the most positive outcomes for each scenario. Each set of circumstances could lead to far worse results.

---

	Reactive Response	Proactive Response
Oil Peaks by 2030	Business as Usual Ireland continues to use current assumptions until close to peak, leaving key decisions to the market	Enlightened Transition Ireland actively prepares for transition by encouraging efficiency and uses market mechanisms to speed shift to renewable energy.
Oil Peaks by 2007	Localisation Market determines allocation of remaining oil and gas. World economy plunged into depression by high prices.	Fair Shares Energy rationed to share it fairly. World economy does well but consumption in rich countries falls.

---

This project started from the idea that over the next 50 years the price of energy will rise very significantly in relation to the price of labour as a result of both oil and gas depletion and restrictions on the release of greenhouse gases in order to slow climate change. In the 1920s, the price of a litre of petrol was ten times its price in 1995 in terms of the length of time the average worker had to work to buy it. (See Folke Gunther’s article in Feasta Review No. 1 http://www.feasta.org/documents/feastareview/guenther.htm) It is not inconceivable that energy prices will return to that level.

There are, of course, an infinite number of ways in which Ireland’s energy future might work out but we have tried to set the boundaries within which that future has to lie by developing the four scenarios explained elsewhere on this site. We will be asking people drawn from the major sectors of Irish life consumers, energy suppliers, manufacturers, the construction industry, transport companies, farmers, etc how they would wish to change the way they operated if each of the scenarios came about. For example, it might take someone six months at present to earn enough to buy a new car. Would he or she still want to have one in future if a scenario indicated that it might take them five years to get enough money together because of the huge jump in the cost of the energy used to make the vehicle? And how would that decision affect where they wanted to live in relation to shops, work and schools? Would they heat their houses to the same temperature and, if not, would that affect the weight of the clothes they chose to wear?

The changes in consumer demand would have massive knock-on effects on what was manufactured, as well as how (production techniques might become smaller-scale and more labour-intensive) and where (transport costs would rise sharply). Goods would be made to last, and to be easy to repair. Nothing embodying a significant amount of energy would ever be dumped or incinerated it would all be recycled instead. (After all, we don’t dump gold now, do we?). Agricultural techniques would change. Many more horses might be used and no-till systems would become more popular. The higher cost of fertilizers might mean that the price differential between organic and inorganic food disappeared. There might be very little new construction, and what there was would be done with low embodied-energy materials such as local stone and wood. Most building activity might be improvements and conversion work.

The results of our discussions will be run through Feasta’s ECCO model of energy flows (rather than money flows) in the Irish economy to see if they can be made to be consistent with the amount of energy Ireland might be able to afford. If not, a different set of adjustments would be required and we will go back to each sector to see what they might be. In effect, the model enables one to assess what it might be possible to accomplish in Ireland if the factor limiting the level of activity here is the supply of energy rather than the availability of cash.

The main aim of the project is to get policymakers from the various sectors thinking about how their industries are going to have to change in response to energy shortages and the climate crisis. Perhaps the price of energy won’t return to 1920s levels but, even if it doesn’t, every sector in Ireland is still going to have to make the same types of change although to a lesser extent.

Feasta’s partners in the project are Larry Staudt and Ray Byrne from the Centre for Renewable Energy at Dundalk Institute of Technology, and David Crane of Sunwheel Technologies in England. Dave and Larry worked together two years ago to develop the ECCO model Comhar and Sustainable Northern Ireland are also working with us. Phoebe Bright from Vivid Logic is developing the scenarios and making this information available online.

The project will end with a conference in Dublin on Wednesday, October 12th at which the results will be presented and discussed. The conference will be open to the public and is part of the Autumn 2005 Convergence festival. After the conference we will be producing a written report.

Return to Table of Contents

| Discuss | Page history | What links here | Related changes Main Page | About Energy Scenarios Ireland | Find: This page has been accessed 5572 times. This page was last modified 23:15, 12 Aug 2005.

Home • Information • News