[Peakoil] Open letter to Kevin Rudd - by Lionel Orford, Queensland

[Keith Thomas]

The following was published two days ago by Lionel Orford, in 
Queensland.

I'm posting it here because it's focused on the Australian situation. 
Unfortunately, he seems to conflate measures to deal with peak oil with 
measures to deal with climate change (for example, the second of his 
"most pressing needs" is "major investment in infrastructure to better 
manage our water usage", which, while a good thing, does not appear to 
be the second most important thing Australia should do to cope with 
peak oil).
=========================
Open letter to Kevin Rudd, Australia's new Prime Minister
http://members.optusnet.com.au/~lionelorford/

by Lionel Orford
3 December 2007

The Hon Kevin Rudd MP
Prime Minister
Parliament House
CANBERRA ACT 2600



Dear Prime Minister,

Firstly, congratulations on your historic election win. Your promise of 
“new leadership” and a focus on Australia’s future are certainly needed 
at this time.

You have come to power at a time of a looming worldwide economic 
crisis; a time when we desperately need new leadership to deal with the 
immense problems ahead of us and an end to the deception, denial and 
neglect that characterised the Howard era. The news is in and it is 
very bad news indeed:

	• 	 We have now almost certainly reached Peak Oil. The highest ever 
level of worldwide production of “all liquids” was in 2006 and 
conventional crude oil was in 2005. It would now take a minor miracle 
to raise production above these levels and the rate of decline is 
almost certain to accelerate over the next few years such that 
“business as usual” is impossible.

	• 	 Global Warming is proceeding much faster than most scientists 
expected and we are completely clueless on how serious the problems 
will be and how fast they will unfold.

I do not address the Global Warming issue in depth in this letter 
because no actions by your government alone can have any significant 
impact on the problem as it is a worldwide problem, where extensive 
damage has already been done and major consequences are now 
inescapable. However, I must stress that I fully support major 
initiatives in renewable energy development, energy conservation and a 
global plan of action through the UN because these are the correct 
actions to mitigate the crises being brought about Global Warming and 
by Peak Oil.

Even though the effects of climate change are likely to be very 
serious, they are largely unknown and will play out over the coming 
decades. However, Peak Oil will have major consequences over the coming 
years – during your time as Prime Minister.

The unfolding crisis is in several ways analogous to the sinking of the 
Titanic. We are now at the stage where the ship has hit the iceberg and 
is already taking on water; its fate is sealed.

The crew is now trying to avoid panic by the passengers by announcing 
“All is well, the ship is unsinkable, there’s no need to launch the 
lifeboats”. Unfortunately most of the crew is yet to realise that this 
is simply not true – they are optimists, still in the denial of the 
dreadful truth.

There is an urgent need for recognition of the problem so as to best 
manage the crisis. Denial of the problem at this time will lead to 
inaction and a far greater disaster, just as it did on the Titanic.

Like the Titanic, this crisis was caused by gross negligence and hubris 
that led to a belief that the ship was unsinkable. The inevitability of 
Peak Oil and its effects have been known for decades, but rigorously 
denied, based on the belief that our technological prowess has made us 
invulnerable to reality.

Welcome to the job of Captain of the SS Australia.

Peak Oil and the Unfolding Economic Crisis

To those unstudied in PO, it initially seems “no big deal” - something 
that, to the Greenies, will stop us destroying ourselves or something, 
to the Economists, that the market and technical innovation will deal 
with. Both are extremely misguided by their respective ideologies and 
just flat wrong.

The bad news for the Greenies is that far from being that which will 
save us by reining in capitalism, it may well result in our demise 
through social dysfunction and the use of any energy source no matter 
how environmentally destructive.

The bad news for the Economists is that the market and technical 
innovation is completely unable to provide solutions to the demise of 
its staple food source – cheap energy. It has been assumed that as 
crude oil declines, we will turn increasingly to “alternative” sources 
of oil. This is a ridiculous assumption, based on hubris and blind 
faith; it is completely detached from reality. There are simply no 
alternatives to oil – no combination that can be obtained fast enough 
and in sufficient quantities to replace the dwindling supply.

What we have seen over the last 3 years of significantly higher oil 
prices is massive stimulation of efforts to increase supply, but the 
small increases in supply have not matched the declines in the large 
mature oil fields. We have seen demand fall to match supply by means of 
poor countries simply falling by the wayside. Now the world is guzzling 
its way through its trading reserves, but this can not last for long.

Very soon we will face an oil supply shortfall which results in 
dramatic escalation in the oil price. As the price increases, people 
will do what they can to reduce their usage. However, very quickly the 
discretionary use of fuel (trips to the coast, overseas holidays, 
interstate travel, etc) will be reduced to almost nothing.

At first this doesn’t sound that bad, but consider what it means for 
our service based economy. At best, it means a downturn and at worst, a 
collapse of the tourism industry, the airline industry and the rest of 
industries based on selling us stuff we want but don’t actually need. 
It means unemployment for many thousands, along with the bankruptcies 
and foreclosures of people’s homes.

