Senate Report on Australia's future oil supply


Senate Report on Australia's future oil supply

On Wednesday 7th February 2007, the Australian Senate received the Final Report on Australia's future oil supply and alternative transport fuels from the Rural and Regional Affairs and Transport Committee. The Association for the Study of Peak Oil (ASPO) in Australia welcomes this report and hopes that it will raise the prominence of the issue in all levels of Government policy development.

The inquiry considered the question of 'whether Australia should be concerned about peak oil'. They correctly noted our fear 'that declining production after the peak will cause serious hardship if mitigating action is not started soon enough'.

Through written submissions and committee hearings, industry experts including members of ASPO Australia 'criticised what they regard as over optimistic official estimates of future oil supply with detailed and plausible arguments'. There has been plenty of economic bravado condemning these plausible arguments but the Senate Committee was not able to find 'any official agency publications which attempt to rebut peak oil arguments in similar detail'.

The methodology in these official agency publications is flawed; because they rely too heavily on principles of economics rather than geology. Future oil demand is estimated by extrapolating previous growth in oil consumption and scenarios from the United States Geological Society are used to support a prediction of how much of that demand the world outside OPEC can meet in the next two decades. The International Energy Agency then brazenly but openly assume that OPEC countries will fill the very large gap that remains, requiring them to double their current production. This despite the fact that the Middle East is a mature oil province and the evidence that many of their largest fields are already in decline. Contrary to rumours, the region is thoroughly explored and the geology well understood: the possibility of discovering double what they already have is approximately zero.

Historical experience in the United States and the North Sea is clear. Once the largest oil fields begin their decline from maximum production, it becomes impossible for smaller, more technically challenging fields to make up the difference. There are now too many countries where production is in terminal decline. We should not be surprised to find stagnant and falling production in OPEC member countries insufficient to offset these declines. Instead, it is likely that declining worldwide production will be evident within five years.

Completely reassessing the future of global oil supply goes beyond the Committee's remit. Understandably they have recommended that 'Geoscience Australia and ABARE be required to more fully investigate and report to the Government on the probabilities and risks involved'; but they'd better do it quickly.

In a 2005 report for the US Department of Energy, Robert Hirsch found that the era of plentiful, low-cost petroleum is approaching an end, presenting the world with an unprecedented risk management problem. Unless mitigation, initiated by Government, is orchestrated more than a decade in advance of the peak, the economic, social and political costs would be 'dire and long-lasting'. That means, even accepting optimistic forecasts, that the time to start is now.

The Committee stated that 'longer term planning is needed' and described as 'inadequate' the failure of most official publications to consider the future beyond 2030. This reflects a widespread and fundamental complaint about Government processes, exhibited by our lack of action on climate change, that the weight given to long term concerns is grossly insufficient.

By far the quickest and most cost-effective means of responding to the long term issues of peak oil and climate change is to make gains on the demand side. The Committee made several important, although hardly revolutionary recommendations: increase fuel efficiency of vehicles, investigate congestion charging, support use of rail for long distance freight and review fringe benefits taxation to reduce perverse incentives for car use.

The report's biggest failure was not to make stronger recommendations to encourage 'walking, cycling and public transport in cities'. The best they managed in this regard was to recommend the Commonwealth continue funding for Travelsmart projects. This highlights a second widespread and fundamental concern with our system of governance: the acrimonious relationship and division of funding responsibilities between State and Federal Governments. The States have the basic responsibility to operate public transport services, but only the Federal Government has the funding capacity for the scale of infrastructure investment now required if, as the committee recommends, we are going to reduce our high level of dependence on oil.

If we remain ignorant of the imminent reality of peak oil, the probability of responding inappropriately increases. In a society starved of liquid fuel, there will be a mad-rush to convert even the dirtiest coal into oil and we can easily foresee that a desperate economy will have no time for carbon capture and sequestration. While such an effort would make only a small dent on the oil supply gap, it would have a disastrous impact on our ability to reduce carbon emissions in a rapidly changing climate, even as our oil supply is forcibly reduced.

We must hope that the style and substance of Australian Governments and international co-operation improves markedly and quickly, for responding to the twin challenges of peak oil and climate change requires new leadership and bold long term thinking. The right strategy will prioritise changing our values and behaviours to rein in extravagant consumption patterns. The next step would be a Herculean effort to implement efficiency improvements and renewable energy technology. Attempting to satisfy never ending growth in oil and energy consumption, whatever the proposed source, only proves that we have yet to learn anything about living sustainably.