Costello in for a crude awakening


When the G20 met in Melbourne last week its current Chairman Peter Costello placed oil security at the top of the agenda. But while he paid lip service to the need for Australia to reduce its reliance on oil, his main focus was on finding ways to increase supply. Costello’s calls for an ‘energy super freeway’ and his criticism of oil cartels completely failed to engage with the real threats to Australia’s energy security: climate change and peak oil.


The world consumed 84m barrels of oil per day in 2005. With the rise in car ownership, particularly in the rapidly developing economies of China and India, world demand is growing faster than supply. A forty year pattern of using more oil than we find has been the major cause of the current price spike. The year in which the most oil was discovered was 1968. Since 1981 the world has consumed more oil than it has discovered. Consider telling a financial counsellor that over the last few decades you have been spending considerably more than you earn. They would probably advise you to rein in your spending. Yet rather than pushing for demand reduction at the G20 meeting, Costello’s key proposals involved:

  • increasing dialogue between oil exporting and consuming countries (which China has already been doing for years with little impact on the price of its oil imports);
  • ‘opening’ world energy markets (code for reducing the power of OPEC, which may bring prices down in the short term but would do nothing to deal with the depletion of known reserves) and
  • unclogging shipping lanes for oil tankers (which are not particularly ‘clogged’ and which would have little impact on the crude price).

Last week Costello said ‘They haven’t started preparing for it and they don’t even know its coming. Their shocks could affect the globe’. The Treasurer was referring to the aging populations of developed countries, but his words apply equally to oil depletion. A couple of years ago risk management expert Dr. Robert Hirsch was asked by the US Department of Energy to assess what lead time would be required to mitigate the effects of peak oil (the point at which maximum oil production is reached). In a report released last year his team found that 20 years of unprecedented effort would be required, prior to the date of peak oil, to avoid major economic collapse. If one accepts the ever growing chorus of petroleum geologists warning that peak oil is likely to occur between 2006 and 2015, clearly we have a problem. Dr. Hirsch makes a point echoed by the recent Stern report on the costs of climate change: the cost of preparing too late is far greater than the cost of preparing too early. In fact he estimated that the cost of short sighted planning could be “in the tens of trillions (US) and more” once Peak Oil is upon us. Yet here we are in 2006, with the Chairman of the G20 — a collection of the world’s most powerful financial leaders, talking about boosting supply and letting demand take care of itself. Sadly for Costello, the peak is caused by geological constraints, not clogged shipping lanes. Whilst central bankers are powerful people, they are unable to increase the amount of oil in the ground.

In the coming years it will be increasingly necessary for world leaders to develop sensible plans to deal with the effects of oil depletion. A small international group of resource experts, led by acclaimed petroleum geologist Dr. Colin Campbell have developed an oil depletion protocol. Richard Heinberg has outlined its framework in his recent book The Oil Depletion Protocol. It provides a plan to help smooth the transition toward a world with less oil. Accepting that peak oil will occur within the next 15 years, the protocol presents a planned strategy to reduce consumption by an amount approximating the estimated natural depletion rate of 2.6% per year. To ease our way into this unchartered period in our history, the protocol advocates minimising the social and economic impact of oil depletion by acting in a planned, proactive way. As Edward Schreyer, former Governor General of Canada and High Commissioner to Australia says ‘sometimes it’s rational to ration’. Central to the success of rationing must be an appreciation of the uniqueness of oil as an energy source. The reason oil has played centre stage in political and economic considerations over the last 100 years is because it is so useful. It is extremely energy dense, transportable and tolerant of wide temperature fluctuations. Just 100ml of oil can lift a car to the top of the Eiffel Tower. Professor Robert Kaufman, Director at Boston University’s Centre for Energy and Environmental Studies makes the point that peak oil represents the first time humans, on a global scale, will be forced to transfer to a poorer energy source.

Image from sxc

It is for this reason that we must begin to assess our flippant use of oil more carefully, at both a government and an individual level. Should governments still be building new freeways and subsidising car manufacturers? Is it a good idea to use the car in the city for every trip, even short ones? Every time we use a litre of petrol to go down to the shops to buy a litre of milk, we have one less litre available for tasks more deserving, like digging that farm dam. The good news is our extravagant use of oil means there is plenty of room for improvement in the way we consume oil.

Transport, as the world’s largest consumer of oil, is the most logical place to begin fuel conservation measures. The CSIRO reports that 49% of household emissions are generated by transport. Governments now have a responsibility to reverse decades of auto-centric transport planning. Short distance urban car trips are the low hanging fruit in this problem. According to figures from Victoria’s Department of Infrastructure, approximately 30% of urban car trips are under 3km, and 50% below 5km. This pattern of very short car journeys is repeated throughout Australian cities. Developing strategies to convert a significant proportion of these short distance car trips to walking and cycling is an appropriate place to start the process of weaning ourselves off the car. Luckily, there are several successful examples which Australia can look to for inspiration. In the late 1960s, Dutch cities were suffering from high levels of congestion and air pollution, owning to heavy car use. In response, authorities developed comprehensive bicycle infrastructure networks. A significant proportion of road space, once occupied by motor vehicles, was reallocated towards bicycle lanes and paths. The separation of cars and bikes, coupled with the widespread adoption of 30km/h speed limits in urban areas lead to the rapid adoption of cycling as the preferred mode of transport. Since then the Dutch have led the developed world in bicycle friendly design. The average Dutch city has 25% of all trips conducted on bicycle. The number one reason would-be cyclists choose not to cycle is fear of motor vehicles. The evidence could not be clearer — provide safe streets, designed to accommodate cyclists and people will ride.

Another important feature of Dutch transport design, of particular relevance to Australia is their integration of cycling and train travel. Some 30% of Dutch train journeys start or finish with a bicycle trip. Since the 1950s, many Australian homes have been built beyond comfortable walking distance from the train station. Developing a fine mesh of bicycle lanes and paths, radiating out from each suburban station would dramatically increase their catchment, thereby making train travel a realistic alternative to the car for many suburban residents. Add to this safe and attractive bicycle parking and many would find the combination of bike/train travel a winning solution. Cycling success stories can be found even in auto obsessed California. Davis, a town of 60,000 has cycle paths along 80% of its streets and now boasts a quarter of all trips conducted on bicycles. Urban planners in Davis are required to consider, and in many cases prioritise the needs of cyclists in planning decisions. Excellent signage and end of trip facilities, such as bike parking, showers and lockers are integral to Davis transport policy.

Refocusing transport policy away from the car towards walking, cycling and public transport would offer multiple, synergistic benefits, impacting on more than one important area of government responsibility. Not only will it reduce Australia’s exposure to high oil prices, it will assist in the fight against obesity and reduce our contribution to climate change. There has never been a more important time for government to deal with this confluence of emerging issues through creative transport policy. Urgent investments in sustainable transport present our governments with an opportunity to provide a legacy to future generations. Once Australian governments implement these measures, our socoety will be far less oil vulnerable, not to mention healthier and more sustainable.

Peak oil may be the biggest challenge ever to face the global economy. If we fail to take action now to soften its impact, then the G20 Summit’s motto ‘Building and Sustaining Prosperity” will be very difficult to achieve.

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