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Use your brain Morris, take the train
Oil’s inexorable decline must drive Sydney public transport reforms

By MATT MUSHALIK and GAVIN GATENBY*
29 September 2005
Possum News Network

History will record that the Carr Government’s greatest failure was that it squandered the opportunity to make timely preparations for “peak oil”. Few Australians are familiar with this phenomena, but its ramifications will seep into every aspect of political and social life in the coming years.

For a whole decade state cabinet ignored a sincere and increasingly strident warning from oil industry experts: the maximum possible level of world oil production was imminent and would be followed by inexorable decline. It remains to be seen whether the Iemma cabinet will face the issue squarely or remain in denial.

Earlier this year, under relentless pressure to fix Sydney’s transport chaos, Carr announced a belated and minimalist plan for future public transport. At the time, world oil prices had just passed $US53 a barrel and industry sources were warning of $US60 a barrel in the coming northern winter, the traditional demand peak. Ominously, this threshold was passed in June – during the northern summer – and the price now hovers between $64 and $70.

Meanwhile, the future availability of the oil and LPG that power most of our transport barely figures in the Australian infrastructure debate. If the issue is discussed at all, the impression is given that we’re dealing with a temporary coincidence of unrelated events and that prices will soon go back to “normal”. Oil company bashing and populist “solutions” abound, but very few commentators will commit themselves on the root cause – the successive and continuous peaking of production in many oil-producing countries.

Production from any given oilfield always follows the same life cycle: it first increases, then reaches a peak or plateau and then declines. Peak oil is a geological characteristic of oil production, reflecting the laws of fluid mechanics controlling the flow of oil through the pores and fissures of oil-bearing rock to the wells. Peak oil is also driven by the economics of exploration and production, which seek fast returns for investment and forces companies into ever growing production until production peaks. Usually the peak happens when 50 per cent of the field’s oil is produced (“Hubbert’s Peak”). Advanced technology can push the peak up to 60 per cent but the decline is then steeper. Peak oil happens in every oil field, in every oil province, in every country and, in aggregate, in the whole world.

As of last year, 18 major oil producing countries were in decline, at 1.1 million barrels a day per year. By 2009 this group of countries will be joined by six more – accelerating the rate of global decline to 1.6 million barrels per day, per year.

The issue now in dispute is the year in which world production will peak before going into permanent decline. This will happen when production volumes from growing and declining countries balance each other, something that can, in advance, only be estimated, and known with certainty only in hindsight.

We’re already in the first phase of this crisis. The most detailed and methodologically reliable analysis for the approaching years comes from Chris Skrebowski, member of the London based Oil Depletion Analysis Centre (ODAC) and editor of the professional oil and gas journal Petroleum Review. Skrebowski considers 2004, with a daily production of 82.4 million barrels, as the first year in which there was virtually no spare capacity. From now on, he calculates, every oilfield project coming on-stream must both offset accelerating decline in existing fields and provide for growth in demand. And demand is rising inexorably.

Skrebowski’s research shows that supplies could be extremely tight in the fourth quarter of this year depending on when a new pipeline from Baku to southern Turkey comes into operation. More oil fields are scheduled to come on-stream in 2006, slightly improving the outlook, But Hurricanes Katrina and Rita have temporarily reduced Gulf of Mexico (GOM) output by almost 1 million barrels a day. Future new GOM projects totaling 800 Kb/day might also be delayed. Even if repairs can be affected quickly, the world’s fields will still struggle to provide 2 per cent growth over the next 3 years.

After 2008, the world will have to adapt to lower growth rates. In this phase, high oil prices will trigger “demand destruction”. If all oilfield projects come on-stream in time, the peak of production can be expected around 2010, otherwise earlier. Even if a new, giant, field were discovered today, it would most likely be offshore and development would take at least five or more years. In other words, for the next five years, oil production is almost pre-programmed.

For the period after 2010 and into 2012, uncertainty grows, but if current trends continue, in 2015, production will be back to 2004 levels.

This reality is in stark contrast to the complacent outlook of politicians and the public who, upon being told that oil will “last” for 40 years imagine the situation is analogous to a car’s petrol tank – we’ll keep driving for four decades and then it’ll suddenly run out. Actually, it will be as though the supply of petrol to your car’s engine was slowly strangled. In 40 years time, petroleum will be a rare and precious commodity, carefully husbanded for applications for which it is irreplaceable.

In the smoothly-functioning theoretical market beloved of economists this decline would act as if it were new demand, sending prices steadily upwards, but real life will surely be messier. As consciousness of peak oil sinks in, turmoil in the Middle East may limit supplies and international competition and market panic will inevitably boost prices further.

Think about this: Skrebowski’s year of “demand destruction”, 2008, is just three years away, and four years before the projected completion of stage one of the state government’s very modest rail expansion plan.

Our present car fleet is not remotely prepared to cope with stagnant, let alone decreasing, oil production. Even if half of all new cars were hybrids, we would achieve only a 2 per cent annual reduction in fuel consumption – very close to the initial decline rate we can expect after peak oil. And such a transition would take 25 years assuming 8 per cent new car sales every year and a booming economy.

This means that the growing road traffic now cited to justify investment in new tollways and road tunnels cannot be sustained in the future, irrespective of population growth.

We have to replace oil-dependent transport. The only proven and readily available alternative mass-transit technology is electric trains and trams with power from coal or gas-fired power stations – or renewable sources, when these come on-stream.

In urban areas, the quickest and most economic way to implement this would be light rail along all major roads and tollways. This is commercially risk-free because that’s where the traffic is. Low density suburbs would need feeder bus services, and cycle-tracks, to connect to train and tram stations. Sydney should urgently follow the example of Perth, which has already put such a system in place (using its narrow-gauge rail system) along the Mitchell freeway. A second project is under way along the Kwinana freeway.

Premier Morris Iemma should seize the opportunity to change planning priorities in favour of public transport. In the face of peak oil, Sydney can’t afford more months of denial and muddling through.

• Matt Mushalik and Gavin Gatenby are members of public transport advocacy group EcoTransit Sydney. Matt Mushalik is a civil engineer.

 

The “newspaper of record” in denial

Matt Mushalik and I originally wrote this piece for the Sydney Morning Herald – way back before Bob Carr’s resignation – in response to the Herald’s call for the public to get behind its “Campaign for Sydney”.

Alas, Robert Whitehead resigned as editor and the campaign died in the arse, but we persisted – regularly re-writing the piece to reflect recent developments and resubmitting – because we felt that the future of the fuel that powers our society was of more than ordinary public interest.

Since the beginning of this year the Herald has published but a single article on peak oil (2 April) – and it was misleadingly headlined “Running on empty”. Actually, of course, we’re running on half full. The Financial Review has done better with three stories in the same period.

Emails to me by two successive opinion page editors reflect the general atmosphere of denial in the mainstream media:

17 August: “Thanks for this piece it is very interesting – and strong – but I am afraid I will not have any room for it, I am juggling too many other pieces right now.”

14 September: “Quite apart from its length, debating the issue of 'peak oil' is not where we should be focusing our efforts.”

“Where should we be focusing our efforts …?” I responded, amazed.

“Telling us something we don't already know.

“We like to try and advance the debate in some way ...”

It’s hard to respond to something like that, but I tried: “Alas … 95 per cent of the public haven't a clue about the peak oil concept. First, they have to grasp that there's a fundamental problem. To have a debate, the punters need to see the facts and theories on the table.”

And I never heard from him again.

• GAVIN GATENBY

 

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