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Election silence on Peak Oil

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Christine Milne 22 Nov 2007

Two Green issues have been swept under the carpet by both Howard and Rudd during this election campaign – the nuclear agenda, which I'll post on shortly, and peak oil.

For those who think peak oil is a left-wing conspiracy theory, it's worth noting that President Bush recently told a White House press conference that:

"I believe oil prices are going up because the demand for oil outstrips the supply for oil. Oil is going up because developing countries still use a lot of oil. Oil is going up because we use too much oil, and the capacity to replace reserves is dwindling. That's why the price of oil is going up."

How astonishing that just yesterday, as crude oil prices rose above a record $99USD per barrel, the Labor Party was announcing yet another billion dollars for a highway, without, as is now typical, any mention about the imperative to upgrade the nearby rail line out of the steam age. They think there are fewer votes in rail, obviously.

The escalating oil price is a key threat to the Australian economy and the laissez faire attitude of both the Government and the Labor party to the diminishing confidence about global oil production and strong oil demand growth forecasts should dismay the Australian community.

Australia's self-sufficiency in oil is forecast to decline significantly in coming years, with serious implications for the trade deficit. Without discoveries of major new oil fields, Australian Petroleum Production and Exploration Association projects that our oil self-sufficiency would fall to less than one-third of consumption levels by 2015. This would cost around $20 billion in 2015.

Not only will this create inflationary pressures but it will precipitate an “access” crisis. Australia’s political leaders have failed to notice that many of the world’s oil resources have been nationalised with owners and suppliers being governments not necessarily friendly to the United States and its deputy Sheriff. China has spent the last few years buying the oil resources of Africa, Venezuela is already hostile and President Putin sees his next phase as being an energy tzar. This leaves Australia and the USA increasingly locked into supply from the Middle East and the conflicts inherent in securing that supply.

It is remarkable that, while Sweden makes plans to be oil free by 2020 and US President George Bush calls for US citizens to wean themselves off oil, Howard and Rudd promise more roads. More roads only serve to induce more traffic. Building more freeways as the oil price rises is like handing out free garden hoses as the drought deepens.

Populist pork barrelling by both the Government and Labor over the election campaign has increased Australia's vulnerability to oil scarcity. In the first half of this election campaign alone, promises for new roads through politically sensitive electorates reached $15 billion. Incredibly, some, like the RACV yesterday, even support increasing fuel consumption by reducing the fuel excise.

Instead of funding for new roads, the Greens have polices for bold funding of reliable, fast and safe public transport, mandatory fuel efficiency standards, more stringent government vehicle procurement policies, tying subsidies for car manufacturing to efficiency standards, removing fringe benefits tax benefits for driving, and removing favourable tariff treatment for four-wheel-drive vehicles.

Not only are the policies of the Coalition and Labor exacerbating an Australia's vulnerability to rising oil prices, but they have disgracefully ignored all of the ten recommendations of this year's Senate Committee report on Australia’s future oil supply and alternative transport fuels. This important inquiry, which was initiated by the Greens and reported in February this year, identified peak oil as a risk to be managed, yet none of the committee's ten recommendations have been acted upon.

For those new to the issue, peak oil will have occurred when the rate of global oil production starts its final decline, from the current trends of increasing yearly production. The exact timing of when peak oil will occur is debated – some strong arguments have been mounted that it may have already been reached – but measures to reduce oil dependency, such as developing public transport infrastructure and improving the fuel efficiency of the vehicle fleet, take many years. Since the cost of acting too late to reduce oil dependency far exceeds the cost of acting too soon, there is a clear imperative to respond to credible warnings now.

According to a widely discussed report published last month by the Energy Watch Group, world oil production has already peaked. That report concludes:

"The major result from this analysis is that world oil production has peaked in 2006. Production will start to decline at a rate of several percent per year. By 2020, and even more by 2030, global oil supply will be dramatically lower. This will create a supply gap which can hardly be closed by growing contributions from other fossil, nuclear or alternative energy sources in this time frame.

The world is at the beginning of a structural change of its economic system. This change will be triggered by declining fossil fuel supplies and will influence almost all aspects of our daily life."

Even the International Energy Agency, using an alternative, more conservative methodology, conceded last week that:

"Although new oil-production capacity additions from greenfield projects are expected to increase over the next five years, it is very uncertain whether they will be sufficient to compensate for the decline in output at existing fields and keep pace with the projected increase in demand. A supply-side crunch in the period to 2015, involving an abrupt escalation in oil prices, cannot be ruled out."

If Howard and Rudd were true fiscal conservatives they would recognise that there is no quick fix to the emerging oil supply gap and that our economy, indeed all economies are utterly dependent on easily accessible oil.

The Government and Opposition are promoting policies that will make the problem worse by locking us in to more roads, artificially cheaper fuel and even more polluting alternatives like coal-to-liquids. Only with the Greens in balance of power in the Senate will we see Australia preparing to oil proof Australia.

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