The media succumbed to attention deficit disorder over petrol prices – again – when the CSIRO released its Fuel for Thought report. “Peak Oil: Petrol to Reach $8 a Litre” screamed the Sydney Morning Herald’s sensationalist page one healine.
The report actually claims, in the next 10 years, petrol price will increase only slightly if international supply matches demand. “However, if there is a near-term peak in international oil production resulting in declining future oil supplies, petrol prices could increase to between $2 and $8 per litre by 2018.” Another caveat on the $8 per litre mark was that this can occur only if supply declines abruptly, and alternatives can’t be brought to bear quickly.
The past may not reliably predict the future, but the Queensland Government’s Office of Economic and Statistical Research say between 1997 and 2007 petrol jumped from around 65 cents per litre to $1.22. If history repeats, we’d be looking at $3.20-$3.50 per litre in 2018, comfortably inside the CSIRO’s ballpark.
Other factors will be in play in the coming decade. The CSIRO says there are three to consider: Whether or not there will be a peak in oil production, how rapidly alternative fuels and vehicles become available, and Australia’s future access to oil.
Download the full CSIRO report in PDF form here
The consensus view on global peak oil is: soon. A series of peaks in individual markets have already occurred. America’s happened in the 1970s, which explains why much of its military – the elite Central Command – is parked in the Middle East. As Michael Klare observes in his book Blood and Oil, “the US military is being converted into a global oil protection service”.
As unpalatable as it may be for some, energy security is a powerful argument in favour of Australia’s ongoing alliance with the US. As the CSIRO sees it: “Australia is very vulnerable to changing [energy] market conditions.” This is due to our high vehicle use, high fuel consumption per vehicle, 97 per cent reliance on oil-based fuel and declining domestic reserves.
Recent modest growth in global production has occurred through the exploitation of new oil fields, but reputable oil industry observers increasingly point out that very limited undiscovered crude oil reserves remain. In 2004, former oilman turned editor of Petroleum Review Chris Skrebowski said: “There are not enough large-scale projects in the pipeline right now to offset declining production in mature areas and meet global demand growth beyond 2007.”
Investment bank Goldman Sachs says refining and tanker capacity is also under-done. (The peak year for these was actually 1981…) In a report entitled The Sustainability of Higher Oil Prices it claimed without the required $2.4 trillion infrastructure investment, energy crises would become “more frequent, more severe and more disruptive of economic activity”.
The CSIRO’s $2-$8 petrol price model is based on peak oil occurring between 2008 and 2013.
ALTERNATIVE FUELS AND VEHICLES
A technological ‘silver bullet’ won’t happen. In 10 years the only viable non-conventional options are LPG and natural gas. “Only these among the non-conventional fuels have the capacity to expand their availability into the transport market in the required timeframe due to existing production and distribution infrastructure,” says the CSIRO.
It’s not until “beyond 2020” that advanced biofuels and synthetic fuels –covered in earlier Fuel Lines – will have sufficient infrastructure in place to get them anywhere near the grid.
The CSIRO also says the primary economic driver away from conventional fuels will be the price of crude itself – petrochemical fuel really will orchestrate the succession of alternatives, and its own demise.
Most worrying for Australians, businesses and the car industry is the CSIRO claim that if oil supply wanes, “technology … will not be sufficient to meet the supply gap”. Reduced travel between five and 40 per cent will be required – not a happy thought if you’ve set up shop anywhere served adequately only by road transport.
The CSIRO says choices about vehicle size and how much we travel will be equally important as fuel and technology in combating our future vulnerability to oil’s economic impact – a statement sure to put the wind up Ford’s and Holden’s senior executives. Logistic planning, across both the boardroom table and the kitchen bench, will be the key to doing business on Australian roads in the next decade.
The silver lining is this: a 40 per cent reduction in travel, if that’s what it takes, means at least 16 million tonnes less Greenhouse emission annually, plus proportional reductions in pollution and the $17 billion road trauma problem. Then there’s traffic congestion. Many people currently spend two hours each day commuting in traffic. Annually, that’s the same time the average person spends awake each month.
That’s not driving; it’s wasting one’s life in traffic.
Read more about LPG here.
Read more about natural gas here.
Read more about hydrogen here.
Download the full CSIRO report in PDF form here