Oil spills are tragic, but they are also inevitable
There is a rather pretentious old saying that I cannot remember the source for, which posits that you can only truly appreciate the beauty of a fragile vase once you accept that one day it will break. Or, to put an environmental spin on it, you can only truly appreciate the oil you use each day if you accept that one day the pipelines bringing it to you will leak.
The most surprising thing about the ongoing Shell oil spill in the North Sea – already the worst in 10 years – is that anyone is surprised.
The simple fact is that if you drill countless wells in the seabed and lay countless miles of pipes and install countless valves in some of the more hostile and remote parts of the planet, then sometimes those wells, pipes and valves will leak.
The risks are inherent. They will be there for as long as we choose to drill for oil offshore. The oil industry can argue that the risks are falling as a result of improvements in technology and safety procedures, but those risks will never get anywhere close to zero.
Moreover, any progress made reducing the risk of oil spills is partially or completely offset by the desire to move into deeper and more hostile North Atlantic and Arctic waters where the risks start to again rise exponentially. And all that comes before you get into the Rumsfeldian known and unknown unknowns, such as natural disasters, human error, and threats as yet unimagined.
I am no apologist for the oil industry (far from it) but, in many ways, it is a testament to its engineering and PR expertise that globally only a handful of large leaks make the headlines each year. If you are going to drill for oil, accidents will happen.
Greenpeace know this, which is why they are today stepping up calls on the government to impose an immediate moratorium on new drilling licences for the deep and rough waters off the west coast of Shetland. "What hope low-risk drilling in Arctic waters if the oil and gas industry can't even stop substantial leaks in the relatively benign environment of the North Sea?" they ask, not unreasonably.
The government, desperate to maximise as much of the UK's oil and gas reserves as possible for use as a "bridging technology" while we shift to cleaner sources of energy, has already given short shrift to these calls for a moratorium, promising only that an investigation of the Shell leak will allow for lessons to be learnt.
However, Greenpeace could still significantly disrupt or even halt this new wave of deepwater drilling by taking a more sophisticated version of its argument to the courts, where lawyers acting on behalf of the NGO are even now arguing that the risk management and spill response plans put forward by the companies hoping to exploit reserves in Arctic waters are inadequate – a line of attack that will suddenly have far more resonance in the wake of the Shell spill.
For the wider business community, the latest leak provides a timely reminder of the inherent risks associated with our continued reliance on oil. As with the relationship between consumers and food production, we are strangely disconnected about where our most important source of energy comes from. We take oil's availability for granted but, if you think about it dispassionately, the fact we are forced to drill in increasingly deeper waters to source it means it is almost inevitable that prices will continue to rise in the long term and more environmentally devastating spills will occur.
This reality provides yet another reason why savvy and responsible businesses are investing in enhancing efficiency and reducing their reliance on oil supplies that are subject to ever increasing environmental risks and price volatility. But, more importantly, the spill should serve as a wake-up call to those investors who are continuing to plough billions of dollars into an oil industry that looks more dysfunctional by the day.
I've referenced this report before, but it is again worth highlighting the recent study from the Carbon Tracker Initiative that reveals how the world's fossil fuel giants are laden down with risks that are being either ignored or underplayed by investors.
Oil spills are just one of the more obvious manifestations of these risks, and they can be thrown into the mix alongside the risks posed by carbon regulations and taxes, reputational and legal threats, and the existential challenge posed by the fact we cannot burn all identified fossil fuel reserves if we are to stop runaway climate change.
I've often marveled at the way petrolheads and fossil fuel lobbyists mock alternative energies by pointing out the difficulty of producing silicon or steel or lithium ion to make solar panels or wind turbines or electric cars that then have to be rolled out in huge numbers alongside major infrastructure upgrades.
In contrast, they remain unquestioningly wedded to a system where we have to drill wells miles under the seabed to pump out an explosive substance that we then have to refine and ship to all corners of our economy. Or to put it another way, I can understand why some renewable energy stocks face junk status, given the technology and policy risks they face, but if renewables are a high-risk investment, so are fossil fuel assets.
Sadly, many investors, fossil fuel giants and policymakers have a huge vested interest in ignoring these long-term risks – risks that only get pushed into the spotlight when the industry faces one of its periodic environmental crises.
Equally sadly, we will probably not have to wait all that long for the next inevitable oil leak to make these risks painfully apparent all over again.
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