AN INDEPENDENT THOUGHT?

Petrol prices have risen again (locally from 129.9 to 133.9 per litre) but as most of us will have noticed by now when it comes to fuel (energy) prices they mostly tend to go up and stay up over the longer term regardless of occasional short-term drops in price. Despite the recession related blips general longer term trend for hydrocarbon prices in much of the world appears to remain steadily upwards.

Partially this is unavoidable due to increasing demands for more energy (particularly from energy hungry India and China), the growing planetary population and the short term nature of our planet’s hydro carbon fuel reserves. This trend is relatively easy to plot (even in the short term) and the medium and long-term consequences of being dependent upon energy resources that you don't actually control should be pretty self evident to even the dimmest Westminster politician.

That said it’s worth noting that there are basically two types of energy resources primary and secondary. Primary energy is energy that is largely supplied without being transformed e.g. crude oil, natural gas, and coal and secondary energy that requires a transformative (often energy intensive and sometimes polluting) process to refine it before it can be used to produce energy.

As of March 2012 around two thirds of UK primary energy demand was met from domestic production. Coal accounted was barely 4% of final energy consumption by fuel in 2010. Almost all UK oil and gas production came from the seas that surround the UK. Peak oil (for the UK) happened in 1999, and Peak gas production took place back in 2000. Since then the UK has moved from a position of relative self-sufficiency to one of dependency on imported oil and gas.

By 2009, imported gas was around 32% of the total gas used. 58% came from Norway, 25% from liquefied natural gas (LNG) from various different countries, 16% came from the Netherlands, and 2% came via the Belgian interconnector pipeline. The increased reliance on imported oil and gas left the UK far more open to supply risks associated with global supply constraints and price volatility. The UK Government periodically punted plans to reduce the need for oil and gas imports, by pushing primary energy production, and by developing low-carbon alternatives such as electric vehicles, biofuels and fuel efficiency.

The writing is not so much on the wall as on TV, as last Tuesday saw the first airing of a Gazprom advert on UK domestic television advert – they sponsor the European Champions League.  Russia has periodically put the squeeze on gas exports to the Ukraine, (currently some 80 per cent of Russian gas exports to the EU flow through the Ukraine) so the real dangers of relying on imported energy from unreliable sources have been clearly highlighted.

Russia (with full coffers) has ridden out most of the consequences of fluctuating oil prices and appears to have managed to avoid any real consequences of declining cash reserves despite its economy being heavily reliant on oil and gas exports. While some countries subsidise their fuel prices (just how sustainable that is over the medium to longer term is open to debate), in the UK this does not happen, so everybody wins, Government gets more tax revenue, the oil companies get more profit, and us the ordinary punters get consistently fleeced.

As for gas, some states have made efforts to protect themselves against external shocks to their energy needs; France was able to store 122 days of gas and Germany able to store 99 days worth (2009 figures). Here in the UK the almost entirely market driven approach turned out to be entirely inadequate, in the UK had a storage capacity which would have lasted for only 15 days (2009 figures). Some countries discuss the issue of energy independence at the highest level here in the UK such talk is best avoided.

New Labour took the best part of a decade to recognise the need to increase storage capacity and the UK has been playing catch up ever since. One consequence of this lack of storage capacity is that UK had to sell gas during the summer and purchase gas again when it is needed in the winter. The Conservative’s headlong dash to gas in the 1980’s was accompanied by a complete failure in strategic energy planning. The situation has been made worse by the current Government's decision to somewhat half-heartedly look at developing diverse reliable alternative energy sources whilst pursing yet another dash for gas.  

The last New Labour Government and the current Con Dem Government largely ignored repeated warnings that the lack of sustainable energy has set the UK on a path towards higher domestic energy prices and potential power blackouts. Over the next four to six years almost all of our old nuclear reactors, along with nine major coal and oil-fired power stations, will be run down and closed, with nothing ready to replace them.

We are now in the situation where we will become even more dependent upon imported gas from either unstable regions or dubious suppliers. The Con Dem’s solution to was to rush to go Nuclear and to effectively hand the Nuclear industry lock stock and barrel over to French energy companies who are busy paying off large loans to the French government. Anyway that was the plan, although the wheels seem to be coming of that particular wagon.

