“Every generation has its taboo… the resource upon which our lives have been built is running out. We don’t talk about it because we cannot imagine it. This is a civilisation in denial.”
George Monbiot

“Peak oil represents the most serious and immediate challenge to our prosperity and security. It will impact on our lives more certainly than terrorism, global warming, nuclear war or bird flu.”
Andrew McNamara, Queensland Parliament Hansard, speech of 22 February 2005

Crude facts about oil

Oil is the foundation of our modern economy and our society, responsible for our wealth, transport, and production. The world consumes 13 billion litres of oil each day. A vast proportion of products we take for granted are derived from oil: fertilisers, computer parts, packaging, pipes, toys, and countless others.

Nineteen sixty four was the year in which the world discovered the greatest amount of oil. Since then each year we have found less and less. In 1982 we began consuming more oil than we were discovering. We now consume four times more oil that is discovered. The price of oil has risen from US$10 a barrel in 1999, through US$140 in June, and is tipped to reach US$200 before the end of the year. If it weren’t for the strong Australian dollar, petrol prices would currently be much closer to $2 a litre.

What is peak oil?

Peak oil is the point in time when the maximum rate of global oil production is reached, after which it begins to decline. Global oil consumption is growing, and until now production has kept pace with consumption. However oil is becoming increasingly difficult to find.

When will it peak?

While forecasts for the date of the global oil peak range between right now and 2020+, there is growing consensus that the peak of oil production in non-OPEC countries will occur between 2010 and 2015. The CEO of Shell Oil said recently “Shell estimates that after 2015 supplies of easy-to-access oil and gas will no longer keep up with demand.” Last year the Queensland Oil Vulnerability Taskforce predicted peak oil will be reached within 10 years.

What are the likely effects?

Abundant, cheap oil has moulded our modern western lifestyles, so the impact of peak oil is difficult to overstate.

The shock waves as we slide down the other side of the oil production peak will affect our ability to move people and goods, grow food and other crops, heat and cool homes, provide health care, build housing, as well as to produce plastics, medicines, synthetic fabrics, computers and toys. In the USA, for example, each calorie of food is produced by burning 10 calories of oil; each gram of electronic microchips uses 630 grams of fuel.

As a sign of things to come, US chemical manufacturer Dow recently announced a 20 per cent price rise on its whole range due to the increasing cost of energy, feedstock and transportation. In the wide brown land of Australia, eighty per cent of oil usage is for transport. Queensland’s transport, mining, resources and primary industries are particularly vulnerable to increasingly expensive and scarce oil. And most of us live in car-dependent settings.

The threat of high oil prices brings predictions like the desertion of whole belts of outer suburbs, accompanied by the inevitable social upheaval that results from the loss of the Australian dream.
Adam Grubb of EnergyBulletin speculates that if oil reaches $5 a litre we will see suburban wastelands where abandoned McMansions are raided for their copper wiring, where people are forced to live in their cars, and destitute communities fall back on neighbourhood trading to survive.

“Many services of the welfare state may be withdrawn, depending on the political climate,” he speculates. “Restaurants, tourism, recreation, personal services and electronics are likely to be some of the hardest hit industries. The cheap airline industry will collapse. There may be food rationing of basic items.” Beyond Australia’s shores, there is the distinct probability of international conflict as wars are fought over remaining oil supplies.

Facts of petroleum excise subsidies

The Federal Government excise on petrol and diesel is approximately 38 cents per litre.

• Queensland:

The Queensland Government refunds just over 8 cents per litre of the federal excise via a Fuel Subsidy Scheme, resulting in cheaper fuel. The Queensland Government’s Fuel Subsidy Scheme cost taxpayers $528.52 million in 2006/07. The state fuel subsidy is currently received by anyone buying fuel at the bowser in Queensland, however the government has announced plans to alter the system so that only residents of the state receive it. How this will be administered and at what expense is not yet clear.

• National:

Under the federal Fuel Tax Credit Scheme, off-road users such as mining companies pay no excise on diesel. The scheme costs taxpayers $4.9 billion last financial year, up 38 per cent from the previous year, the equivalent $230 a year for every Australian. From 1 July 2008, mining companies will pay no excise on unleaded petrol under an extension of the Fuel Tax Credit Scheme.
Trucking operators receive a rebate of 18.5 cents a litre on excise, paid under the federal Fuel Tax Credit Scheme.

Fossil fuel subsidies: who knows?

For every $28 spent by the government on the fossil fuel industry, only $1 is spent on renewables. A Newspoll survey commissioned by Greenpeace found 78 per cent of Australians didn’t know that oil, coal and gas receive much more in the way of subsidies than renewable energy. GetUp’s Galaxy Research poll found that Australians overwhelmingly prefer their taxes to support renewable energy rather than fossil fuels.

Breakdown of fuel prices in Queensland

The following breakdown is based on a pump price of 147.4 cents per litre (already outdated) for petrol paid by a motorist. For simplicity, a component of ethanol in the fuel is not considered in the equation. In contrast, a mining company does not bear the cost of any excise or GST.