No silver bullet for oil in crisis

It’s easy to take cheap oil for granted when we fill our cars to drive down the great Ocean Road for the weekend, or buy more products dependent on the petrochemical industry to add to those that already fill our homes. The recent higher prices may make us grumble a little, but they haven’t yet made big changes in our oil-hungry habits. Peak oil could soon change all that.

Peak oil is the media-friendly term for the point at which global oil production reaches a maximum after which we will produce less and less oil each year. The timing of peak oil is of more than academic importance. Oil underpins the global economy, being essential to transport and freight, and also for the petrochemical industry. Economic growth has always gone hand-in-hand with growth in energy consumption and if we are caught unprepared when one of our major energy sources starts to decline the consequences could be disastrous. Soaring oil prices would only be the start.

A recent report for the US Department of Energy by Robert Hirsch found we would need to start preparing 15 years in advance of the oil production peak to ensure a smooth transition to other energy sources. How much time then do we have left to prepare for this event? The debate over the timing of peak oil has been often described as being polarised between “pessimists” such as Kenneth Deffeyes and Colin Campbell, and “optimists”, such as the International Energy Agency (IEA), with forecasts of the peak ranging anywhere between now and 2030 or beyond. This seems to offer little guidance at first glance, however some common ground is starting to emerge.

There is growing consensus within the industry that oil production outside the OPEC countries will peak in the next ten years. Statements to this effect have been made in the last year by senior figures from BP, Exxon and the IEA. This means that beyond this point the IEA is relying heavily on OPEC to not only meet growing demand for oil, which the IEA projects as reaching over 100 million barrels a day by 2025, but also to replace declining production in the rest of the world. This is a huge ask and there are serious doubts about the ability of OPEC, and particularly Saudi Arabia, to deliver. These concerns come not only from outsiders like energy investment banker Matt Simmons, but also from former Saudi Aramco senior executive Sadad Al Husseini.

How then can we deal with this problem? If peak oil occurs sooner rather than later then we’re already starting very late to prepare for it. There is no silver bullet that is going to solve this problem, no magic technology that is just waiting in the wings to replace oil in the near future. Bio-diesels and ethanol have problems of scale - they will never replace more than a small fraction of oil production. Options like coal-to-liquids technology will require massive infrastructure investment that will take many years to implement. The much-vaunted hydrogen economy is decades away and has many technical challenges to overcome. In any case hydrogen is an energy store, not an energy source, as it requires energy - and natural gas - to make it. These and other oil alternatives won’t solve the problem of peak oil on their own, but they will all likely play a part in the future. In the short term though the one thing that is really on our side is the slack in the system.

Our modern industrial way of life is based on the assumption of cheap plentiful oil and we are profligate in our use of it. Our modes of transport, city-planning and supply chains were never conceived with energy efficiency in mind, so there are enormous gains to be made in changing the way we do things. Some of these changes will happen quite naturally and quickly. With high oil prices imported food will become expensive food, making local produce more attractive to consumers. This will reduce fuel use in freight and discourage over-centralised distribution networks. Other longer term changes such as improving public transport will require real political will, but they will be essential for those on lower incomes in outer suburbs who will be hardest hit by rising fuel costs. Further into the future, our settlements and work patterns may change radically, moulded by the constraints of scarce and expensive oil.

Dealing with peak oil will be just one step on a long road to a very different and more sustainable way of life, and many other issues such as CO2 emissions, water use and salinity, will all have to be dealt with along the way. Nevertheless, peak oil is an increasingly urgent issue and despite the remaining uncertainties we can’t afford to wait and see, hoping that something will turn up. As was observed by WA minister for Planning and Infrastructure, Alannah MacTiernan, at last year’s Oil: Living with Less conference, “It is … certain that the cost of preparing too early is nowhere near the cost of not being ready on time”.