Planning for peak oil - what it will mean

Peak oil is a term to describe the dwindling world oil supply. We won’t run out of oil - at least not in the short term - but there will be less oil and it will be more expensive. This problem is exacerbated by the burgeoning economies of India and China; so, just as supply is decreasing, demand is increasing. The latest BP Statistical Review of World Energy states, “It is no secret any more that for every nine barrels of oil we consume we are only discovering one”.

When looking at peak oil, we should be aware that it is in the commercial interests of oil companies to exaggerate the amount of their oil reserves. Their share price depends on it.

South Australia has no transport plan - if there was an understanding of peak oil we would have. At the national level the transport-related promises of both parties in the 2007 federal election were almost entirely about roads. Yet, in May 2005, the then Premier of Queensland, Peter Beattie, listened to the concerns of the member for Hervey Bay, Andrew McNamara, and set up the Queensland Oil Vulnerability Task Force.

Its report was tabled in October 2007 and recommended the development of a Queensland oil vulnerability mitigation strategy and action plan. Queensland's minister for sustainability responded by saying Queensland would have to adopt a wartime mentality in regards to oil use, and a committee has now been set up to prepare that recommended strategy.

The report considered three scenarios of low, central and high in relation to petrol prices and made observations about the implications under each of the scenarios. The authors assumed that the most likely scenario was the central one; that is, oil prices would average US$58 to US$60 a barrel between now and 2015, then reach US$70 to US$80 a barrel by 2050. The high scenario assumed that prices would rise to US$110 to US$115 a barrel by 2050.

History tells us that, only two months after the release of that report, the average price was US$87 a barrel and it hit an historical peak of US$100 a barrel early in January this year. Although it has fallen back a little since then it remains remarkably high.

That we are already facing the high scenario demonstrates how quickly this situation can get out of control without government having strategies in place. Oil market volatility could plunge the economy into crisis. Higher costs for using private cars will most certainly result in social disadvantage. In our large cities those with less income are pushed to the outer suburbs to obtain housing. Urban sprawl is a direct result of oil dependence and an unstated expectation that oil will always be there.

People living on the edges of cities are almost always car dependent because public transport is not factored in with urban expansion. They usually carry higher levels of debt, often having recently purchased housing and often there are few businesses or industries to provide employment, consequently outer suburban dwellers are forced to commute long distances in their cars. The result is fuel poverty.

Regional areas will be hit harder still because their food and commodity costs include the extra cost of petrol to transport them. State governments will have to look seriously at providing public transport in country areas. One of the risks associated with rising costs in rural areas is a population drift to cities and larger regional towns. We need strategies to deal with that influx.

Governments could be taking action on a variety of fronts to encourage the use of fuel-efficient cars by, for instance, offering lower registration costs. The Reva electric car has been refused registration in Australia because of the question of vulnerability to impact in a crash but we continue to register motorbikes, which offer no rider protection. We know the Reva has potential as an alternative mode of transport. So why not simply create a new category of registration?

We have seen the announcement of the closure of Mitsubishi, and I have called for that site to be used for the manufacture of solar buses; however, it could equally be used for an electric car industry.

In terms of transport, the government will need to seriously consider car pooling. We need to look at full-time bus lanes and soft technology, such as scooters, cycling and walking. As far as work is concerned, we are going to have to look at encouraging telecommuting.

Cities including Toronto, Vancouver and Portland have shown that people do not take their cars to work when they know they will never have to wait more than 10 minutes for public transport.

A congestion charge could be applied for people taking their car into the city. The money raised could go to public transport development.

What are the implications of peak oil for urban planning? We need transport-oriented development, where we allow a heavier density of housing close to railway stations and so on.

Greater investment in freight rail infrastructure should be happening now because it is far more fuel efficient. Air travel is highly fuel intensive, and it is likely that in the future this mode of travel will be used only for business purposes rather than tourism.

We are told by the South Australian government that we are on the brink of a mining boom. I do not have figures for South Australia, but the Queensland task force report does.

The Queensland report states that the mining industry is the second largest consumer of petroleum products in that state, with oil-based products making up 50 per cent of its energy use. The more remote the mine, the more it is likely to consume, particularly diesel for power generation. The amount of processing that occurs on site also determines the degree of oil dependence and, therefore, vulnerability.

The exploration stage of mining is also highly oil dependent. Once up and running, the mines use oil products for the extraction and trucking of ore, and flights into and out of the mines. The Queensland report gives some interesting examples of the dependence on oil. For example, New Hope Coal Australia uses 16,063,000 litres of oil to produce 2,068,000 tonnes of coal, that is 7.6 litres of diesel to produce one tonne of coal. And we need 100 litres of oil for one ounce of gold.

