The most critical problem we now confront is not global warming or how to tax emissions, but providing enough affordable fuel to avoid severe recession before alternative energy can become reality. The Lucky Country faces a choice between disaster and a unique opportunity.
Over the past two years climate all over the world has inexplicably begun a pronounced cooling. This is contrary to all expectations from global warming theory and growing other evidence is also indicating that the threat has been overestimated. However, the obsession with catastrophic climate change seems to have distracted attention from a much more certain and immanent danger. The oil supply vital to the entire economy is not keeping up with increasing demand while presently all focus is on renewable energy solutions that will require decades to develop and implement.
Consider just a few key facts about oil:
- production is already in decline in some 50 nations;
- new discoveries have steadily declined for several decades and are far below depletion rates;
- oil exports are decreasing in most exporting nations as their own domestic demand increases;
- refining capacity has not kept pace with demand due to environmental restrictions and investment concerns over future supplies of crude;
- most existing refineries are designed for light sweet crude the supply of which is rapidly declining;
- future oil will increasingly be heavy sour crude which only a minority of existing refineries can use;
- the major producers have no reason for massive investment to increase production. The value of their remaining reserves is rapidly appreciating. Increased production would reduce prices and accelerate depletion. Expensive infrastructure for increased production would soon end up excessive to declining reserves.
Growth in demand, shortages and further price rises will slow the global economy for the foreseeable future. Fuel intensive sectors such as primary production, transport and travel will be hit especially hard.
Viable alternative energy is still decades away. Using commercially proven technology synthetic fuel from coal and gas could supply all our needs here in Australia at much less than the current price of fuel from oil. Only emission restrictions on CO2 stand in the way. "Clean" renewable technology is decades from becoming commercial.
The Australian economy is in a vulnerable position. Manufacturing is in decline and, at 13 per cent of GDP, is among the lowest in the developed world. The trade balance remains in chronic deficit even with the mineral boom. In April it became positive for the first time in six years but in May it was in deficit again, chiefly because of rising oil prices. Foreign debt is growing at twice the rate of the economy. It is now about 60 per cent of GDP, the highest in the developed world.
High commodity prices normally last only a few years before increased production, spurred by high prices, brings them down again. An end to the boom will result in a fall in the exchange rate of the Australian dollar, an even worse trade deficit and a crippling increase in the cost of foreign debt. An economy not dependent on imported oil would be a huge advantage.
Australia's portion of global CO2 emissions is about 1.4 per cent or just six months' growth in China's emissions. Natural uptakes of CO2 over Australia's land and Exclusive Economic Area of surrounding ocean absorb much more than this. Our net contribution to global CO2 emissions is already negative. Whatever we do or don't do will be trivial to the global situation, either in quantity or even as an example. Why cripple the economy for an increasingly doubtful theory?
Global warming is a distant and uncertain possibility of a problem that most likely does not even exist, at least in the catastrophic form being predicted. It can only be meaningfully addressed by developments that will require decades to become effective and which, in any event, must be undertaken even without the threat of warming.
Severe economic hardship because of fuel costs and shortages, however, is an imminent probability. This could be greatly alleviated if not avoided altogether by development of our own liquid-fuel supplies. It would be far easier to do this now in a time of prosperity than trying to do it in a recession. Having such capacity already in place might well even avert a recession here altogether. Being energy independent would be a huge competitive advantage in a time of high energy costs and shortages everywhere else.
Although precaution in the face of uncertainty is sensible, the realm of hypothetical risk limitless. Many perceived risks turn out to have no reality. Remember the Y2K millennium bug scare? We cannot build fortresses against every shadow of doubt. Precaution too is not without its own attendant risk. Any proposed precautionary measure must be weighed against alternatives as well as consideration of its own consequences.
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