The high price of petrol today is causing discomfort among motorists. So much so that our federal politicians have spent almost a week haggling over whose scheme is best suited to knocking a few cents per litre from the pump price.

But in a world where oil is increasingly scarce, where the security of supply remains a problem, and where the environmental cost of using fossil fuels to power your car is soon to be factored into the pump price, is that the right response? What are the long terms solutions to our oil dependence? And is this the beginning of a new era of high-priced oil?

Crikey asked a panel of experts to answer questions on the good old days of cheap oil, what the politicians should really be arguing about, and how our economy will look when petrol costs many dollars per litre.

Today, Adam Grubb, the Australian editor of Energy Bulletin, answers Crikey’s questions.

Have we entered a new energy era of high-priced oil? Are the days of $1/litre petrol gone for good?

Yes, the fundamentals would suggest so. We appear to have reached the peak in oil production. Global conventional oil production peaked in May 2005. Australia as a net importing nation is particularly vulnerable. Our internal oil production peaked in 2000, as shown in this US Department of Energy graph.


Australian oil production

Most of the major countries we depend on for imports are themselves past their own peaks of production: Vietnam, PNG, Malaysia, New Zealand and Indonesia. Internal affluence and oil consumption is increasing in most of these countries such that exports are falling far more rapidly than actual oil production. Of the major countries we depend on, only the UAE has not been decreasing exports in recent years. (See, for example, this graph on Indonesia.)

This is a trend we are seeing globally. Competition for increasingly scarce oil exports will make procuring replacement oil an expensive exercise, perhaps one sometimes resulting in conflict. Only a fairly severe global recession is likely to make oil a less scarce commodity, and then only temporarily.

As a policy response, how useful is lowering the fuel excise in combating the rising price of oil, both in the short and long term?

Of course there may be some short term relief for struggling families. However we need to face the reality that oil is never going to be as cheap again as it was in the late eighties and nineties. As global oil exports continue to fall, prices will continue to rise in real terms. So we would merely be delaying the inevitable, while reducing government revenue which might be better spent helping those in need with more long term strategies and preparing the country for a leaner, and greener, future.

Peak oil and climate change present us with an unprecedented challenge: how to begin consuming radically less fossil fuels while maintaining dignified lifestyles and essential services. At a personal and national level we need to be investing much of the remaining fossil fuel energy into sustainable infrastructure, research and behaviour change. Electrifying transport, building renewable capacity, restructuring university courses, energy retrofitting buildings, relocalising economies; these are major investments, and they require energy. We simply won’t be capable of making the investments on the scale necessary if we wait until we no longer have access to cheap energy.

It’s also worth considering just how cheap oil is in energetic terms. A litre of petrol contains the energetic equivalent of a worker performing three weeks of hard manual labour. Might you not consider that cheap, even at $20 or $200 a litre? Sadly, we’ve built an economy, housing, food and transport systems dependent on extraordinary amounts of cheap energy, such that someone commanding enough energy to put an Ottoman sheik to shame can be just barely getting by, working two jobs and paying back a mortgage.

What sort of policies should Australia be developing to cope with high-priced oil?

We need to radically increase investment in renewable energy technology; implement a Tradable Energy Quotas (TEQs) system for allocating personal carbon allowances; adopt the Oil Depletion Protocol on top of the Kyoto Protocol; encourage in every way urban and small farm organic food production; extend public transport services; promote suburban mixed-use planning, to allow people to work near where they live; encourage the rebuilding of local industries, with an emphasis on the small scale production of reliable, repairable essential items; develop sustainable forestry practices; stop all new freeway development; produce public education campaigns directed at the understanding of the issues and resulting in behavioural change.

For all this we need a strong sense of purpose and common goals. The collective history of all Australians must be drawn upon, we must feel ourselves part of a story, as a nation that rises to challenges with good humour and that values self reliance and the land we live on. We must be made to feel we are going forward into a healthier, earthier, more community oriented future. The suburban dream didn’t work out that well for most people. There is much to be gained by the challenges ahead of us. The government must provide the leadership necessary to bring the nation together for these challenges within a spirit of good will.

Sketch a picture of the Australian economy when petrol is $5/litre and rising, considering things like food, infrastructure, the family budget and inflation?

The McMansion suburbs are likely to fall into disrepair as the price of commuting and mortgage repayments cause many houses to be completely abandoned and stripped for copper wiring and other resources. Many formally middle class people who have lost their homes will be living out of their cars, perhaps even in gated car camps as are already being set up in the US. Many adult children won’t be able to afford moving out of home, and many households may take in boarders and relatives, creating larger households.

Repair and reuse industries will flourish, many based in garages and sheds. Urban and peri-urban food production will increase and vacant lots will be turned into food gardens. The streets will be more lively, with ad-hoc markets in used goods and home produce.

Use of foot transport, bicycles and public transport will increase. Street crime will not necessarily increase in direct proportion to economic hardships, as greater social use of the streets, due to less cars and the presence of walkers may provide a level of surveillance.

Some infrastructure and centralised social services may be slowly beginning to break down. Important phone lines will be left unanswered more often, unfilled potholes will be more prevalent. Many services of the welfare state may be withdrawn, depending on the political climate.

Restaurants, tourism, recreation, personal services and electronics are likely to be some of hardest hit industries. The cheap airline industry will collapse.

There may be food rationing of basic items.

Despite rapidly rising input prices, farmers, where the season is kind, will once again be making fair returns on their efforts, and will be able to employ some of those moving from the cities.

Those with strong community or family bonds will fare better than new immigrants and the otherwise socially isolated. Adaptability and resilience will be key personal strategies. Those too institutionalised by schooling and wage work, and those who consider high consumption lifestyles a birthright and the alternatives unthinkable will have a psychological struggle to adapt. Ecologically inspired strategies such as permaculture design will move from being an environmentally inspired hobby to a core economic strategy.

Those who are looking for solutions which simultaneously tackle environmental impacts, build social bonds, save money and increase health and wellbeing, will find ideal solutions in local food production and a network of manufacture and repair microindustries.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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