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'Peak Oil' drives urgent energy alternatives

By Ian Dunlop - posted Monday, 1 September 2008


We actually need higher oil prices to wean us off the use of oil and to encourage alternatives. This may seem hard, but the problem will become far worse unless we face up to this reality quickly. There is certainly a case for assisting those most exposed to ease the transition to a world of expensive energy, but it should be via specific targeted measures, not with across-the-board attempts to drop petrol prices that are miniscule in relation to the size of the problem.

Passing the peak raises the question of who will get the available oil. Several solutions have been proposed.

The first of these involves letting the market take its course - the preferred route of most economists. However, this conveniently skirts around the traumatic societal impact of recession or depression arising from high energy prices, and the potential for the creation of failed states as developing countries, and possibly even some developed countries, are increasingly forced out of the market.

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The second solution is the “Washington Consensus” of sending in the Marines to secure supply. Recent experience in Iraq suggests that this is hardly a sustainable alternative.

Third is a global mechanism for equitable sharing of available oil, such as an Oil Depletion Protocol akin to the Kyoto Protocol for carbon emissions. Indeed, the IEA was created in 1973 for exactly this purpose - to assist the OECD countries in allocating oil during the first oil shock. This time the problem is far greater, but we have handled similar situations in the past and we will probably have to resort to allocation mechanisms again, despite the protests of the market economists.

Global warming

But if peak oil was not enough, there is another problem: global warming and the need to radically reduce our carbon emissions from fossil fuel use - probably to completely decarbonise the economy by 2050. This will itself raise fossil fuel prices as carbon becomes properly priced, via mechanisms such as emissions trading, to reflect its environmental cost.

There are solutions to these converging issues, but they take time to implement, and we should have been planning for this years ago. We did not do so and we are now facing the consequences.

Some obvious responses, such as increasing coal consumption or converting coal to liquids, are carbon emission-intensive and, in the absence of carbon capture and storage (which is still unproven for large-scale application), would be extremely detrimental to solving global warming. The two issues are in­extricably linked and need to be treated with consistent and holistic policy. So what would that policy look like?

First, we need an honest, public acknowledgment by the government and business leaders of the real challenges we now face.

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Second, we need urgent education campaigns to inform the community and gain support for the hard decisions ahead.

Third, we must establish an emergency, nation-building response plan to place the economy on a low-carbon footing, minimising the consumption of oil. Such a task would be akin to a 21st century version of the 1950s Snowy Hydro Scheme, but much bigger and broader, or the Marshall Plan, which reconstructed Europe after World War II.

The components would begin with:

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This is an edited transcript from ABC Radio National’s Ockham’s Razor and published in Australasian Science.



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About the Author

Ian Dunlop is an independent analyst of energy policy with extensive experience as an executive in the global coal and oil industries. He has been CEO of the Australian Institute of Directors and is now Deputy Convener of the Australian Association for the Study of Peak Oil.

Creative Commons LicenseThis work is licensed under a Creative Commons License.

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