Now Cameron (and Westminster’s) focus is on Shale Oil/Gas as the great panacea for the UK’s energy problems – the problem is unlike primary energy sources the extraction and preparation of shale oil/gas is energy intense and certainly based on the Canadian experience exceptionally polluting. Even if Europe chooses not to chase Shale then developments elsewhere in the world could mean that as had been said elsewhere we can effectively kiss goodbye to curbing climate chance for ever and bequeath rising sea levels, wild weather and pollution to our descendants.

Even if the environmental and pollution issues could be addressed (and we don’t appear to be anywhere close to doing that at the moment ) there are other significant issues. For one, Shale oil/gas is a finite resource, there is just like oil, coal and gas, there is little chance of extracting 100% of reserves. What we may be talking about extracting something like 40 or 50% of it – which might last around 10 years – the big question is what happens then? While we use the brief window of Shale based energy are we going to develop secure energy supplies for the future or is this merely short term fix?

What successive Westminster Governments (since 1997) should have done was to  work with the devolved governments and the Irish Government to make these islands entirely self sufficient via renewable non market driven energy resources run by not for profit companies. They should have developed a flexible self-sufficient energy development strategy that encourages decentralised microgeneration. This could create jobs, useful skills and bootstrap the economy out of the recession as well as helping consumers by delivering community beneficial energy schemes – significantly successive Westminster governments have chosen not to do this.

Wales needs direction not Carwyn’s platitudes when it comes to the development of safe and secure energy resources. The renewable energy sector can play a key role in creating sustainable green energy jobs for local people, not damage the environment and provide our communities with a long-term viable economic energy future, that’s should be the real future dividend for our communities rather than the shareholders in the City or provide well paid jobs on the board for former Westminster politicians. 

BIG MONEY?

I am old enough (just) to remember when petrol can in at £1 for 3 gallons, and a little later £1 a gallon, we are now paying around £6.02 per gallon (no wonder they changed things so that you buy by the litre rather than the gallon). I can recall adults at the time saying that if it got any more expensive they would cut back on driving or give up their cars (obviously that never happened).

Personally I reached my own private peak oil last June and am lucky enough to be able to use some subsidised public transport to get to and from work. The car is a luxury largely reserved for the weekend. Just for the record the UK average price for a litre of petrol is around: 133.89 and for diesel its around 142.21.

That 133.89 per litre breaks down along the lines of:

• 47 pence for the basic cost of the fuel
• 57.95 pence flat rate duty
• 22.32 pence VAT
• 1.5 pence for the bio-fuel element
• 1.12 pence for the supplier
• 4 pence for the retailer

Considering that motorists in these isles use around 37.6 billion litres per year you can see that is big money. Everybody wins - the Oil companies get rich, the Government gets a handy chunk of tax, the middlemen get their share - save for the motorist and the haulage firms who pay through the nose again and again. Wales is one of the parts of the UK that is least prepared for the consequences of fuel shortages and Peak Oil.

We have a transport and delivery network that is almost entirely dependent on petrol and diesel to get things done and to put things on the shelves. We have a high percentage of people who commute by car from where they live to where they work and many of them travel considerable distances. Our public transport system is inadequate, we need a combination of trams and trains to get people to work (and back again), we need to look at electrifying our local rail lines and ensuring that they are fully integrated into the transport system.

We face a future where cheap fuel will be a thing of the past, so we need to ensure that all our communities have reasonable access to a reliable cheap system of integrated public transport, at the heart of which needs to be our long neglected rail network. The old excuses about a lack of funding, despite the banking related financial crisis, are no longer acceptable;

We in Wales make up around 5% of the population of the UK, and make significant contributions to the exchequer - so we need 5% of the UK transport spend, and full control of our transport planning and our transport budget.If Westminster wants to make the Union work then cough up the cash!

LOCAL KNOWLEDGE

I am no fan of globalisation, never have been, it's done (and does) damage to a whole number of our communities as unscrupulous employers chase ever greater profits by searching for cheap labour. What had not crossed my mind was that globalisation does not just effect commercial business and manufacturing industry, it affects agriculture as well. The global food production system is also at risk from globalisation (and also from an end to cheap oil). Cheap oil, which is admittedly a relative concept at the moment, makes industrial agriculture and bulk international food distribution both possible and affordable and has fueled ironically a rapid loss of genetic diversity in food plants and domesticated farm animals.

Over the last 8,000 or so years humans have been very good at breeding agricultural livestock with particularly desired traits more meat, better milk yields, sheep with hooves that are more resistant to salt water, etc.The United Nations Food and Agriculture Organisation has noted that the world loses one domestic agricultural breed a month and of the 7,600 breeds on the UN database of farm animal genetic resources some 20% are at risk of extinction.

