Error parsing XSLT file: \xslt\FacebookOpenGraph.xslt Mark Sinclair's Blog: 12 November 2008 - Change will happen soon
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Mark Sinclair's Blog: 12 November 2008 - Change will happen soon

Date: 12 November 2008

Mark Sinclair is boss of leasing firm Alphabet

Well it was quite a week. In the US, Americans voted for change. In Paris, the world's energy watchdog had change thrust upon it.

As Barack Obama prepares to become the 44th President of the United States next January, he's acknowledged in his victory speech that he faces a disastrous financial crisis and a mounting energy challenge. He'll also have the formidable task of taking on Washington's "permanent government" with its army of 40,000 lobbyists trying either to prevent change or to mutate it to their clients' advantage.

As one commentator said: "It is a difficult mission and the stakes could hardly be higher."

Just how high became clear on Thursday, when the Financial Times semi-officially leaked the forthcoming annual World Energy Outlook report by the Paris-based International Energy Agency. Its core message: cheap oil will soon be a thing of the past and that will have enormous repercussions. The report warns: "It is not an exaggeration to claim that the future of human prosperity depends on how successfully we tackle the two central energy challenges facing us today: securing the supply of reliable and affordable energy; and effecting a rapid transformation to a low-carbon, efficient and environmentally benign system of energy supply."

For the IEA, which has for decades planned on the assumption that world oil production will always keep up with demand, this amounts to an about-face no less dramatic than the one that happened in American politics on Tuesday night.

Having been forced by recent events to re-examine its data and challenge its own long-held assumptions, the agency no longer believes that future exploration and drilling - even with pre-crunch funding levels - will be able to make up for the irreversible production declines now taking place almost everywhere except Saudi Arabia.

Oil prices (which even at $60 a barrel are still twice the average of the last 40 years) are expected to spike higher when the world economy begins to recover, says the agency. Large price swings will become the norm in the following decade, with the underlying trend rising towards $200 oil in 2030 - although it doesn't help to note that the IEA's previous forecasts have consistently underestimated future oil price movements.

Tsunami is an overused word these days, but fleets certainly seem to be facing one when it comes to oil-related costs - and it could hit as early as 2011-2012. If you want to know more about where the UK stands in relation to oil depletion, I recommend reading a report, Oil Crunch, by the newly-formed UK Industry Taskforce on Peak Oil and Energy Security.

The lower a fleet's overall CO2 emissions are, the less exposed it will be to the crunch that experts are predicting. A company whose fleet averages 160g/km of CO2 spends nearly 25% more on fuel than one whose cars average 130g/km. In fact, if you compared two such fleets on a Whole Life Costs basis, you'd probably find that the greener fleet was very much more cost-effective to its owner across a wide range of benchmarks from leasing costs to employer's National Insurance Contributions.

Even if the IEA and the UK Industry Taskforce are only half right, it surely makes sense for fleets to step up plans to reduce their carbon emissions - perhaps to an average of 130g/km or less - as rapidly as possible.

Obama's campaign website still carries the slogan "Change can happen." Energy watchers are saying that it will, and sooner than many thought possible.



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