In a new book, former oil geologist and government adviser on renewable energy, Dr. Jeremy Leggett, identifies five "global systemic risks directly connected to energy" which, he says, together "threaten capital markets and hence the global economy" in a way that could trigger a global crash sometime between 2015 and 2020.

According to Leggett, a wide range of experts and insiders "from diverse sectors spanning academia, industry, the military and the oil industry itself, including until recently the International Energy Agency or, at least, key individuals or factions therein" are expecting an oil crunch "within a few years," most likely "within a window from 2015 to 2020."

Interconnected risks

Despite its serious tone, The Energy of Nations: Risk Blindness and the Road to Renaissance, published by the reputable academic publisher Routledge, makes a compelling and ultimately hopeful case for the prospects of transitioning to a clean energy system in tandem with a new form of sustainable prosperity.

The five risks he highlights cut across oil depletion, carbon emissions, carbon assets, shale gas, and the financial sector:

"A market shock involving any one these would be capable of triggering a tsunami of economic and social problems, and, of course, there is no law of economics that says only one can hit at one time."

At the heart of these risks, Leggett argues, is our dependence on increasingly expensive fossil fuel resources. His wide-ranging analysis pinpoints the possibility of a global oil supply crunch as early as 2015. "Growing numbers of people in and around the oil industry", he says, privately consider such a forecast to be plausible. "If we are correct, and nothing is done to soften the landing, the twenty-first century is almost certainly heading for an early depression."

Leggett also highlights the risk of parallel developments in the financial sector:

"Growing numbers of financial experts are warning that failure to rein in the financial sector in the aftermath of the financial crash of 2008 makes a second crash almost inevitable."

A frequent Guardian contributor, Leggett has had a varied career spanning multiple disciplines. A geologist and former oil industry consultant for over a decade whose research on shale was funded by BP and Shell, he joined Greenpeace International in 1989 over concerns about climate change. As the organisation's science director he edited a landmark climate change report published by Oxford University Press.

Industry's bad bet

Leggett points to an expanding body of evidence that what he calls "the incumbency" - "most of the oil and gas industries, their financiers, and their supporters and defenders in public service" - have deliberately exaggerated the quantity of fossil fuel reserves, and the industry's capacity to exploit them. He points to a leaked email from Shell's head of exploration to the CEO, Phil Watts, dated November 2003:

"I am becoming sick and tired of lying about the extent of our reserves issues and the downward revisions that need to be done because of far too aggressive/ optimistic bookings."

Leggett reports that after admitting that Shell's reserves had been overstated by 20%, Watts still had to "revise them down a further three times." The company is still reeling from the apparent failure of investments in the US shale gas boom. Last October the Financial Times reported that despite having invested "at least $24bn in so-called unconventional oil and gas in North America", so far the bet "has yet to pay off." With its upstream business struggling "to turn a profit", Shell announced a "strategic review of its US shale portfolio after taking a $2.1bn impairment." Shell's outgoing CEO Peter Voser admitted that the US shale bet was a big regret: "Unconventionals did not exactly play out as planned."

Leggett thus remains highly sceptical that shale oil and gas will change the game. Despite "soaring drilling rates," US tight oil production has lifted "only around a million barrels a day." As global oil consumption is at around 90 milion barrels a day, with conventional crude depleting "by over four million barrels a day of capacity each year" according to International Energy Agency (IEA) data, tight oil additions "can hardly be material in the global picture." He reaches a similar verdict for shale gas, which he notes "contributes well under 1% of US transport fuel."

Even as Prime Minister David Cameron has just reiterated the government's commitment to prioritise shale, Leggett says:

"Shale-gas drilling has dropped off a cliff since 2009. It is only a matter of time now before US shale-gas production falls. This is not material to the timing of a global oil crisis."

In an interview, he goes further, questioning the very existence of a real North American 'boom': "How it can be that there is a prolonged and sustainable shale boom when so much investment is being written off in America - $32 billion at the last count?"

It is a question that our government, says Leggett, is ignoring.

Crunch time

In his book, Leggett cites a letter he had obtained in 2004 written by the First Secretary for Energy and Environment in the British embassy in Washington, referring to a presentation on oil supply by the leading oil and gas consulting firm, PFC Energy (now owned by IHS, the US government contractor which also owns Cambridge Energy Research Associates). According to Leggett, the diplomat's letter to his colleagues in London reads as follows:

"The presentation drew some gasps from the assembled energy cognoscenti. They predict a peaking of global supply in the face of high demand by as early as 2015. This will lead to a more regionalised oil market, a key role for West African producers, and continued high and volatile prices."

The text of the 2004 letter is corroborated by a 2009 PFC Energy report commissioned by the International Energy Forum which concluded that world conventional oil supply was approaching "peak production, where the petroleum industry's ability to continue to increase - or even maintain - production of conventional oil (and eventually gas) is constrained...

"Exploitation of unconventional oil will provide additional liquids, but in all probability only at increasingly higher costs, and it will depend on significant investments to develop appropriate technologies to convert today's resources into tomorrow's reserves. The exact timing of both the plateau and onset of irreversible decline will be influenced by the factors that determine long-term changes in supply and demand. Nevertheless, the challenge is coming, and this emerging world of limited conventional production will require major adjustments on the part of both consumers and producers."

