 | Peak oil: BP, Conoco CEOs say it's here - also IEA's Fatih Birol really freaks out | The Oil Drum | Linking Promises to Funding |  |
| The Bullroarer - Saturday 10 November 2007 | TOD: Australia/New Zealand | The Bullroarer - Sunday 11 November 2007 | |
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I agree with everything above and I will be voting Green and preferencing the Coalition last, however, this is what I think will really happen...
In the next few years oil prices (and commodity prices in general) will continue to head upwards, US recession or not. I believe Chinese economy has become a largely self-sustaining beast and is less and less dependent on U.S consumers continuing to open their wallets. This Chinese demand will ensure that commodity prices remain strong, and the Australian dollar will continue to track commodity prices upwards, including oil.
This means the Aussie motorist will be largely protected from future rises in oil prices. The price of oil will have to rise substantially faster than the price of commodities we sell (coal, iron ore etc) for the Aussie motorist to suffer.
If we do see any pain at the bowser the politicians will simply lower fuel taxes to ease the pain. This is already official policy for Family First and the LDP, and its an easy vote winner for the Coalition in opposition.
Are you expecting the oil and subsequent fuel supply to remain steady or grow? Will China be able to secure an exponential supply of oil to continue their growth and exports?
Will Australia be able to secure enough fuel to continue strip mining of iron ore for the Chinese market?
It is best to dig the well before you are thirsty.
But he is not protected from physical oil shortages. In the case of oil, it is an untested assumption that market forces (prices) will always bring demand down to supply levels. Once demand destruction has worked its way through the discretionary down to the essentials we can expect massive government interventions all around the world - including quotas.
You also assume that profits from coal and other exports will trickle down to motorist's incomes as fast as oil prices rise.
A continuous growth in China of 8% pa will create social tensions and we have no idea how that will evolve and how the Chinese government will manage these problems. ASPO China has also calculated that Chinese oil production will peak in the next years. Spot diesel shortages have already impacted on truck movements.
Peak oil is likely to weaken commodity prices as oil, coal, iron ore and other minerals are in demand at certain physical ratios depending on technology which cannot be changed over night. One would have to do economic modeling to find out whether the Chinese boom can offset weakening demand elsewhere.
The coal business also cannot go on forever.
http://www.abc.net.au/7.30/content/2007/s1870955.htm
What Hansen meant might be the disappearance of the Arctic summer sea ice by 2013:
Causes of Changes in Arctic Sea Ice; by Wieslaw Maslowski (Naval Postgraduate School)
http://www.ametsoc.org/atmospolicy/documents/May032006_Dr.WieslawMaslows...
So it is both optimistic and premature to see the Australian motorist in a cocoon created by high commodity prices.
You put it quite starkly Matt.
I think Australia is very vulnerable to peak oil.
40% and growing oil imports, very poor agricultural land, drought and water shortages.
Reliance on mineral exports to maintain a balance of payments and just about 100% reliance on coal for electricity.
Australia is already thirsty, the well should have been dug 30 years ago.
Matt:
I didn't say this is what I would like to see happen, but its what I think will really happen. Obviously its unsustainable in the long term, but the current situation can keep going for a few more years, at least for the term of the next government.
Yes there will be demand destruction, but that will happen in the poorest countries first, and because of the strength of our dollar Australia will one of the last countries where demand destruction occurs.
Profits from the resources boom will continue to be redistributed as the government rakes in billions from mining company taxes. Every day we see Howard and Rudd promising more pork to placate "working families". That pork is coming directly from the resources boom.
China is doing everything it can to secure its oil supply so it can continue its breakneck economic growth. Why do you think President Hu does tours of Africa? He's not going there for the wildlife! When African oil is fully owned and operated by the Chinese they can operate completely outside the oil markets, and pay considerably less per barrel.
I don't see peak oil weakening coal prices. When TSHTF and oil hits $500/barrel we will see huge investments in coal-to-liquids. Australia will be seen as the new Saudi Arabia.
No arguments from me about the dangers of burning more coal. Its completely and utterly insane.
So it is both optimistic and premature to see the Australian motorist in a cocoon created by high commodity prices.
Its not premature, its been happening for years! Plot the AUD vs crude oil for the period 2000-2007 and you will see they've been in lockstep.
Believe me, I'm not being an "optimist" when I say Australia will be shielded from high oil prices in coming years. IMO, its the worst possible outcome for Australia.
Did you know the Government is preparing for Australia's National Liquid Fuel Emergency Simulation Exercise Catalyst 2008?
I checked the statistics. The demand destruction in poor countries is hitting them hard but their saving means nothing to the world oil market. They just don't consume much anyway. For example, from the 1st quarter 2006 to the 2nd quarter 2006, the main demand destruction happened in Japan (1.2 mb/d), former USSR (0.5 mb/d), Korea (250 kb/d), Italy(240 kb/d) and France (210 kb/d)
The energy profit ratio of CTL is very low. It will have as little to do with the conventional oil from Saudi Arabia as the Canadian tar sands. Monash Energy - if it ever goes ahead - would produce a mere 60 kb/d of diesel. It will be very expensive. Enough for the ADF, bush fire brigades, roadtrains carrying wheat where there is no rail and other essential transports.