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Shell Oil Releases Signals and Signposts Report – Is Shell a Climate and Energy Alarmist?

Shell's Signals and Signposts warns of peak oil on the horizon Sounding the Peak Oil alarm

“Alarmist” is a moniker often used in the climate crank community for those concerned about fossil fuel use and climate change.

Whether deserved or not, it is interesting to consider the role and alarm plays. Typically an alarm is a means of focusing attention on an imminent or impending danger or threat, alerting those effected into action in time for restorative action to take place – run from the burning building, buckle up on the seat belt, call for help, pull back on the airplane control stick, develop a sustainable climate and energy policy… You get the idea.

Shell Oil released their Signals and Signpostsreport yesterday, setting out a range of expected energy and climate scenarios through 2050. Clearly Shell is sounding an alarm, saying, in essence, that new oil discoveries and current efficiency and renewable energy policies will leave an energy gap the size of the entire energy industry output in 2000 as demand triples by 2050. Even if fossil fuels could somehow fill that gap “CO2 emissions would then be on a pathway that could severely threaten human well-being,” the report summarizes.

Call it Peak Oil if you will, but the report shows difficult and transformative times ahead. But there is still time – if alarmingly short – to do something about it.

“Decisions made in the next five years have profound consequences over the next decades,” says Shells Jeremy Bentham, VP of Business Environment, “…it is only by taking a realistic view of the situation that we can make a start.”

So as Congress “debates” climate science and continues to engage – or succumb to – a well-orchestrated campaign of disinformation about climate and energy, oil giant Shell sounds an alarm alerting us that time is now to face the future before us.

While not everyone will agree with the positions taken by Shell, at least a report like Signals and Signposts creates a framework around which a real discussion can begin. If only our political leaders could do the same.

Signals and Signposts in summary (from Shell press release dated April 14, 2011🙂

  1. We believe that the world is entering an era of volatile transitions and intensified economic cycles. The recession interrupted the oil and commodity price boom but it may return. Emerging nations like China and India are going through materially intensive development and a tighter market will continue to put pressure on prices and generate volatility. Improvements in policy-making and strong gains in productivity have helped economies to grow without inflation in the last two decades. We do not believe the moderating effect of this combination of good policies, good practices, and good luck will continue into the future.
  2. We are seeing a step change in energy use. Developing nations, including population giants China and India, are entering their most energy-intensive phase of economic growth as they industrialise, urbanize, build infrastructure, and increase their use of transportation. Demand pressures will stimulate alternative supply and more efficiency in energy use — but these alone may not be enough to offset growing demand tensions completely.  Underlying global demand for energy by 2050 could triple from its 2000 level if emerging economies follow historical patterns of development.
  3. In broad-brush terms, natural innovation and competition could spur improvements in energy efficiency to moderate underlying demand by about 20% over this time. Ordinary rates of supply growth — taking into account technological, geological, competitive, financial and political realities — could naturally boost energy production by about 50%. But this still leaves a gap between business as- usual supply and business-as-usual demand of around 400 EJ/a – the size of the whole industry in 2000. This gap – this Zone of Uncertainty – will have to be bridged by some combination of extraordinary demand moderation and extraordinary production acceleration.
  4. Supply will struggle to keep pace with demand. By the end of the coming decade, growth in the production of easily accessible oil and gas will not match the projected rate of demand growth. While abundant coal exists in many parts of the world, transportation difficulties and environmental degradation ultimately pose limits to its growth. Meanwhile, alternative energy sources such as biofuels may become a much more significant part of the energy mix — but there is no “silver bullet” that will completely resolve supply-demand tensions.
  5. Smart urban development, sustained policy encouragement and commercial and technological innovation can all result in some demand moderation. But so can price-shocks, knee-jerk policies and frustrated aspirations. Timescales are a key factor. Buildings, infrastructure and power stations last several decades. The stock of vehicles can last twenty years. New energy technologies must be demonstrated at commercial scale and require thirty years of sustained double-digit growth to build industrial capacity and grow sufficiently to feature at even 1-2% of the energy system. The policies in place in the next five years shape investment for the next ten years, which largely shape the global energy picture out to 2050.
  6. The global economic crisis has coincided with a shift in geopolitical and economic power from west to east. This decisive shift is transforming the global economic and political system. The change is gradual, but its potential consequences are profound. The economic crisis in the west may accelerate this trend. Future generations may see 2008 as the turning point. The world faces a period of uncertain global politics. Strategic fault lines are emerging. Rising powers are increasingly and confidently asserting what they see as their national interests. This is undermining global mechanisms for ensuring collective security.
  7. Environmental stresses are increasing. Even if it were possible for fossil fuels to maintain their current share of the energy mix and respond to increased demand, CO2 emissions would then be on a pathway that could severely threaten human well-being. Even with the moderation of fossil fuel use and effective CO2 management, the path forward is still highly challenging. Remaining within desirable levels of CO2 concentration in the atmosphere will become increasingly difficult.

Download the full Signals and Signposts report (pdf)

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