Ninety per cent of the energy used in agriculture is oil-based. In Australia we have low fertility soils. Without the pesticides and fertilisers they have become reliant on, will farmers have enough produce left to export? If not, what impact will that have on our state's economy?

As a consequence of climate change and reductions in water we can expect dairy products to increase in cost, so we are already bearing a cost in terms of our food. Fishing will be quite strongly impacted by peak oil, given that 30 per cent of costs are fuel-related, and this has been increasing as distances to reach fishing grounds have increased.

Australia has already reached its oil peak and our reserves are on the decline, with less than 70 per cent of our oil coming from local fields. This means that we are now seriously dependent on imported oil, often politically unstable countries. Australia is supposed to maintain an equivalent of 90 days' oil supply, according to the Agreement on International Energy. In practice, Australia is lucky to have 50 days' supply at any one time.

At a state level the situation is far more drastic since the closure of the Port Stanvac refinery. South Australia holds between 10 and 17 days of petrol, and there were two days in December last year when the supply of diesel was one day short of nothing - a potential disaster for freight transport and Adelaide's train services.

Without a refinery the South Australian government might have to start prioritising the use of diesel. For instance, most remote communities are dependent upon diesel for their electricity generation. Perhaps the state government can assist these communities with the installation of solar and wind alternatives.

Alternatives to fossil fuels must be investigated and advanced. There is a federal rebate to convert cars to LPG. Biofuels are touted as an alternative, but they can also result in food price increases when land that was producing food for human consumption is turned over to crops to create transport fuels. Although ethanol is a possibility, overall it is a net energy loser, i.e. more energy is used in the cropping and production than is produced.

Some in Australia see the abundance of coal as a potential saviour, but using coal produces huge amounts of greenhouse gases.

Forgetting all the other arguments I have against nuclear energy, it is not a solution as an alternative to oil either.

I do recall that as long ago as 1986 Professor Martin Green saying, with solar technology, we could turn roofs of carports into solar energy collectors for electric cars, giving us enough charge in our batteries to travel 80km - enough for most people to get to and from work. With the squeeze on resources, because of climate change and related water scarcity, combined with peak oil, we must question those who argue for increased population.

The “green revolution”, caused by the use of fertilisers and pesticides, allowed the growth of populations worldwide but as the price of these increases in response to peak oil, will that revolution grind to a halt?

Can the existing population be sustained at the current levels of affluence? I contend that if we are to increase the population in Australia we will have to accept a lower standard of living.

Plastics produced from oil have become a mainstay of the developed world; think of bottled water, plastic in our computers. Some clothing fabrics are made from petrochemicals, as are our phones, paints, garden hoses, radios and TVs.

What are the alternatives to plastics? What will be the impact on essential services? What about health? The pharmaceutical industry is highly dependent on the petrochemical industry. What sort of industries will we be able to sustain and where will they be located?

Internationally, Sweden aims to be nearly oil free by 2020 by replacing all fossil fuels with renewables.

A series of self-designated “peak oil transition towns” have been set up in the UK, including Totnes which has developed an Energy Descent Action Plan.

In the US cities in Oregon, Texas, California, and Washington, have recognised the looming problem. When you look at the public transport systems in those cities it is clear that they have a head start on us.

Other cities, such as Portland in Oregon and Bloomington in Indiana, have gone beyond that and have action plans. Portland has established a Peak Oil Task Force that produced a report with a principal recommendation of “act big, act now”, and I cannot think of a much better recommendation. The US House of Representatives has a bipartisan peak oil caucus, and has recommended that the US, in concert with its allies, should establish an energy project along the lines of the “Man on the Moon” project set up in the late 50s and early 60s. This should be done with the same urgency and creativity with which that project was tackled. Eight months ago, the British parliament formed its All Party Parliamentary Group on Peak Oil and Gas.

The former US secretary James Schlesinger said last year that there was no longer a debate on whether or not the peak oil concept was arguable and that we will face great difficulty in dealing with it. The IEA predicts that the first supply crunch will happen within five years, so we need to act quickly.

The Hirsch report states:

Without massive mitigation more than a decade before the fact, the problem will be pervasive and will not be temporary. Previous energy transitions (wood to coal and coal to oil) were gradual and evolutionary; oil peaking will be abrupt and revolutionary.

It is highly likely that we do not have the decade for preparation the Hirsch report recommends.

At a meeting I attended 12 years ago I was told that the substitution of energy for labour will no longer be viable when peak oil begins impacting, that a global economy will not be viable and that economic growth will end. Delaying action will exacerbate the problem as the tax revenue will begin to decrease as peak oil takes its hold.