The result will be a recession, which drives down demand to match 
supply through “demand destruction”.

A mild rate of decline (say < 1.5% p.a.) may result in a mild recession 
that goes on and on because there is insufficient oil to allow 
re-establishment of economic growth. The world economy would grind to a 
halt and a failure of the market system would probably follow.

However, it is far more likely that the economy will overshoot into a 
recession far more severe than what is required to cut back oil 
consumption to match supply. Ironically, as in the 1980’s, we would 
then see an excess of oil supply and a dramatic fall of the price. 
However, unlike the recovery of the 90’s, any economic recovery would 
be short lived due to significantly reduced oil availability due to 
depletion in the intervening period.

The magnitude of the coming decline in oil availability is truly 
alarming. In October 2007, the Energy Watch Group – a research body 
that provides advice to the German government – has released a report 
which states that which is becoming more and more obvious; that we 
passed the worldwide Peak Oil in 2006. Furthermore, EWG forecasts that 
the decline rate will be much higher than that foreseen by any other 
group, including ASPO. EWG predicts that crude production will be down 
to around two thirds of current production by 2020 and to half by 2030. 
If these well researched forecasts are correct, it is totally 
infeasible to reduce consumption by this amount in 2 decades, except 
through a collapse of our current system.

But the story gets worse. Petroleum geologist Jeffrey J. Brown has 
developed an ‘Export Land Model’ which models what happens to exports 
from the major oil exporting nations whose domestic demand is still 
growing while their oil production is in decline. These nations include 
Saudi Arabia, Iran, Venezuela, Kuwait, many of the smaller middle 
eastern oil producers and most importantly Russia – the worlds largest 
oil producer. The model suggests that it will only take about 9 years 
from Peak Oil for exports from the major producers to reduce to zero. 
This is very much in line with what actually happened to the Britain, 
where it took only 6 years from peak production for Britain to again 
become a net oil importer. This spells disaster for major oil 
importers, particularly the USA and Western Europe.

Right now, the USA seems to be in the initial phase of “The Long 
Emergency”, as James Kunstler has dubbed it. I think that the only 
uncertainties are how fast their economy will fall apart and what the 
reaction of the US high command will be. A collapse of the dollar seems 
imminent because of the converging effects of the unsustainable boom 
financed by ballooning consumer debt and the unsustainable flooding of 
the world economy with US dollars to import two thirds of their oil as 
well as a flood of consumer goods. The United States is bankrupt but 
nobody wants to admit it. The main reasons that in the US dollar 
retains any value at all are that a large number of countries hold 
dollars as foreign reserve, almost everybody buys their oil in dollars 
and manufacturing countries, particularly China, do not want to see a 
collapse of their largest market.

The consequences and speed of the downfall of the American Empire are 
highly unpredictable, but it is certain to be a disaster for the whole 
world, which ever way it unfolds. I worry that the US high command may 
do something really stupid, like launching military action to seize oil 
by force by attacking Iran or Venezuela for example. My only hope is 
that their current war for oil is going very badly and I don’t think 
the American people will support any new resource wars. However, this 
may change if the economy collapses and there is massive unemployment 
and hardship similar to that of the Weimar Republic of the 1920s.


What Your Government can do about it.

Prime Minister, it’s time to tell the crew and passengers the dismal 
truth and get everybody working together to launch the lifeboats.


Step 1. Tell the Truth

No government wants to tell the truth about the dire situation because 
that would cause a loss of confidence in the market economy and the 
government itself. However, you have an obligation to inform the 
Australian people of the seriousness of the situation and to take 
action to start to deal with it. You have an obligation to desist with 
the “all is well” denial and inaction of the previous government; to 
seek frank, fearless, honest and realistic advice from departments such 
as ABARE and DITR rather than covering up the problems by seeking only 
“optimistic” advice that will maintain confidence in the market 
economy, as your predecessor did.

I contend that it is far better to level with the Australian people 
before a crisis hits than to wait for it to happen and then react by 
saying “who could have known? – I was deceived!” Well – after verifying 
what I’m now telling you – you have no excuse to not know! To claim 
that you didn’t know would be to claim your own incompetence and the 
electorate would be justified in throwing you out of office at the next 
election.

The news must be delivered so as not to cause panic and I do see how 
difficult that is. The finesse required here is to term the news in 
terms of planning for the coming oil supply and economic problems. I 
note that your election campaign rhetoric did mention this very 
briefly.


Step 2. Start Planning for Major Infrastructure Works

When the economy goes into recession or depression, the only known way 
that some economic activity can be restored and unemployment reduced is 
by government investment – Keynesian economic intervention. At the same 
time as this government intervention is required; the nation has a 
burning need for infrastructure to allow our society to function with 
an ever declining supply of oil.

I suggest that these are the most pressing needs:

	• 	 Major investment in national electric railway infrastructure – 
long distance freight, high speed passenger rail and suburban light 
rail. A vast amount of petroleum is consumed by road freight, air 
travel and commuting. The majority of it can be powered by electricity. 
This would also enable greenhouse emissions to be significantly reduced 
due to the large increase in efficiency of rail transport compared with 
road and air transport.

