Subsidised petroleum denies reality of peak oil
With oil becoming scarcer and more expensive, government policies of subsidising oil consumption are delaying urgent action and directing vital funds away from long term solutions.
After growing for 150 years, the oil age is coming to an end. The term peak oil is one we will hear a lot more in the future. It refers to the time when the production of oil stops growing and starts to decline.
While the oil shocks felt around the world in 1973 and 1979 were caused by geopolitics, the 21st century shock of peak oil is largely due to the growing gap between demand and supply. The effects of peak oil will be profound. However the populist policies of State and Federal Governments that apply selective excise subsidies merely tinker at the edges of the price of fuel. Mitigating the impact of peak oil means taking action that reduces our dependency on oil, in other words reducing its cost to consumers and industry. To date such action remains in the too-hard basket.
While some developed countries are reducing their oil consumption Japan has achieved a 10 per cent reduction over recent decades, and even the USA’s consumption dipped in 2006; such reductions are more than overtaken by increased consumption in China and India. China outstripped Japan in 2003 to become second only to the USA in its oil consumption. On current trends it will equal the USA in 2020. India doubled its oil consumption between 1992 and 2005.
These trends cannot continue simply because there is not enough oil in the world to sustain them. Demand is pushing the price up and if it weren’t for the rising Australian dollar, petrol today would be much closer to $2 a litre. Investment bank Goldman Sachs has predicted the price of oil to average $US141 a barrel in the second half of 2008, eventually rising to $US200.
The Queensland Government was warned of the dire consequences of peak oil in a report by the now Minister for Sustainability Andrew McNamara published in October last year. Queensland’s vulnerability to rising oil prices – taskforce report advised that tourism could be devastated by rising fuel prices as aviation and motoring costs increase.
The report’s predictions are now starting to become reality, with airlines the first to suffer and Qantas and Jetstar announcing cuts to schedules. The knock-on effect was immediately felt by tourism, the state’s second largest industry behind coal, and one highly vulnerable to changes in fuel prices. Not only is it heavily reliant on long-distance air travel, drive tourism accounts for 75 per cent of domestic travel in Queensland.
Around the world, upward oil prices are biting. General Motors, which manufactures larger fuel-hungry SUVs and pick-up trucks, recently announced it will close four plants in North America because of the pressures of rising oil prices. Chrysler too is feeling the pinch with a downturn in sales.
Given the dire warnings of peak oil and its time frame, only fundamental changes can cushion its effects. As Andrew McNamara said last year: “We will have to confront the reality that the society we have been used to living in is going to have to change dramatically.”
His taskforce report recommends: reduction in consumption of liquid fossil fuels, encouraging the development and use of alternative fuels, technologies and strategies, and preparation for demographic and regional changes, as Queenslanders change travel, work and living habits in response to rising fuel prices.
The report was hailed by commentators, one stating: “It marks the Queensland Government as the first state/provincial government in the world to recognise that peak oil is real and decide to do something about it.”
Since its release in October, however, the only update has been a February announcement that the government is developing a strategy. Calls to Mr McNamara’s office yielded no further information.
Any preparation for the shocks of peak oil is contradicted by the Premier’s early June announcement to fast track more urban sprawl. Some 17 sites in the southeast have been identified to help absorb a population growth of more than 20 per cent over the next 10 years. Areas earmarked on the Sunshine Coast are Maroochydore, Meridan Plains, Caloundra South and Palm View. Questions about public transport and services to these new suburbs remain unanswered. The conclusion is that the developments follow set patterns of oil dependence and in no way prepare future residents for the necessary altered travel, work and living habits identified by Mr McNamara.
Such preparation, as Mr McNamara no doubt knows, is expensive and not amenable to quick fixes. Around Australia, environment groups are calling for the billions of dollars currently spent on fuel subsidies to be redirected to fund critical changes.
In his recent address to the Australian Press Club, Don Henry, Executive Director of the Australian Conservation Foundation said the Federal Government should take fossil fuel subsidies and invest them in energy efficiency, better public transport and cleaner cars.
Likewise, community activist organisation GetUp advocates levelling the playing field through removing fossil fuel subsidies and placing a price on carbon, either through a carbon tax or a regulated cap-and-trade scheme.
Railways, cycle paths and public transport are a better investment than roads, says the Sustainable Transport Coalition, and the perverse policies that subsidise heavy car use and excessive freight transport must be dismantled.
Mr McNamara said to parliament in February 2005: “Peak oil… will impact on our lives more certainly than terrorism, global warming, nuclear war or bird flu.” However, instead of action, the State and Federal Governments through their fossil fuel subsidies appear determined to either ignore the problem or entrench it even further.
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