UK Parliamentary Group: Peak Oil threatens development in poor countries

A group of British MPs, together with two development groups have released a new report showing the potentially catastrophic consequences of the looming peak in world oil production on poor countries. The text warns that decades of progress could be reversed and that the efforts to make poverty history might be in vain. The risk exists that the UN’s Millennium Development Goals will never be achieved. What is more, social unrest and conflict may arise as a consequence of the ongoing energy crisis. The document titled The Impact of Peak Oil on International Development therefor calls on all stakeholders involved in development work to adapt their strategies to this new dangerous energy landscape.

High oil prices are largely responsible for the current spike in food prices, which already resulted in food riots in several countries. But the energy crisis can go much further and “make poverty a permanent state for a growing number of people, undoing the development efforts of a generation”, the report warns. This is so because access to affordable and abundant energy, in particular liquid fuels, is the key to agriculture, economic development, mobility and social progress (earlier post, with an assessment by the UN of the disastrous impacts of high ($60 per barrel) oil prices on the Least Developed Countries, and the report by the InterAcademy Council which sees tackling energy poverty in the developing world as one of the biggest challenges of this century).

Written by the House of Commons’ All Party Parliamentary Group on Peak Oil, RESET and Practical Action, the new study says that “communities across the globe are more vulnerable than ever, living in an unsustainable present and facing an uncertain future.”

The parliamentary group, chaired by lawmaker John Hemming, was formed in 2007 to consider the production outlook and the consequences of declining supply for the British and world economy. It has 20 members. Its report now refers to warnings that peak oil is likely to occur “before 2015″ and the current jump in oil prices is “a prelude to even more severe increases in the next decade,” a statement issued with the report said.

Energy security has become a political priority for governments world-wide, a priority which needs to be reflected in the field of international development. Principal donors of overseas aid and senior policy advisors are encouraged by the Group to consider that:

  • Vulnerability to energy and commodity price rises must be addressed at all levels - from humanitarian aid to bilateral development;
  • Business as usual is not an option: future project funding should include criteria for reducing energy vulnerability - especially in post-disaster recovery and reconstruction settings;
  • Food production should be de-linked from petro-chemicals; proven alternatives should be promoted.

Transport, diesel-generated electricity, refrigeration, plastics and medicines are all susceptible to increasing energy costs. Availability of all these items is not in question - the question is whether people will be able to afford them as energy becomes scarcer, the document states.

Political and economic impacts of high oil
When oil passed $130 per barrel in May 2008, it sent shockwaves through the global economic system. As prices have risen, protests at the economic impact have been organised. Hauliers across Britain, France, the Netherlands and Bulgaria, as well as European fishermen, have shown their desperation.

“However, the impacts are hitting hardest in the developing world, where fuel price rises make the difference between poverty and extreme vulnerability”, the report states:
:: :: :: :: :: :: :: :: :: :: :: ::

After Indonesia withdrew subsidies in June, leading to a 30% fuel price jump, daily protests have erupted. In the Lebanon, reports were received of five people killed and forty injured, as police attempted to quell civil unrest as a result of protests against rising fuel costs.

Potential impacts of a global recession
In 2006, Dr Robert Wescott, former chief economic advisor to the US President, stated that “if oil increased to $120 a barrel and stayed there for a year [...] it would almost certainly precipitate a global recession”. Goldman Sachs and OPEC representatives indicated the possibility of a $200 barrel by the end of 2008 meaning that despite efforts to stem economic downturn in the short term, a global recession is now likely.

The impacts of global recession on the international development sector would be profound. For agencies working in the field, the outcomes are likely to be stark: higher operational costs together with contracted donor aid budgets.

Furthermore, as oil prices rise and commodities become less affordable, social unrest and conflict is inevitable - food and energy riots reported already during 2008 are testament to this.

Economic Impacts on Developing Nations
In 2007, a High-Level Task Force based at Oxford University, warned that high energy prices would “wipe out Millennium Development Goal progress”. Meanwhile, the International Energy Agency found that each $10 per barrel increase costs sub-Saharan Africa 3% of GDP. In the year 2000, it was estimated that countries in sub-Saharan Africa spent 14% of their GDP on fuel imports. Oil is now $100 a barrel more expensive than in the year 2000.

