Monday, 10 February 2014

Peak short-sightedness

The last post got me reading some of the Department for Transport (DfT) forecasts, which have some amazing predictions in them. It did strike me odd how the DfT can forecast things like future mileage, without any mention or regard to the global decline in oil supplies that we call Peak Oil. Surely that will have some effect? All the graphs and quotes are taken from Road Transport Forecasts 2013 : Results from the Department for Transport's National Transport Model or Road Transport Forecasts 2011: Results from the Department for Transport's National Transport Model, January 2012 Lets start with a good one.......

The black line in this graph shows the actual recorded car miles travelled per person per year, and the red line shows the most likely projection according to DfT. The black line looks very much like the peak of a bell curve to me, but to the DfT this is a minor blip in the continuing growth that they are expecting. Despite an increasing older population who drive less miles and many young people unable to afford to learn to drive or buy a car until they are much older now, the overall trend in their view is for us to be driving more, as soon as the 'temporary' constraints of the recession and high fuel prices pass. Even the light green line, which represents the projection if there is a continued high oil price and continued low growth in GDP, shows a growth in travelling! How do they work this one out given the impact of the last 5 years has shown a continuous decline?

The DfT don't make these projections alone. They rely on projections for the population increasing from the Office of National Statistics (ONS), and projections for the economy growing from the Office for Budget Responsibility (OBR) and projections for oil prices from the Department for Energy and Climate Change (DECC). Here is their forecast for oil prices....

This is probably my favourite graph of the bunch :-) What does it tell us? That oil prices over the next 15 years are not expected to follow the trend for the last 15 years, but could do anything from increase by 72% or decrease by 27%. It gives the impression that DECC really has no idea what oil prices are going to do.

If we just think logically, what kind of impact would a growing global demand for oil have? It may well push prices up. Instability in oil-producing regions? It is likely to push prices up. Increasing carbon taxes (Ok this is me wishful thinking)? It could push prices up. Increasing extraction costs for oil as we have to dig deeper and go to more remote areas like the Arctic to find oil? They will push prices up. But wait....high oil prices lead to recession and recession in turn reduces the demand for oil, so oil prices could subsequently drop, just like they have in 2008. My prediction is that we will see more high peaks in price followed by troughs, but the overall trend will see prices rising. I suppose the graph is roughly on track in that prices are mainly shown to rise, but it just looks like no graph I have ever seen!

 Car miles per person (with 5 year annualised growth rates)

The blue line in the graph above is showing the average car miles per person since the 1950's, and conveniently points out all the dips where there were recessions. The pink columns show the rate of growth, so in the fifties many people were just getting the oppotunity to own their own car and petrol was becoming available again after the rationing during the war, so there was plenty of growth. The Suez Crisis caused a small dip in growth. The 1970's price spikes had a far bigger impact, but growth recovered in the late eighties. Really since then growth in miles driven per person has been far lower and has decreased from 2005 onwards.

"Historically, static growth or falls in car miles per person correlate with periods of high oil prices or economic contractions. This is specifically seen during fuel rationing of 1957, twice during the 1970s where there were spikes in the oil price and economic recessions, during the recession of the early 1990s and in the year 2000 when fuel prices increased by over 10%. "
Now here comes the lovely green line predicting that economic recovery will lead to continued growth in miles driven. Plus of course new cars are now more efficient, so will cost less to run, meaning we can all afford to drive even further! I really feel that there is a trend here that DfT are missing. People I know are looking to reduce their commute, walk and cycle more, and drive slower to reduce fuel consumption, not just to reduce fuel costs, but also to reduce carbon emissions and the time spent stuck behind a wheel. What about you?

Looking at the car miles per person back to the 1950's makes the graph look even more like a bell-shaped curve. Can anyone else see this or is it just me? Car miles per person in England really seems to have peaked, and only wishful thinking by DfT is trying to slow down it's descent. Of course growth in car miles would be good news for a short-sighted government, who think about increased income from fuel duty, sales of new cars and increased GDP. But can we really ignore or dis-associate it with the longer term issues such as climate change, air pollution and diminishing natural resources.

I am glad peak car miles is here. The more we can reduce our reliance on driving everywhere, the better prepared we will be for rising oil prices and the supply restrictions which are on the horizon.

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