An oil expert has predicted a boost for North Sea activity in the next few years because of a rocketing oil price.
Andrew Reid, Aberdeen-based managing director of energy consultancy Douglas-Westwood, expects the oil price to soar above $200 a barrel at the expected peak of world output towards the end of this decade.
He said yesterday that a trebling of the current oil price would be good news for the UK offshore industry but bad news for consumers.
“We will reach worldwide peak oil production of about 95million barrels a day between now and 2020, compared to current output of about 85million barrels,” he said.
“I can see the oil price going above $200 a barrel when we hit this peak. North Sea reserves will become more valuable and this will encourage more exploration and production. But it will not be good news for the public, who will face much higher costs for many things, including petrol and electricity.”
Mr Reid was commenting after it emerged that Sir Richard Branson and other business leaders will warn tomorrow that the world is hurtling towards an “oil crunch” to match the financial crisis within five years.
A new report backed by the Virgin Group founder and other business people will say the world is running out of oil and that the coming challenges may be more serious than the credit crunch. Sir Richard – whose airline and rail businesses are sensitive to the cost of crude oil – joined other company chiefs in warning of price spikes and shortages in the near future unless action is taken.
“The next five years will see us face another crunch – the oil crunch,” the report said. “This time, we do have the chance to prepare. The challenge is to use that time well.”
The report is compiled by the Industry Taskforce for Peak Oil and Energy Security, a group of private British companies whose members include Sir Richard, Stagecoach chief executive Brian Souter, Scottish and Southern Energy boss Ian Marchant and Philip Dilley, chairman of consultancy firm Arup.
“Our message to government and businesses is clear: act now,” the group said.
“If we don’t, we run the risk of a return to the oil price shocks of the 1970s, with all the inherent uncertainty and trauma that brought.”
It said fuel shortages could lead to shortages in consumer products, while the UK’s energy security “will be significantly compromised” and the impact of climate change makes the challenge all the more urgent. Oil price shocks could also “destabilise economic, political and social activity” and have the potential to hit the most disadvantaged in society hardest.
The report comes amid general fears about future energy security and costs in the UK. Oil prices have been particularly volatile in recent years, spiking at $147 a barrel in July 2008 before plummeting to $32 a barrel that December amid the financial crisis and onset of the economic downturn.
Chris Skrebowski, an independent oil consultant who prepared part of the report, said the recession had pushed the “oil crunch” point – when global demand will use up stocks faster than they can be replaced by new production – back by two years and given governments and firms more time to work out how to act.
Shrinking economic output has suppressed demand and therefore allowed prices to stay relatively low. He warned that spare capacity built up by oil cartel Opec could be run down as early as 2012-13 and no later than 2014-15, which in turn is expected to cause oil price spikes “imperilling economic growth”.