The Parliamentary Group says the current situation is clearly unsustainable and needs to be addressed. Where possible, development assistance should promote energy security through local, renewable energy generation that minimises dependency on fossil fuels. This is in line with EU energy policy.

Energy poverty and alternative energy
It is important to remember - amidst all the discussions of the impact of Peak Oil and Climate Change on our energy usage - that around a third of the world’s population today still has no access to electricity and almost a half of the world’s population still cooks over open fires.

Energy poverty is a feature of life in the developing world. Ending energy poverty means providing sufficient access to improved energy sources, to cover:

  • Elemental needs - providing basic energy needs in the home
  • Basic services that make a big impact on quality of life: energised pumping to bring water closer to the home, refrigeration for vaccines, lighting in health posts to extend opening hours, lighting and basic equipment in schools to improve teaching facilities, and better facilities in schools and clinics to attract better doctors and teachers to work in rural areas.

There is a direct correlation between energy consumption figures and countries’ levels of development, as shown by the graph charting Human Development Index (HDI) scores against per capita energy usage (graph, click to enlarge). HDI seems to reach a plateau when the average nation’s people consume about 4000 kWh (kilowatt hours) per capita of electricity annually.

The EU recognises that to avoid energy vulnerability we “cannot hang on to old, fossil energy systems”. An equally compelling argument has been made for overseas development in a UN Development Programme analysis that “today’s situation [...] entrenches poverty, constrains the delivery of social services, limits opportunities for women and erodes environmental sustainability at the local, national and global levels.”

Energy security and development
In relation to energy security, it is useful to identify where communities in the developing world may be most vulnerable to energy price rises. Risk areas include cooking, electricity, light, heating and cooling.

From this point, it is possible to see how renewable energy systems, or in some cases
increased efficiency, could play a useful role to reduce vulnerability, offer better economic value and strengthen resilience. The economic comparison between renewable energy systems and fossil fuel improves every time the price of oil rises.

To tackle energy poverty in a world of rising oil prices and the threats from climate change the following actions are required:

  • Urgent government action to reduce the unit cost of renewable technologies, including solar photovoltaics, and to increase efficiency (e.g. through feed-in tariffs).
  • Greater emphasis on renewables as the first choice option wherever feasible and additional grant funding to cover increased capital costs where this is not the lowest cost option.
  • More investment in decentralised energy production to enable the rural poor to gain access to energy where extensions of national grids are unlikely in the medium term.
  • Grant financing to enable developing countries to access new technology to improve efficiency and reduce carbon emissions where fossil fuel use is currently inevitable.
  • Recognition that, if energy poverty is to be dealt with, the developing world’s use of carbon will have to increase in the short to medium term and that the developed world’s absolute and relative share of consumption of fossil fuels will have to fall sufficiently to accommodate this and concerns over reducing global carbon emissions.

This paper advocates urgent risk assessment in energy scarcity, international development and cooperation. Viable strategies need to be identified that can mitigate further hardship and disaster through community based projects. These strategies need to be included in donor funding criteria.

More specifically, the following recommendations are made:

  • Support and fund a Working Group on energy security and international development to undertake contingency planning on the impact of Peak Oil in developing countries, and humanitarian response capacity
  • Make local energy security a donor funding criteria to encourage organisations to adopt appropriate technologies and designs
  • Initiate wider dialogue and action planning within the UN and other leading donors on questions of energy security
  • Fund research and training that builds capacity in local food and energy security that is independent from fossil fuel imports - disseminated across the humanitarian and development sector.

Many proactive strategies exist to manage this transition to sustainable, low carbon
communities. They should be integrated into humanitarian and development funding
priorities and criteria, the report concludes.

Picture: bags of rice being offloaded from a truck on weekly market in eastern Niger. Low transportation costs are vital to ensure food security.

House of Commons - All Party Parliamentary Group on Peak Oil: The Impact of Peak Oil on International Development [*.pdf] - June 2008.

Biopact: High oil prices disastrous for developing countries - September 12, 2007

Biopact: Global effort to fight energy poverty in Africa is launched at the World Economic Forum - June 14, 2007

Biopact: Leading scientists: energy crisis poses major 21st century threat, action needed now - October 23, 2007

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