Requests for comment from PFC Energy and Cuadrilla, a UK energy company, concerning Leggett's warning of a near-term oil crash despite shale gas production received no response.

Critics point out that Leggett and others warning of peak oil are wrong because they never saw the prospect of shale. In response, Leggett tells me:

"Its true that the short burst of shale gas and shale oil has taken a lot of 'peakists', myself included, somewhat by surprise, and that the oil peak has been pushed out in time a little by tight oil. What hasn't changed is the basic issue: most of the incumbency says the 'all-liquids' oil production peak is many years hence, the minority doubting the narrative says it is much nearer, within this decade. And lets not forget: conventional crude oil has already peaked, as even the IEA admits."

After his stint as Greenpeace's science chief, Jeremy Leggett went on to found the UK's largest solar energy company, SolarCentury, and to advise the British government on renewable energy from 2002 to 2006. He is now convener of the UK Industry Task Force on Peak Oil and Energy Security which includes major multinationals like Arup Group and Virgin, chairman of the Carbon Tracker Initiative which aims to improve the transparency of carbon embedded in equity markets, and a co-organiser of the Trans-Atlantic Energy Security Dialogue I reported on last January. That same month, Leggett addressed world leaders at the World Economic Forum in Davos about his forecast.

The 2015 oil crunch forecast, Leggett writes, is corroborated by the Industry Task Force report:

"In this report we updated the evidence that defines global oil reserves and extraction rates, and concluded that the global peak production rate for oil would likely occur within the decade, very likely by 2015 at the latest – at a value no higher than 92 million barrels per day."

Based on flow rate data, the report found that "increases in extraction would be slowing down in 2011–13 and dropping thereafter." From then on, global oil production would drop "at 1% a year from 2015. If the then IEA forecast of demand rising to 105 million barrels a day in 2030 were to prove correct, supply would fall short in 2015."

Uncertain future

The "incumbency", as Leggett calls it, strongly disagrees. A much-touted Massachusetts Institute of Technology (MIT) study, The Future of Natural Gas, has predicted that US gas consumption will double to 40% of the country's energy needs by 2050.

Though at first glance an impressive body of interdisciplinary work, a report by the US-based Public Accountability Initiative in March last year documented "growing evidence that the oil and gas industry" had attempted to "corrupt" the process of "academic inquiry." The report alleged that the MIT study was both authored and funded by oil and gas industry insiders, and as a consequence marred by "poor scholarship."

Other large studies of oil supply challenges which acknowledge the peak of conventional production are less specific, though. The UK Energy Research Centre, for instance, has forecasted such a peak to occur "before 2030" - a position backed up by more recent research published by the Royal Society. A convener of that research, however, agrees that a near-term peak is more likely than a later one.

Peak oil does not mean, Leggett insists forcefully, that oil is "running out." The problem is the increasing costs of extraction and decreasing flow rates of unconventionals:

"It will never run out. Oil reserves under the ground, we tried to say, once again, are not the same as oil flows from production pipes at the surface."

The UK Industry Taskforce's pinpointing of 2015, Leggett emphasises throughout his book, is corroborated by forecasts from a range of other agencies, including the US and German militaries.

UK risk blindness?

Citing the cracks appearing in the US shale market, he pulls no punches about the stark consequences of what he sees as the UK government's deliberate policy to "actively suppress renewables":

"Picture the scene if most of the national energy eggs are put in that basket, infrastructure is capitalised, and then supplies of cheap gas fall far short of requirement, or even fail to materialise."

I put Leggett's concerns about UK energy strategy to the Department of Energy and Climate Change (Decc), and whether they found his scenario at all plausible. A spokesperson said:

"Geological uncertainty, economic, geopolitical and environmental factors make it difficult to predict future oil reserves. The Government does not subscribe to a particular view on when oil production is likely to peak and at what level, although there is a recognition that it is inevitable that oil production will peak and then begin to decline. The Government is committed to a diverse energy mix and is investing in nuclear and renewables, which will ensure we have a secure supply of energy in the future. The lights will not go out."

Although Jeremy Leggett's warnings put him in a minority, he is in good company. Writing in Nature in 2012, former chief government scientist Sir David King dismissed the notion that a shale gas boom could avert a coming energy crisis due to overestimated reserve sizes, rapidly declining production rates, high production costs, and insufficient profits.

The good news, Leggett writes, is that the unprecedented ramifications of a post-crash economy could create exactly the kind of new social and political context that could spur massive appetite to change our ways. But in practice the crash could play out in different ways:

".... if my suppositions are correct so far – a big if – the world faces either an oil shock by the end of 2015 and a financial crash soon after, or a second financial crash before then, followed by a delayed oil crash some years later."

Dr Nafeez Ahmed is executive director of the Institute for Policy Research & Development and author of A User's Guide to the Crisis of Civilisation: And How to Save It among other books. Follow him on Twitter @nafeezahmed

In Part 2, we explore Leggett's 'road to Renaissance' - his solutions for mitigating a crisis and working together to create more sustainable, fairer and prosperous societies.