Coming Soon: The Day of Reckoning
The real oil crisis facing industrialized nations is not the price today, tomorrow, or even next year, but the inevitable tapering off in supply starting now. This is a simple geological fact that no amount of civil protest, political obfuscation, or military intervention will change.
According to analysis by the UK oil market consultancy Petroplan, reserves outside the Middle East are in peak production now and will begin declining over the next few years. This includes Australian fields.
The Middle East will correspondingly increase its global market share over the coming decade, but does not have the reserves to make up the shortfall as the rest of the world dries up. Middle Eastern production will peak between 2010 and 2015, then begin tapering off.
Petroplan's Dr Colin Campbell - a former executive with Texaco, Amoco, BP, and other oil multinationals - warns there are no more oil lakes to be found. Oil is associated with certain geological conditions. Satellites have X-rayed every inch of the planet's crust to find at best a few puddles where technical, political, and climatic conditions make extraction possible. Antarctica, for instance, could only be mined at enormous expense, even if it were feasible to have container ports of the scale necessary in such a hostile environment.
But even large puddles such as Antarctica will not make up the shortfall as the major fields decline.
The politics of rising demand and declining supply are a minefield, especially as the two most populous nations, India and China, are rapidly industrializing using the same fossil-fuel intensive model that delivered material riches and high living standards to the West. The prospect of military giants like China and the US competing for dwindling reserves in short-fuse regions like the Middle East and the Caspian Sea is troubling, to say the least.
Political volatilities aside, the trade implications are profound. Globalization depends entirely upon long-range transport of goods using trucks, planes, and ships. Even within Australia, we take it for granted that necessities such as fruit and milk travel long distances from farm gate to supermarket shelf without becoming prohibitively expensive.
Australia further faces a security-of-supply question. Barry Jones, executive director of the Australian Petroleum Production and Exploration Association, says local production is expected to decline from a high of 418,000 barrels a day last year to 180,000 barrels or less by 2010. Making up the shortfall from imports will add $4 billion to the current account deficit.
Australian governments have a number of options. They could in the short term reduce the excise on oil products as a way of reducing petrol prices. This would placate the electorate but not solve the underlying problem. It would also have the unhappy side effect of reducing the budgetary pool for education, health, public transport, and environmental repair.
Hypothetically, the entire Australian road-transport fleet could be converted to gas, conserving our dwindling oil reserves for shipping and air travel. Jones expects this would buy us another 20 to 30 years of self-sufficiency, but the conversion would be expensive. Enormous investment in distribution infrastructure would be necessary, raising the price of gas, while owners would bear the cost of converting vehicles.
High-performing electric vehicles, called hybrids because they run on batteries with petrol back-up, are on their way. These would reduce oil consumption, but hybrid cars are recharged from the electricity grid and most Australian electricity comes from greenhouse-unfriendly, coal-fired power stations.
The major car companies - Honda, Toyota, Ford, and DaimlerChrysler - are racing to bring fuel-cell vehicles on to the market; the first commercial models should be out by 2003. These vehicles run on hydrogen, emit only water vapor, have almost no moving parts.
However, it takes time to turn over a national fleet and again, individuals would bear the cost of exchanging their old vehicles. The facilities to produce and distribute hydrogen would have to be built; companies would have to recoup their costs in the retail price of hydrogen.
There is also the question of whether planes and ships can run on fuel cells. Presumably yes, but at a price and not any time soon.
We have had a good time for the last 50 years, thanks to cheap fossil fuels. World economic growth has grown elevenfold in the last three decades, and we in the West, at least, have enjoyed the fruits as if there were no tomorrow: cheap food, cheap clothes, easy travel, and big houses filled with all manner of gadgets and trinkets.
But as Winston Churchill said in 1936, "the era of procrastination, of half-measures, of soothing and baffling expedience, of delays, is coming to its close. In its place we are entering a period of consequences."
I would like to think our governments are planning ahead.
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