The International Energy Agency, in a recent report, has predicted much higher oil prices within five years at best.
Peak Oil denial is at the highest levels in Australia. Food and fuel prices are removed from 'core' inflation. Ford Australia builds gas guzzlers then asks for a handout when new car buyers get cold feet. The 'answer' to housing affordability is new subdivisions with an hour or two's commute to the CBD. The PM's good mate Steve Forbes assured us oil would be $20 a barrel around now. Carbon trading gets put off for several years.
Unfortunately I don't think there is any easy answer to Peak Oil for Australia. Smaller cars and compressed natural gas as fuel may help somewhat but the system is heavily locked into maximum road miles. That system needs a major redesign but unfortunately there will be casualties along the way.
I wondered when the IEA report would see light of day here. I'm a subscriber to the Peak Oil hypothesis although I think it should be called Plateau Oil in that the 'peak' will probably be bouncing around for a few years yet as prices affect demand and, as mentioned, new supply comes on-stream. The peak is more like Mount Kosciusko than a witches (or dunces, given the ignorance of it) hat.
A couple of points: finally the biofuel myth is being questioned. Anecdotal comments about the way biofuels have been corrupting other markets have been around for a while now.
Okay, raw stats need to be taken with a grain of salt but the numbers are consistent with the thought that we are in the plateau stage now and continuing high prices support that notion. By the way, recently Mexico announced a move to lower production.
As for the affect of PO. In the US the housing market is coming off it's highs and the blame is on poor lending practices, but this misses the point that many borrowers have become stretched financially. Virtually every commentator includes in the reasons 'high gas prices'. Something to ponder. I've said before in my comments that food supplies are not the immediate nor medium term worry, falling asset prices are.
We economists have few tools at our disposal but elasticity of demand is one of them and is robust. The demand for food (after the overproduction has been stripped out) is inelastic so progressively we'll see a higher proportion of oil production going there as other activities dry up. I wouldn't like to be in the massage therapy business when oil is at $150/b or supplies intermittent. Our kids should choose their jobs (and debt levels) carefully.
Well written article Michale, but could you, or perhaps someone else explain to me that part of the article concerning shipping fuels?
I realise that when lighter oils are depleted and greater quantities of heavier and more sulfurous grades of oil are being processed, the price of heavier oils will rise accordingly, which in turn will have an effect on the price of shipping to some degree, but what I don't understand is just why shipping would therefore automatically change over to distillates? Surely it will be cheaper for the shipping industry to continue to use heavier oils that have not been subject to so much refining rather than change to distillates? Perhaps it's all about greater mileage per 'tank' by changing fuels?
I might hasten to add that I'm not indifferent to your article. It's simply that, as an ardent follower of the "end of cheap oil" scenario and one who is prepared to spread the message, I need to know all the facts. I must say, an increase in shipping costs is one area I haven't really thought too much about for the very reason that they use lower grades of oil. Michael, I hope you can enlighten me on this issue.
aime, i believe the point about 'distillates' in shipping is that improved refining will allow road transport to commandeer shipping oils through higher prices, thus driving up shipping costs even faster.
however, there is a bright spot in shipping: it is perfectly possible to run the worlds shipping on a combination of sail and sun screens. it'll need more ships because slower average journeys, but no technical problems.
Interersting question Aime, if the "global economy" starts to fail there will be less demand for shipping as well.
tonnage of each ship calculates how much oil is leaving each country.
That info is probably commercial but it would be interesting.
It's high time for the Peak Oil discussion!
It is my hope and expectation that Peak Oil will drive the global "recession we had to have", turning the focus of investment from labour efficiency to resource efficiency.
Much of our inefficient energy use can be put down directly to the cheap availability of liquid fuels. The global economy reacts promptly and effectively to changes in the price of oil. A sustained increases in oil prices will divert investment from wasteful technologies to more efficient ones. Use of "stationary" energy for transportation will become more widespread (eg. rail, electric vehicles) and fuel-free power will come into its own, with prices spiralling down as technologies mature.
If, as hinted above, high fuel prices drove the "subprime mortgage" collapse, we may see a rapid change in urban planning priorities as a response, even sooner than I might have hoped.
I see the change in investment priority which will be driven by Peak Oil as our economically-sustainable path to ecologically-sustainable energy use. We'll never reach Peak Coal or even Peak Natural Gas, because Peak Oil will make them obsolete.
To Aime regarding shipping fuels : if/when high-tech refineries 'crack' the heavier fractions of crude to produce more light oil (gasoline) for automobiles, those refineries won't be producing any 'fuel oil' at all. At the moment heavy oil is abundant and cheap; a decline in its supply would quickly make shippers look at alternatives. Existing marine engines would run more efficiently and cleanly on regular diesel than they do on the heavy stuff, so if the fuel oil price goes up shippers will happily spend the same amount on better fuel. There's no need for a turnover in capital equipment before this could happen.