The UNFAO has stated that the globalisation of the worlds livestock markets is the biggest single factor in driving the loss of diverse domesticated livestock. Western focused agriculture has long prised the production higher yields of meat, milk, eggs, etc. Outside of the areas - other traits have traditionally been more important in different parts of the world. Tough local breeds of cattle have been bred over centuries to cope with dry spells, to subsist of particular eco-systems, disease and erratic local weather conditions and periodic droughts.

Now the global trend is for Holstein-Freiesan cows which are literally becoming a global super breed. Now don't get me wrong, I don't have a word to say against Holstein-Friesan cattle agriculturally (as in many things) one size does not fit all, allowing the market to impose European style intensive agriculture and agricultural styles on areas like the Sahel (in Africa) and in Brazil or other parts of the globe does not suit particular soil types or agricultural; practices.

In the colonial period, consummate arrogance which dismissed local agricultural custom and practice as primitive and which led to the imposition of European farming methods in the eco-sensitive Sahel region of Africa led to disaster. Closer to home, the loss of domesticated plant and animal diversity within Europe as EU funded agriculture begins to impose unnecessary and or 'free market' driven changes on traditional agricultural practices in Poland and parts of Eastern Europe should be resisted and avoided at all costs.

The loss of diversity will limit our chances of breeding (by traditional methods) crops that are more tolerant to drought, heat, excessive rain and less dependent upon oil based fertilizers which pollute our water resources. We should know better, we have to make the right choices now, because unravelling the mess that industrial scale agriculture could (and probably will) create cost us dear in the future.

ON THE FIDDLE...

Last week the price of oil fell after the International Energy Agency announced that its members would sell some of their reserves on the world market.The International Energy Agency (IEA) stated that the move was in response to the disruption in supplies caused by the Libyan conflict. The plan envisaged a release of an extra 60 million barrels of oil on to the world market.

The US government announced that 30m barrels, half of the total, would be released from its Strategic Petroleum Reserve. The UK planned to contribute three million barrels.The release has been designed to reduce the price of oil further in order to protect the economy.Oil Industry analysts have warned that there is a risk the IEA's latest move may hurt relations with major oil exporters i.e OPEC.

In truth any short term economic effect caused by the release of oil reserves will be cancelled over the medium term by a combination of increased demand and the effects of falling production. IEA members are required to hold sufficient stocks of oil to last 90 days without any imports (currently the IEA says its members are holding enough for 146 days or 4.1 billion barrels). IEA members have agreed to make two million barrels of this available every day for 30 days in an effort to increase the amount of oil on the market and therefore reduce the price.

The IEA also says that it will review the market again in 30 days time. The Saudi's incidentally have come out and said that they would be increasing production to meet demand - it will be interesting to see if this actually happens considering the potentially perilous state of production form the Ghawar and Safanyia oilfields. Either way no doubt OPEC will reduce production to maximise their profits and mitigate the IEA's decision.

just for the record as we begin to face the effects of peak oil, it is worth noting that oil consumption in Canada and the United states has grown by 20% since 1980 and is up 63% in Australia and 74% in New Zealand, obviously the Chinese are also using more oil than previously to feed their growing economy. Prior to 2008 the IEA itself said that production form the world's oil wells are is declining at a rate of 3.7% per year. After 2008 the IEA vigorous revision of it's figures and stated this rate of decline actually stands at 6.7%.

Why does the phrase fiddling whilst Rome burns come to mind...

CHEQUE BOOK COLONIALISM?

The acquisition of land by multi nationals for development or to acquire resources at the expense of local people is bound to be a touchy subject especially when little medium to long term sustainable benefit is delivered to the indigenous inhabitants. We in Wales, ironically, should know about this having been at the sharp end ourselves when it comes to the exploration our natural resources and have been largely peripheral to any benefits received.

What's happening now in Africa is subtly different, there is a race going on between multi national companies on one hand and the emerging economic giant of the Peoples Republic of China on the other hand to acquire land, not so much for the minerals (although that is a factor) but to acquire the ability to grow food. An interesting report (produced by the Oakland Institute) has noted that Hedge funds are now getting involved in acquiring land in Africa to produce food and biofuels, which will all boost their profits.

The report notes that foreign firms and hedge funds) have been quietly purchasing large chunks of land in Africa, often without any proper contracts and that this activity has led to the displacement of millions of small farmers, who are losing out as multi national firms try to secure their hold of the global food markets. Food production is often sacrificed to make space for cash crops for export, including flowers and biofuels, which fetch a tidy profit.