	• 	 Major investment in infrastructure to better manage our water 
usage. We need to return the waste water generated by our cities to the 
land, together with the precious nutrients it contains.

	• 	 Major investment in carbon capture and storage. I personally don’t 
think this will prove technically and economically viable, but none the 
less, we should pursue it until it is proven non-viable. We have no 
other resource except coal which can be readily deployed to provide the 
rapid increase in the electricity we need.

	• 	 Massive investment renewable energy. The most promising 
technologies here are solar thermal with heat storage and geothermal. 
There is no point in developing large scale intermittent resources such 
as wind, photovoltaic and wave power because such intermittent 
generation cannot be managed on a large scale.

	• 	 Develop oil from coal technology in Australia, with the up-front 
requirement that any plant built must sequester the huge amount of 
carbon dioxide it produces. Again, this may never be viable, but the 
viability should be assessed.

	• 	 Get serious about infrastructure to allow bicycles to be used 
safely for commuting. This includes bikeways, storage facilities, 
showers and possibly public hire bike depots.

There is a problem with major government investment during the current 
boom times because such investment would be inflationary. However, this 
boom will end very soon and the planning behind such major 
infrastructure works takes years, with only a relatively small amount 
spent during the planning phase.


Step 3. Start conserving what we have left

Rationing of fuel will be one of the first steps required to deal with 
the coming shortages. If this isn’t done, there will be mayhem – 
hoarding of supplies, black market profiteering, queues for fuel at 
petrol stations and crucially, shortages for essential services, 
particularly food production and distribution. I believe that tradable 
quotas are the best means of rationing demand as they would allow 
people with greater needs to buy additional quota and reward those who 
conserve most effectively.

If rationing was implemented via a worldwide “Oil Depletion Protocol”, 
where all countries reduce their consumption progressively to match the 
available supply, this would mitigate the problem in the most equitable 
way possible, hopefully preventing a breakdown of world order. However, 
getting the US on board is bound to be difficult.

The rationing system must also reserve enough fuel to implement the 
infrastructure works required to adapt to the post-peak world.


Step 4. Get our best and brightest onto developing long term solutions

The size of the challenge that confronts us is truly staggering. I 
fully support your “Education Revolution” and regard the deliberate 
neglect of public education by the Howard government as reprehensible. 
However, there is no point training more economists and bankers for the 
capitalist system which will not exist for much longer.

A new economic system

The fundamental problem behind all the problems we face; the reaching 
of practical limits to growth in the case of oil, water and 
deforestation and the consequences of the waste products in the case of 
Global Warming, is that our economic system emanates from economic 
growth and fails to function without it.

We need an entirely new economic system which must be able to:

	• 	 function effectively without economic growth

	• 	 function to equitably share resources in a world of declining 
resources

	• 	 enable the development of local communities that are largely self 
sufficient

	• 	 facilitate depopulation of the planet

	• 	 restore planetary ecosystems.

Such an economy may need to be a state run economy, which have a poor 
track record. We need to learn from the mistakes of former state run 
economies and come up with something that works. I have thought long 
and hard about this and can offer few practical suggestions.

A new energy system

We must face reality and understand that we are dependant on large 
amounts of energy just to meet our fundamental needs and this cannot be 
changed in years or decades; it will take lifetimes. We must also 
understand that while there is energy available, we humans will use it 
because availability of energy is standard of living.

A recent Energy Watch Group report tells the bad news that coal will be 
peaked out worldwide within 20 to 30 years. It will simply impossible 
to provide the minimum energy needs of a population that lives in 
cities once the oil, gas and coal are severely depleted.

Current technology nuclear power (based on the fission of Uranium235) 
is able to provide only a relatively small part of our energy needs 
because viable supplies of Uranium235 are very limited. Developing this 
technology for Australia would be very short sighted indeed.

Hence I contend that we should get started on developing safe breeder 
reactors which convert Uranium238 to nuclear fuel and/or breeder 
reactors that convert Thorium to fuel. Uranium238 is a large resource 
and Thorium is a vast resource, capable of providing our energy needs 
for millennia. This is a large technical undertaking that will take 
decades, but the long term need for it is really beyond question.


Conclusion

When one fully understands the magnitude of the problems that we humans 
have caused ourselves, it’s tempting to just throw your hands in the 
air in dismay and just give up. Like the Titanic, we are in a situation 
where no desirable outcome is possible. However, we must do what we can 
to work for the best possible outcome.

The first step is to desist with the denial of the problems and the 
fantasy that everything is OK; that the market will sort it out. This 
involves informing the public about the seriousness of our predicament.

The second step is get stuck in and do what we can to adapt to our new 
situation.

If there is any aspect of this letter on which you would like me to 
provide references or further information, I am most willing to provide 
this. Stealing your line - I’m from Queensland and I’m here to help.

Most sincerely

Lionel Orford

--------------------------------------------
Keith Thomas
www.evfit.com
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