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Peak oil and an economic recovery

By Mike Pope - posted Tuesday, 15 September 2009


Price increases of this magnitude will have a pervasive inflationary effect throughout the global economy. These are likely to be of such severity as to prevent full recovery from the GFC or stultify the global economy by making its balanced growth unaffordable and unattainable. The viability of industries which are totally dependent on oil, such as mining, fertiliser and plastics production and the transport of industry are all threatened.

An increase in the price of oil will have a stimulatory effect on R&D into ways of reducing our dependence on fossil fuels, particularly by the transport industry which uses 55 per cent of global oil production for propulsion. We have a very short period, no more than five years, to develop and adopt use of a substitute for petrol and diesel. The most obvious is to convert existing vehicles and produce new ones which are propelled by electricity.

We know the dire consequences which will confront us due to increasing scarcity of oil. We know what must be done to avert those risks and that we have a relatively short period in which to put those measures in place.

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What has been our response? Government has provided Holden-General Motors with a subsidy of $70 million to be used in re-tooling their production line. To what end? To produce a new hybrid car propelled by electric motors, the electricity required being produced by a generator driven by, you guessed it, a petrol engine. True, petrol consumption and therefore running costs will be reduced but dependence on petrol remains.

No other action has been taken by the private or public sectors to break dependence on the use of fossil fuels by transport vehicles. Australia has abundant reserves of gas which could be used as an alternative to petrol and diesel, at least as an interim measure, reducing our growing dependence on oil and the adverse effect this has on foreign exchange reserves and the balance of trade. However, government has failed to take action to increase demand for or the production of vehicles operating on gas.

Governments could and should be taking action to promote the use of electric vehicles. Electricity is already widely available and outlets need little enhancement. It is far cheaper to use than fossil fuels and is emission-free, producing no greenhouse gases or particulates harmful to health. It is open to governments to offer cheaper registration for electric vehicles, reduced import tariffs on imported electric vehicles not produced in Australia and to renegotiate the basis of their subsidies to Holden. Will they? Unlikely.

Battery technology is already sufficiently advanced to give electric vehicles a range of up to 150km between charges and recent developments promise rapid charging and greater capacity. Pending commercial availability of such batteries, Renault intends supporting operations in Australia to provide a network of exchanges where vehicles can exchange spent batteries for fully charged ones. Will these measures persuade Holden to revise its proposal to build hybrid cars in favour of a purely electric vehicle? Doubtful.

The cost of continued dependence on fossil fuels will see world economies, including ours, in deep and increasing strife by 2015, a fate which is avoidable but only if we act to effectively counter increasing scarcity of oil. We know how to. Will we?

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About the Author

Mike Pope trained as an economist (Cambridge and UPNG) worked as a business planner (1966-2006), prepared and maintained business plan for the Olympic Coordinating Authority 1997-2000. He is now semi-retired with an interest in ways of ameliorating and dealing with climate change.

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