Since 2009 foreign firms the report notes that have acquired land equivalent to the size of France (nearly 60 million hectares) from questionable but lucrative deals with a combination of gullible traditional leaders or corrupt government officials in in Ethiopia, Tanzania, South Sudan, Sierra Leone, Mali and Mozambique. No doubt the foreign firms make many promises of progress, development and jobs to local chiefs, but they don't necessarily come close to delivering on the promises.

Investors benefit with a wide range of incentives written into their contracts from unlimited water rights to tax waivers, but, are clearly not there to help feed starving Africans. Sounds familiar doesn't it - not that much of step from the old days of the WDA throwing wads of cash of foreign investors, who got all sorts of benefits (grants and incentives), promised much (I seem to recall the magic figure of 6,000 jobs kept cropping up in the 1980's, 1990s and early 2000's) yet in the end never quite delivered all that was promised.

As we stand on the brink of what has been aptly described as the Age of Scarcity - a combination of peak oil, climate change and financial instability not to mention food security and fuel security, we should all take note of this developments in Africa and look closer to home when it comes to the development of secure energy and food supplies and particularly take note of the issue of ownership.

TWO SIDES OF THE SAME COIN

Oxfam got the publicity (with there report Growing a Better Future) which predicts that the prices of staple foods will more than double in 20 years unless world leaders take action to reform the global food system. By 2030, the average cost of key crops will increase by between 120% and 180%, the charity forecast with half of that increase being caused by climate change. Oxfam got the publicity but the World Bank flagged up the link between poverty and food prices back in April.

They noted that world food prices are 36% above levels of a year ago, made worse by problems in the Middle East and North Africa, and remain volatile, so said the World Bank. Rising food prices have pushed, it noted, 44 million people into poverty since last June (2010) and that a further 10% rise in food prices would push 10 million more people below the extreme poverty line of $1.25 (76p) a day. The World Bank says prices of basic commodities remain close to their 2008 peak, with the prices of wheat, maize and soya all rocketing. The only exception is rice, which has fallen slightly in price in the past year.

Food price changes (First Quarter 2010 to First Quarter 2011)

Maize 74%

Wheat 69%

Palm oil 55%

Soybeans 36%

Beef 30%

Rice -2%

Source: World Bank Development Prospects Group

The bank suggests a number of measures to help alleviate the impact of high food prices on the poor, including encouraging food-producing countries to ease export controls, and the diversion of production away from biofuels when food prices exceed certain limits.The World Bank has also suggested targeting social assistance and nutritional programmes to the poorest, better weather forecasting, more investments in agriculture, the adoption of new technologies (including rice fortification to make it more nutritious), and efforts to address climate change.

The fact that both the World Bank and Oxfam recognise that financial measures are needed to prevent poor countries being subject to food price volatility, is of significance, as it reveals the possibility of a perfect storm (a combination of peak oil and climate change). If that's not enough to worry about factor in increasing fuel prices (one of the consequences of Peak Oil) that will hit poor farmers first and hardest before it really hits the rest of us, just like climate change will.

VSO HUSTINGS

The Voluntary Service Overseas (VSO) Hustings in Abergavenny last night was packed out, with literally standing room only, with the candidates from the 4 main parties being present. Naturally everyone present agreed that the UK Government should honour the commitment to delivering 0.7% of GDP as international aid - but in truth recession not withstanding this is not enough.

Plaid has long supported the campaign to cancel developing countries unaffordable debts and has called for more resources to be made available for the UN Adaption Fund which has been set up to help developing countries adapt to the effects of climate change. Plaid has demanded equal representation for developing countries in the decision making process on climate change action and has long supported the international Fair Trade movement.  

As you would expect Fair Trade, Fairness, Equality, Climate Change and Peak oil came up amongst other topics for discussion. VSO, OXFAM and other development agencies have specific programmes that aim to help poor men and women in the developing countries when it comes to health care, growing crops, access to literacy and to affordable credit. As poor education, poor health and lack of access to credit and markets has hit vulnerable groups in developing countries particularly hard. 

The World Bank and the International Monetary Fund, came in for some criticism - Plaid has long called for essential governance reform such international organisations so that they take into account human rights, the environment and workers rights.  The role of multi-nationals was also discussed along with their impact on the developing world along with how better use of procurement policies here in the UK could benefit both us and food producers, here and in developing countries.