Belfast Telegraph

Why we should embrace the winds of change in energy world

By Liam Clarke

It feels good, but plunging petrol prices show this is the wrong time to be closing down our energy options.

The turbulence in the markets means we need to diversify almost as urgently as we need to balance the books economically, or build a shared future.

It is bad news that First Flight Wind intends to terminate plans for an offshore wind project in the waters off the Co Down coast, which could have provided 13% of our electricity and provided hundreds of jobs.

It is bad news that fracking has been halted in Fermanagh without even an exploratory borehole being sunk to assess the potential. It means we are closing down our options in a volatile world where prices won't stay low indefinitely.

Machiavelli observed 500 years ago, "It is a common failing of mankind never to anticipate a storm when the sea is calm."

At present, the sea is calm, prices are low and falling, but it unlikely to stay that way, because the people who are producing the fall want energy prices to go up again.

Present trends won't continue indefinitely; this is probably a boom-bust-boom cycle in terms of price.

The latest twist is that, just a week ago, the Organisation of Petroleum Exporting Countries (Opec) voted to maintain oil production.

Opec represents the traditional oil-exporting countries, headed by Saudi Arabia, but also includes places like Venezuela.

These states have found revenues falling because of the amount of oil and gas that is entering the market from fracking, especially in the US, and tar sand extraction in Canada, coupled with weak world economic growth.

As a result, oil prices have fallen by 40% and Texas Light Sweet, a product used to benchmark oil prices, has drifted close to $65 (£42.52) per barrel. Bloomberg suggests that this could yet fall to $40 a barrel.

As a result of fracking, US oil production has risen from about five million barrels per day in 2005 to nearly eight million this year.

America promises to become the world's largest energy exporter within a few years - if nothing changes.

Saudi Arabia could take up the slack. It produces oil more cheaply than America and sets price as a matter of policy.

It now look as if the Saudis are trying to push the global price of oil below the cost of fracking, thus driving US, Canadian and European domestic oil producers out of the market.

These new tough-guy tactics leave poorer petroleum-exporting countries to take the strain of falling prices. It could destabilise countries like Venezuela, Iran and even Russia.

In the meantime, though, there are signs that Russia, which exports gas mainly to Europe and 50% of whose federal budget comes from oil and gas, is also turning against the frackers.

Romanian politicians are claiming that Gazprom, the Russian energy giant, is funding and supporting anti-fracking groups.

We may be witnessing a major international realignment, whose outcome is still unknown. For one thing, a United States which wasn't dependent on Middle Eastern energy would have an entirely different foreign policy and could be less willing to get involved in regional struggles.

Three big things matter to us about energy - price, security of supply and meeting our carbon emission target by 2050. We should use this period of lower prices, which may be brief, to develop our own independent energy supplies from sources, which are likely to include renewables like wind and anaerobic digestion to produce power from waste and wave power.

We also need a sober examination of fracking and of oil exploration off the North Coast.

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