Energy is the lifeblood of modern societies.

Amory B. Lovins

Energy Risks

In the past two centuries, the risk we contemplated related to energy was the volatility of the price. This was easily, if not always inexpensively, met by buying futures or hedges against the price changing within a set period of time. This approach has two serious flaws: it means you do not benefit from favourable price changes; and, it only works in the short term.

Moving forward, we have more serious issues to contemplate regarding energy risks, especially for remote communities.

We have passed the point of Peak Oil for conventional oil, worldwide. This means that someday, oil will be too expensive to use for its common applications today. In effect, it will stop flowing. For remote communities, it will stop coming earlier than in the connected, industrialized world. That is because it will actually cost more in remote locations, and richer parts of the world will pay more than remote communties will be able to afford. That's the dwindling supply issue.

Suppply disruptions are a somewhat different issue. Due to mechanical failures, company failures, geopolitical tensions or infrastructure issues, some days supplies just don't show up when expected or desired.

Of course, at some point oil will likely just become unaffordable. That could be related to dwindling supplies as mentioned above, but it could also be a function of governments no longer able to willing to subsidize energy prices, or the imposition of a carbon tax to help mitigate climate change, or at least try to slow it down. Finally, it is possible that the world's citizens may finally wake up and simply force a massive reduction in the use of carbon-based fossil fuels, but more likely climate change will force the issue directly and physically.