You may have noticed – and this is confirmed by the AA’s monthly fuel price report – that petrol and diesel prices are down significantly this month (November 2013). Good news? Well, nestling within every silver-lining there’s often a cloud.
The recent drop in fuel prices seems to go against the long-term trend and raises questions about where the underlying global price of fossil fuels is going. Element 7 of the NEBOSH Certificate in Environmental Management raises questions about the rising costs of fossil fuels and identifies that demand is starting to outstrip supply.
The script that we have been following in recent years goes something like this: the planet’s fossil-fuel supplies are limited and declining, while demand for energy is on an upward spiral as the world’s population expands and people get wealthier.
This means there’s only one place for fossil fuel prices to go, and that’s ever upwards. Bad for our pockets, but at least this inexorable rise in prices, coupled with a decline in fossil-fuel stocks – means that burning fossil carbon – the underlying cause of climate change – should decrease.
So is the recent drop in fuel prices just a blip, or is there something else going on? Has the script changed?
Well, I’ve just come back from a trip to the USA (yes, I know, increasing my personal carbon footprint!) where I encountered what I believe to be The Elephant in the Room in the world energy consumption/climate-change debate. This elephant goes by the name of ‘unconventional’ gas, sometimes ‘tight ’gas and, perhaps more commonly, ‘shale’ gas.
The debate about shale gas has been going on for a little while in the UK – let’s just remind ourselves what we’re talking about and what the concerns are. Traditionally, natural gas (and oil) is obtained by drilling down into reservoirs of porous rock and the gas simply flows out of the rock formation and up to the surface under natural geological pressure. But some gas-containing rocks have such low porosity that gas will not easily flow out of them. Shale formations are the most well-known of these ‘tight’ gas reservoirs, and others can be found in formations of sandstone and limestone.
Until recently, shale gas and other forms of tight gas have been too difficult or expensive to exploit, but recent advances in ‘fracking’ technology have made their exploitation a practical reality. Fracking – or ‘hydraulic fracturing’, to give it its full title – involves injecting a mixture of water, sand and chemicals at high pressure to create small fractures in the reservoir rock, allowing the gas to escape. This process has the potential for some significant environmental impacts: it requires large volumes of water, generates substantial amounts of effluent and may induce minor earth tremors.
These concerns remain a major barrier to shale gas production in the UK – but it’s a whole different picture in the US, where they are just going for it! Shale gas now accounts for 40% of natural gas production in the US and prices are lower than they were ten years ago. There has also been a knock-on effect on the prices of oil and coal, which compete with cheap gas in industrial markets.
But the real game-changer is the sheer quantity of unconventional gas that is available – enough to give the USA and Canada energy security for 100 years, it is believed. There are significant reserves in every continent on the planet and estimates of world natural-gas reserves have more than doubled. In Europe, for example, major deposits of unconventional gas have been identified in Germany, Poland, the Ukraine, Romania, Sweden, Denmark, the UK and France.
So here’s a new script: world reserves of fossil fuel are much greater than we ever thought; we’re all energy junkies and we’re going to get this stuff out of the ground and burn it; the consequences for climate change are worrying, to say the least.
Does this picture have to be so bleak? Well, I think it’s going to take political will of an order hitherto unseen to avoid the temptation of displacing low-carbon energy sources, i.e. renewables and nuclear, with cheap gas.
Richard has more than 20 years experience of managing environmental and social issues in a business context.