Think further ahead about oil, buyers told

10 February 2010

10 February 2010 | Rebecca Ellinor

Fossil fuel buyers need to buy further in advance and reduce their dependency on oil-based fuels if they are to cope with an impending oil crunch.

The advice follows mounting fears over “peak oil” – the point at which the world's oil output reaches a maximum, and either plateaus or goes into terminal decline.

In a feature examining what purchasers can do – which will appear in the next issue of SM (18 February) – experts said the answer was a mixture of buying further ahead, switching away from oil-based fuels and pressing governments to help them weather the storm.

Procurement should be looking to buy “blocks” of oil-related products for the future to insulate against market volatility, said Martin Rawlings, director of UK energy consultancy Blizzard Utilities and chairman of the CIPS energy group.

A key buyer at Virgin Atlantic, who did not want to be named, said it was essential to have strong relationships with suppliers. “As resources become scarcer you’ve got to be able to rely on them. In addition, there has got to be collaboration between suppliers and users to look at alternative fuels.”

The testing of new aviation biofuels by the regulatory bodies of all governments needs to be accelerated, he added. “The biggest thing preventing [the adoption of biofuels] is getting the fuels approved by government bodies. The sense of urgency should be sped up.”

Meanwhile, concerns were raised earlier this month that proposals to reinvigorate the UK energy market would mean significant price hikes for energy buyers. Regulator Ofgem said the industry would need up to £200 billion of investment to turn itself around. It called for radical reform, including promoting “green” energy and creating a government-regulated “central energy buyer”, where all future investment would be co-ordinated through a single entity.

* See the 18 February issue of SM for more about how to tackle the problem of peak oil.

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