[Peakoil] The Australia Institute on Peak Oil

[Alex Pollard]

Good to see the Australia Institute raising Peak Oil awarenes.

There is a lot of cross-over between addressing Climate Change and Peak
Oil however a carbon price per se would not sufficiently price the
scarcity oil nor would it price the risk of oil supply disruption eg
deep-sea drilling, oil supply lanes through volatile regions.

Alex


    
        
            13. The dirty topic of peak oil: get
ready to reduce your reliance 
        
        
            Dr David Ingles, author of Running on empty?
The peak oil debate, writes: 
        
        
            CLIMATE CHANGE, GREENHOUSE GAS EMISSIONS, INTERNATIONAL ENERGY AGENCY, OIL 
        
        
            
            
Wouldn't it be funny if we spent so long arguing about what
to do about climate change that we ran out of cheap oil first?
No, it wouldn't really, it would be catastrophic.
            
But given the government's delay in producing an Energy
White Paper and the steady backsliding on the need to actually
reduce our greenhouse gas emissions in Australia, it is not
beyond the realms of possibility. Even the usually optimistic
International Energy Agency (IEA) is starting to sound a
little nervous.
            
No one can say with certainty how much oil is left in the
ground nor how much it will cost to take it out. As with
climate change, the search for certainty in relation to oil
supply is a fool's errand. But while no-one can say with
certainty how much is left, virtually no economists or oil
industry analysts disagree with the statement that oil
production cannot keep growing forever. The notion that oil
production must one day peak is now referred to as 'peak
oil'.
            
While there is virtually no debate that oil production must
one day peak, there is much debate about the timing and
significance of such a peak. For those who have become
accustomed to talking about emission reduction targets for
2020 and 2050 it may come as some surprise to learn that the
mid-range forecasts for the peak in global oil production are
10-15 years. This does not mean that there will be no oil in
10 or 15 years time, but it means oil is going to get a LOT
more expensive. Put simply, if demand continues to rise and
supply starts to fall the days of the average Australian
driving their Landcruiser to work will be over.
            
Peak oil concerns exploded during the rapid escalation of
oil prices prior to the 2007 global financial crisis. These
concerns have been underscored by official bodies such as the
IEA warning of a possible "supply
crunch" brought about by a lack of new investment
following the crisis, and of rising depletion rates from
existing fields.
            
According to the CEO of Lloyds Insurance,
there are three factors combining to create deep uncertainties
in how we will source energy for power, heat and mobility, and
how much we will have to pay for it. These are the growing
constraints on "easy access" oil, the urgency of
reducing carbon dioxide emissions, and a sharp rise in energy
demand from the emerging economies, particularly China.
            
As with climate change, the debate about peak oil is not
simply confined to whether it exists or not, but whether it is
worth worrying about. Some economists simply argue that as
prices rise rapidly people will be forced to use a lot less
fuel. While this is no doubt true, the potential disruption to
the broader economy of people not being able to afford to
drive to work are significant, to say the least.
            
World economies are built on oil. As occurred in response
to the OPEC oil shock of the 1970s, skyrocketing oil prices
are likely to result in severe disruption to those economies,
with central banks raising interest rates to slow inflation,
people out of work, and famine and civil disorder in the third
world, as much agricultural production depends on oil.
            
The obvious policy response to the inevitable peak in oil
supply is to begin to reduce our reliance on oil well before
we are forced to do so. But what would that entail?
            
Subsidies for oil use are common around the world and need
to be phased out. Wastefully low rates of fuel tax in the US
should be changed. Countries like Australia, while small in
terms of their contribution to demand, have a role to play.
Fuel and road-pricing regimes need to be altered to encourage
fuel efficiency. A congestion tax and investment in public
transport would help to shift people from the least to the
most fuel-efficient forms of transport. Alternative fuels like
natural gas can be promoted and fringe benefits tax
concessions on company cars that encourage owners to drive
more to pay less should be scrapped.
            
Some of the alternatives to conventional oil are becoming
economic at current prices, and might offer a way around peak
oil. But it must be recognised that they can involve extremely
high and possibly unsustainable costs in terms of greenhouse
gas emissions. The extraction of oil from tar sands, for
example, or its processing from coal and natural gas generates
enormous amounts of greenhouse gasses. This poses a potential
dilemma for policy, but the answer is actually quite simple --
a price on carbon.
            
As luck would have it, the policy prescriptions to prepare
for peak oil are almost identical to those required to reduce
our greenhouse gas emissions. Let's hope that policy makers
who are disinterested in saving the planet will pay a bit more
attention to saving the economy. It's inevitable that we will
run out of cheap oil, but it need not be inevitable that our
economies grind to a halt.
            
But if we are to avoid another big and permanent increase
in the price of oil, we need to invest in early adaptation. It
will be costly and difficult to redesign cities, switch the
vehicle fleet to new forms of fuel and invest in public
transport. Ironically, it will be much cheaper and easier to
make such investments before the price of oil surges, rather
than after. Early investment in adaptation measures will pay
high dividends in the future.
            
And who knows, if in 20 years someone finds an enormous new
oil field in the middle of Australia, all that preparation
might have served only to avoid catastrophic climate change.
And wouldn’t we feel silly then.
            
*Dr David Ingles is a Research Fellow at The Australia
Institute, a Canberra-based think tank. He is the author of
Running on empty? The peak oil
debate.
            
        
    

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