Government, due diligence and our future

It seems that every other week, another organisation releases a report suggesting that global oil production is at or near its all time peak and will soon commence an inexorable decline. Despite this, most governments, our own included, have their heads stuck firmly in the sand when it comes to addressing what will be one of the defining issues for industrial civilisations. For example, the UK Energy Research Centre recently released a report to answer the question: “What evidence is there to support the proposition that the global supply of 'conventional oil' will be constrained by physical depletion before 2030?” One of the key conclusions of the report is that:

We consider that forecasts that delay the peak of conventional oil production until after 2030 rest upon several assumptions that are at best optimistic and at worst implausible. On the basis of current evidence we suggest that a peak of conventional oil production before 2030 appears likely and there is a significant risk of a peak before 2020.

So who are some of the organisations that are forecasting a peak around the 2030 timeframe? Answer, the International Energy Agency (IEA) and the US Government’s Energy Information Administration (EIA). And who does our government rely upon for future oil production forecasts? That’s right, the IEA and EIA. While the forecasts of these agencies carry significant weight around the world, they are far from infallible as proven by their poor track record in forecasting oil prices and oil discoveries (see Section 4 of the Heads in the Sand report for an analysis of the IEAs overconfidence in forecasting future oil production).

So we now have the ridiculous situation where the Department of Resources, Energy and Tourism (RET), which provides advice to all other government departments on energy issues, is relying upon “official” forecasts of organisations whose underlying assumptions are at best optimistic and at worst implausible.

While this might not seem earth shattering, the implications of optimistic forecasts of global oil supply are enormous. For example, how many billions of dollars are being spent by state and federal government’s on road infrastructure based upon traffic forecasts relying upon “official forecasts” of future oil production? A more important question is how many billions are not being spent on rail and public transport that would mitigate against a declining oil supply?

It is not as though the government is not aware that peak oil could be imminent. In 2006, the Senate’s Rural and Regional Affairs and Transport report (PDF 1.33MB) into Australia’s future oil supply found that:

The possibility of a peak of conventional oil production before 2030 should be a matter of concern. Exactly when it occurs (which is very uncertain) is not the important point. In view of the enormous changes that will be needed to move to a less oil dependent future, Australia should be planning for it now.

Since the release of this report February 2007, the case for a near term peak has strengthened considerably. Despite this, essentially nothing has been done in preparation.

Given the importance of the role of RET in forging government policy, it would be a reasonable expectation that RET would consider a variety of forecasts of future oil production, rather than just “official forecasts” that just happen to be far enough in the future that our politicians can ignore the dilemma’s that it poses.

In short, you would expect RET to conduct a due diligence check on the arguments for and against a near term peak, rather than an unquestioning reliance on the IEA and EIA forecasts.

A clue as too why this might not be occurring can be gleaned from the National Energy Security Assessment (NESA). The NESA does not mention peak oil, or declining oil exports, while suggesting that alternative fuels are unlikely to provide more than a marginal contribution to Australia’s liquid fuel supply by 2023. So if the peak occurs significantly earlier than 2030, Plan A, business as usual, doesn’t work and there is no Plan B.

A more cynical view maybe that politicians know that there is no replacement for oil. By relying upon “official forecasts”, in the likely event that peak oil is upon us, the politicians, at least in their view, remain blameless, with nameless bureaucrats in the IEA or RET bearing the blame for the inaccurate forecasts. This suggests it is a political decision to ignore the inconvenient little dilemma that peak oil is near. Of course what is merely a political dilemma for those who hold power, is likely to be a rather traumatic experience for the rest of us.

The really disappointing aspect of this official denial is the lost opportunities. Everyday that goes by without preparing for the onset of peak oil reduces our options in managing an orderly transition to a low energy economy. The 2005 Hirsch Report (PDF 318KB), sponsored by the US Department of Energy, suggested that:

Waiting until world oil production peaks before taking crash program action would leave the world with a significant liquid fuel deficit for more than two decades.

If as the evidence suggests, a near term peak is likely, then the likelihood of a sustained economic recovery is negligible. Indeed, although the government may have won the battle with regards to the global financial crisis, they could well have lost the war.