Mallen Baker's Blog

Branson and other leaders raise the alarm on coming oil crunch

8 Feb 2010

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Richard Branson, whose rail and air travel businesses rely heavily on energy, has warned UK ministers that the world is running out of oil and will face an oil crunch even worse than the credit crunch. Other business leaders have joined the high profile businessman, breaking ranks with the likes of BP, Exxon, and the Saudi government who claim that there is no problem.

Who is right?

From where I'm sitting, the ritual refutation that oil will run out any time in the future has all the hallmarks of yet another episode of collective denial. How so? Mostly because those leading the charge for the 'everything is fine' camp are the people with the biggest vested interest in the world believing it to be so.

We've seen it before. The dot-com crash. The credit crunch. Both were preceded by minority voices raising concerns to the general derision and occasional anger of those that wanted to believe that all the rules had changed for good.

In the short term, companies like BP and Exxon may avoid the damage on the stock market that would come with widespread belief that they had fewer reserves than they have suggested. In the medium term - and that's not a long time away, incidentally - human society would lose out big time by not being able to plan with clarity for the changed circumstances that declining oil supplies will bring.

Business leaders that are prepared to raise the issue and alert governments to the challenge play a crucially important role.

This is the positive face of corporate lobbying. Make note, lest you be tempted to wish that business access to lawmakers should be unconditionally restricted.

Take note as well about the completely different context that will apply to business in the future. When energy prices spiked temporarily a year ago, we saw small airlines go to the wall, sentiment in the US moving away from the bigger cars, and a lot of discomfort from those used to heating costs being a smaller percentage of the family income.

It will all come back, but to stay. That will help solve some problems - the cost of flying will price it as a luxury, so fewer people will fly, and prices of food will move more in line with the carbon associated with the product's production so people will choose lower impact options. But the negative impacts will also be enormous.

Time to re-evaluate your business model.

Tags: CSR Richard Branson peak oil corporate lobbying corporate social responsibility Mallen Baker

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