Some are aware that Lloyd’s (in my day known as Lloyd’s of London) is the ultimate source of insurance and risk management knowledge. At Lloyd’s there are hundreds of years of cumulative underwriting wisdom. The principles(investors) in the various underwriting syndicates pay for the misjudgements from their personal wealth. Lloyd’s has gravitas. When they speak, business tends to listen. And now Lloyd’s has spoken about the energy situation with a white paper written jointly with a British think tank. The title is “Sustainable Energy Security.” The conclusions:
• Businesses which prepare for and take advantage of the new energy reality will prosper – failure to do so could be catastrophic
• Business can no longer rely on low cost traditional energy sources
• Asian economies will play an increasingly important role in global energy security
• We are heading towards a global oil supply crunch and price spike
• Energy infrastructure will become increasingly vulnerable as a result of climate change and operations in harsher environments
• Lack of global regulation on climate change is creating an environment of uncertainty for business, which is damaging investment plans
• Businesses must reduce fossil fuel consumption
• Business must address energy-related risks to supply chains and the increasing vulnerability of ‘just-in-time’ models
• Investment in renewable energy and ‘intelligent’ infrastructure is booming. This revolution presents huge opportunities for new business partnerships
The white paper puts Peak Oil out into the future a bit (2020-2030) which disagrees with those who have been beating the drum for a long time and who argue we have already reached a peak, but they are clear that they believe business must begin to act now. Most important to individuals they suggest that oil could go to $200 a barrel which converts to around $10 a gallon ($160 to fill my tank and $25 to mow my grass).
The Gulf situation will factor heavily into this equation. If this is oil’s “Three Mile Island” we need to reflect on the fact that no nuclear facilities have been built in the US since that catastrophe. Off shore drilling will be under much more scrutiny.
How does family prepare for sustainable energy security? Some ideas:
1. Reduce the number of cars you own. The three, four and five car family isn’t unusual.
2. Drive a vehicle that uses less fuel.
3. Move closer to work.
4. Carpool/car share.
5. Use public transportation.
Or, you could just try and capitalize on the situation and go long on oil (USO ).