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Why families need to start planning for the oil crisis

By Daniel Donahoo - posted Friday, 15 October 2004


The price of a barrel of crude oil has increased to over $50 for the first time.

While this rattled the financial pages, it has not made front-page headlines, as perhaps it should. We would like to think this current rise is due to the war on Iraq, or issues with a large oil company in Russia, but petrol prices over one dollar a litre are here to stay.

Oil and all its by-products are non-renewable resources. Oil reserves are becoming much harder to find and as the reserves become scarcer the price of oil increases. Many analysts are suggesting the current rise could well leave us with prices in excess of $60 a barrel. Exactly what this will equate to at the local petrol pump is in many ways irrelevant: whatever it is the price of petrol is destined to rise.

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And, it will most likely rise rapidly. The nature of our economic system is that as something becomes scarce, it becomes more valuable and so more people want it. This creates exponential growth in that item’s price. In the coming years petrol prices will not be increasing by a couple of cents, but by ten or more.

I’ve been watching the oil price closely because two years ago my young family moved to rural Victoria. We live over 150km away from our parents and my children’s grandparents. One thing we did not factor into our decision to move away was that in 10 or 20 years time the price of petrol may well limit the amount of contact we can have with our extended family.

Two years ago our car’s 60-litre fuel tank was costing us $45 to fill up at 75 cents a litre. Just last week, it cost us $66 dollars at $1.10 a litre. That is an increase of 68 per cent in 2 years, and for a one-income family in rural Victoria that impacts on the fortnightly budget significantly. There are already people we know in town who are limiting their driving and watching how they use their car. These people tend to be on the dole or single mothers - people who feel the pinch of increasing prices first.

Even if we are conservative and suggest the price of petrol will rise 50 per cent every 2 years for the next 10, the price of petrol will be over $7 a litre.

It may seem extreme, but this prediction is not alarmist. An Iranian oil expert advised the West Australian government in August that prices in Australia could be over $3 within the next 3 years. He and others have suggested high oil prices have failed to encourage exploration.

Buford Lewis is the manager of fuels development at ExxonMobil, the world’s largest oil producer. At the recent World Energy Congress in Sydney he said, "Longer term, we are dealing with finite resources, but they will be available to us, assuming the march of technology in production of oil and gas, at least until the middle of the century".

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This is a leading expert putting the best-case scenario forward that we will have oil and gas until around 2050. Personally, that worries me.

I have moved my family to a more isolated situation, and increasing fuel prices will no doubt impact on our isolation. Not only will it be more difficult to visit family, but also the cost of transporting food and all other consumables will increase because of transport costs. Access to some community and health services that visit from a nearby regional centre may disappear, as they cannot afford to come. The impact of rising petrol prices will affect not just mine, but all families in some way.

Governments do not appear to be doing much about this forecast problem. In fact, they are intent on investing more in road infrastructure, which seems slightly odd considering many experts’ projections. But the many young Australian families looking for an affordable home and a good community for their children may want to start factoring the creeping prices at the petrol pump into their decision-making.

The impact of petrol price increases on families and communities will be substantial. Simple Australian institutions like summer holidays at the beach and trips to the grandparents may become more expensive and more unlikely for many of us.

So, it is worth thinking now about where you are going to live and what kind of lifestyle you are after because the impact of a decline in oil and other energy sources may be felt in our lifetime.

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Article edited by Ian Miller.
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About the Author

Journalist and columist with The Age, Sushi Das says he is ‘one of today’s young rebels’. Author and ethicist Leslie Cannold has referred to him as one of her ‘gorgeous men’.

Daniel Donahoo is fellow with OzProspect, a non-partisan, public policy think tank. He writes regularly for Australia's daily papers and consults on child and family issues. A father to two boys. Daniel's first book is called Idolising Children and explores our society’s obsession with childhood and youth. Updates on Daniel's work can be found at www.danieldonahoo.com.

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