The high price of petrol today is causing discomfort among motorists. So much so that our federal politicians have spent 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 will 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.
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Today, former oil, coal and gas industry executive Ian T. Dunlop steps up to the plate.
Have we entered a new energy era of high-price oil? Are the days of $AU1/litre petrol gone for good?
There is little doubt we are now in a new high-price energy era. On the demand side, the rapid growth of world population, all understandably aspiring to higher standards of living and consumption, is putting enormous strain on the global environment, to the point that we are probably reaching the “Limits to Growth” forecast long ago. We have reached limits before, but managed to get around them with technology and short-term fixes, normally at the expense of the environment. This time it will not be so easy.
Peak oil does not mean we run out of oil – rather it is the point at which supply cannot expand to meet increasing demand because of technical constraints in global oil reservoirs. We are probably approaching the peak of global supply. We may have already passed this point, or it may be some years ahead; the exact date is less important than accepting the principle and planning to handle it.
Passing the peak raises the question of who will get the available oil? At the moment that is being settled by who can pay the higher prices, but that will not be sustainable – it is already causing major societal unrest around the world, let alone in Australia, as witnessed by protests around Europe in the last 24 hours; some form of allocation system will become necessary, as occurred in the first oil shock in the 1970’s.
Oil prices may drop temporarily, for example, if we move into recession, if increased oil discoveries result from the higher prices leading to more exploration, if geopolitics intervenes as it did in the 1970’s etc., but the general price trend will be inexorably upwards.
The cheap oil has been found and the days of A$1 per litre have gone for good. It is misleading to pretend otherwise.
As a policy response, how useful is lowering a fuel excise or tinkering with the GST in combating the rising price of petrol, both in the short and long term?
It is completely futile. Prices are determined by the international market and there is nothing our government can do about that. Five cents per litre is irrelevant to a market where prices may fluctuate by several dollars, and Fuel Watch is fiddling at the edge of the problem. We actually need prices to rise to discourage the use of oil. This may seem hard, but unless we face up to that reality quickly, the problem will become far worse.
Unfortunately, because we have not been planning for peak oil, there is going to be much hardship, particularly among the less well-off who are dependent on car transportation, road freight operators etc. There is certainly a case to provide assistance to those most exposed, to ease the transition to a high-priced energy world, but it should be via specific targeted measures, not wasting money with across the board attempts to drop petrol prices, which are miniscule in relation to the size of the problem.
The Opposition attitude to this issue is totally irresponsible; they were briefed repeatedly on this looming problem over the last few years and ignored it, assuming that the resources boom would save us. They have left Australia extremely exposed and have to take responsibility for much of the hardship which, unfortunately, lies ahead. The least they can do is to stop petty political point scoring and back up the new government constructively in addressing what is the greatest challenge to confront Australia, and the world, in decades.
The Rudd government were elected with a mandate to address major challenges such as energy security and climate change, which the Howard government were incapable of doing. It is most concerning that the Government have stooped to become embroiled in cheap political infighting when we face a major long term emergency, rather than providing the real leadership we so urgently need.
The only Australian politicians to understand the real challenge we face are Senator Christine Milne from Tasmania, Alannah McTiernan the WA Infrastructure Minister and Andrew MacNamara, the Queensland Sustainability Minister
What sort of policies should a nation like Australia be developing to cope with high-priced oil?
First, an honest, public, acknowledgment by the government and business leaders of the real challenges we now face
Second, urgent education campaigns to inform the community and gain support for the hard decisions ahead
Third, establish an emergency, nation-building, response plan to establish the economy on a low-carbon basis, minimising the consumption of oil, a 21Century version of the 1950’s Snowy Hydro Scheme, but much bigger and broader.
The components would be: first, major focus on energy conservation and energy efficiency; second; large scale conversion to renewable energy; third; major investment in efficient public transport, rail, bus, cycling etc and an immediate halt to investment in freeways; fourth; rapid phase out of high carbon emission facilities such as coal-fired power stations unless carbon capture technology can be introduced within 10 years; fifth, urgent introduction of high-speed broadband to minimise travel and improve communication efficiency; sixth, continued investment in low-emission technology; seventh, rapid reform of the tax system to remove perverse incentives which encourage oil use and environmental degradation.
Can you sketch a picture of the Australian, or indeed the global economy, when petrol is vastly more expensive than today and rising, considering things like food, infrastructure, the family budget and inflation?
We are facing major changes to our lifestyle. It is not just high oil prices, but the overall question of the sustainability of humanity on the planet as population rises from 6.5 billion people today to 9 billion in 2050, all aspiring to an improved quality of life. New technology will undoubtedly come to our assistance but that will not be enough. Conventional economic growth in the developed world will be set aside in favour of a steady-state economy where the emphasis is on non-consumption and the quality of life rather than the quantity of things.
There will be far more focus on local food production, opening up new opportunities for rural areas, cities will be re-designed using high-density sustainability principles to avoid urban sprawl, and integrated with public transport to minimise energy consumption. Work centres will be de-centralised. Rail, powered by renewable energy, will become a major transport mode for both freight and high-speed passenger traffic. Air travel will reduce unless new technology develops jet fuel from, for example, bio sources, and even then emission constraints may limit its use. The internal combustion engine will disappear in favour of electric vehicles for many applications. Cycling and walking will become major activities for both work and pleasure – obesity and diabetes will decline!
The challenge we face is enormous, but it is the greatest opportunity we have ever had to place the world on a sustainable footing, for what we are currently doing is not sustainable. We must not waste this opportunity, but it needs far bolder and broader thinking than we are seeing at present.
Ian Dunlop was formerly an international oil, gas and coal industry executive. He chaired the Australian Coal Association in 1987-88, chaired the Australian Greenhouse Office Experts Group on Emissions Trading from 1998-2000 and was CEO of the Australian Institute of Company Directors from 1997-2001. He is Chairman of the Australian National Wildlife Collection Foundation (CSIRO), and Deputy Convenor of the Australian Association for the Study of Peak Oil.