I am concerned there is no mention of future global oil shortages (Peak Oil) in the nationwide coverage of the BrisConnections story. I am also concerned that the Queensland Government is committed to the project, as this poses a serious risk to the state if Peak Oil arrives soon and is followed by “Peak Traffic” and “Peak Airport Usage”.

Premier Anna Bligh yesterday declared the State Government would “not let this project fall over” but refused to confirm whether more taxpayer dollars would be used to ensure Airport Link went ahead. Ms Bligh said “all possible contingencies” were being explored by the Government.

There is a substantial “oil shortage” aspect, not yet mentioned, in which BrisConnections (and other toll-road companies) have not been at all open and honest with shareholders, and that is the serious risk to the financial side of the project from possible future oil shortages or very high oil prices, as “Peak Oil” approaches or kicks in. The Australian Association for the Study of Peak Oil and Gas feels ASIC should do much more to ensure disclosure of oil vulnerability risks to future income forecasts from transport infrastructure companies.

There are a lot of forecasts that the steep increases in global oil prices of last year will return, as the underlying rate of depletion of the world’s giant oil fields has not changed, and Peak Oil is looming. The International Energy Agency, in its World Energy Outlook report of November last year, suggested, from a survey of 800 giant and supergiant oilfields, that the depletion rate, even after additional work like infill drilling, is about a 6.7% pa decrease in production (and about a 9% pa production decline without additional investment).

There are of course, many pundits that forecast lots of oil, and stable or declining oil prices. “Market forces will fix it”. However, just as market forces were powerless in the face of the financial crisis, they will not be able to create additional oil beyond that with which the world has been endowed.

The Senate Inquiry into Public Transport last month was given some of the evidence by Dr Jim Buckee, recently retired as President and CEO of Talisman Energy (which produces roughly twice as much oil as Woodside). He told the Committee “Black oil has peaked”.

The financial crunch has cancelled or deferred a lot of large oilfield investment projects, which will reduce the amount of oil available in the near future. There is the case that, just as very few saw the financial crunch coming, very few are even considering the possibility (and probability) of an oil crunch in the short to medium term. This also includes the BrisConnections financial forecasters.

Peak Oil will almost certainly mean Peak Traffic and Peak Airport Demand, just as the oil fields’ production declines after the peak, so the vehicle traffic volumes will decline and airport traffic will very probably fall as well. This possibility and the financial implications should be included in information from BrisConnections and other toll-road companies. Much traffic forecasting has been derided (by a US expert), as “Garbage in, and Gospel out”. Traffic forecasts that do not consider future fuel shortages are very likely to mislead and deceive shareholders and prospective shareholders.

Peak Oil does not mean “running out of oil”, but a change from a growth trend — increasing annual production, to a decline trend — decreasing annual production. It means there will soon be a gap between growing or steady demand trends and a future declining supply trend.

Matt Simmons, head of a major energy investment banking company last month told Forbes Magazine he estimates serious shortages could quickly triple or quadruple the price of oil within the next two years — and after that all bets are off: “Somewhere in the next two to five years, $500 a barrel”, he said.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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