Head in Middle Eastern Sands


For the last three months, every time the International Energy Agency (IEA) assessed the oil market they increased their estimate for global oil demand. These forecasts are just one factor that peak oil pundits are keeping an eye on. As demand for black gold increases, it is less likely world production can keep pace.
Australians’ concern about higher petrol prices is justified. They don’t just impact on our own personal budgets, but the whole economy shudders each time global oil prices reach record levels.
But, the fact that oil is a non-renewable resource isn’t a piece of information many Australians appear to retain from their secondary school science classes. The lack of discussion and preparation for oil shock is as alarming as the rising price. More than the price, we should be worried about the lack of debate about the impact and consequences of oil peak in this country.
Peak oil refers to the point in time when extraction of oil from the earth reaches its highest point and begins to decline. We won’t be able to say with certainty when we have reached peak oil until after the fact. Many experts say we have already reached the peak, others are predicting it will happen soon.
We will run out of oil. It is an unavoidable fact. And, while the debate about when is interesting, with few positive forecasts beyond 2050, the more important issue is: what are we going to do about it?
Global demand for oil is increasing at a rapid rate. At the end of 2004 IEA predicted, ‘World primary energy demand … is projected to expand by 60 per cent between 2002 and 2030.’ And this figure just keeps being adjusted up.
Kenneth Deffeyes is a geologist at Princeton University and an expert in the work of Shell Oil geologist M. King Hubbert. Hubbert successfully predicted peak oil production in the US almost fifteen years before it occurred in 1970. Deffeyes has used Hubbert’s work to analyse global oil supplies and estimates that global peak will occur sometime this year.
Oil producers in the Middle East and the Organisation of Oil Exporting Countries (OPEC) claim they can continue to meet demand for the next fifty years but have not provided any figures to demonstrate as such. Market driven optimism is hiding the dire nature of the situation.
It is true that oil companies are still opening new facilities and exploration continues. But the fields soon to come online are regarded as the last of the 500 million barrel mega fields.
Eighteen new mega projects will start producing in 2005, followed by eleven more is 2006. However, 2007 will see only three new projects, followed by three more in 2008. Figures such as these leave experts cynical about OPEC’s production claims.
The impact on global economic systems of peak oil will be alarming.
In October last year the International Monetary Fund scrapped its 2005 economic growth forecasts only a week after they were released in response to the oil price hitting record highs. Less than six months later we are at new record highs.
Current Australian debates that quibble over the small fluctuations in petrol price at the bowser will matter little in the medium to long-term impact of peak oil.
Australia’s geography in relation to the rest of the world, and its size means Australia is highly exposed to increasing oil prices.
Our reliance on oil and petroleum is exhaustively wide spread: food, clothes, plastics, manufacturing, transport and agriculture.
Petroleum plays an essential part in Australia’s food production and consumption systems. Agriculture is reliant on oil. It runs its machinery and transports its product. Large amounts are used in the manufacturing of fertilisers that maintain soil fertility.
Many European countries have begun increasing the price of consumer petrol by 5 per cent annually to try and soften the future impact of rising petroleum prices. Australia must follow.
Iceland is investing in research and development in its aim to become a hydrogen economy. In a forty year plan, it aims to use hydroelectric and geothermal energy to power the nations 180 000 vehicles.
Many other nations are investing in hydrogen technology in search of replacement energy solutions. Japan is investing in hydrogen fuelling station prototypes “ so is the US.
While hydrogen power vehicles are currently getting a good run at international car shows, their development is still highly experimental and costs billions of dollars.
They will require the development and implementation of a whole new fuel delivery system that will be expensive to make safe. Hydrogen is a highly reactive (and therefore) dangerous fuel.
How the United States proposes to meet its oil demand with hydrogen power is a good question. They consume a quarter of the world’s oil supply.
Despite the US indulgence in black gold, when it comes to looking for a problem, all fingers point at China.
In fact, the IEA attribute the latest demand estimate increase to ‘a more robust view of US economic growth and the impact of this and other factors on China’s oil demand growth prospects’. Recent estimates are for over 7 per cent growth of the Chinese economy until 2020.
If we had a larger population, fingers could very well be pointed at us. Australia’s excellent R&D history, sparse geography, but densely populated urban areas should be leading the way by developing new technology and adjusting current social and economic systems.
But, most of Australia is ignoring the issue – except Western Australia.
In 2002, the West Australian government commissioned a report titled Oil vulnerability and the Australian situation. Its findings are stark.
‘Petroleum is currently essential for transport, agriculture and most facets of WA’s community and economic life. Most people have assumed, wrongly, that medium and short-term supplies are assured.’
The report discusses the need to reduce reliance on petroleum because it doesn’t foresee a suitable alternative being found. It suggests Western Australia needs to take immediate action to change community and business practices and be much more efficient in their petrol use.
WA’s Sustainable Transport Coalition (STC) now employs the author of the report, Bruce Robinson. This year in The Australian he asked, ‘What would $10 a litre (petrol prices) do to the outer suburbs of Melbourne and Sydney?’
His own answer: ‘It would take out the major new suburbs on our fringes and impact severely on that mortgage belt.’
The lack of debate in Australia is limiting appropriate government decision-making. Instead of investing more in road infrastructure, Australian governments should be combining to invest in research and development into alternative fuels for transport and industry. They should be modelling potential impacts of oil shock and creating new systems to support regional Australia to deal with the impact of higher fuel prices.
Many young Australian families looking for an affordable home and a good community for their kids must factor in the creeping prices at the petrol pump into their decision-making. Petrol at $10 a litre will be black gold’s Berlin Wall for families in separate states or countries.
The British Oil Depletion Analysis Centre predicts the Earth’s original oil holdings were around 2000 to 2400 billion barrels.
About only half of this is left. And it is only in the last thirty years we have really become serious oil users. Our oil addiction is spreading to the developing world and demand shows no sign of slowing down.

Oil Prices Race to All-Time Peak, Truthout,4 April, 2005

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