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"...public opinion deserves to be respected as well as despised" G.W.F. Hegel, 'Philosophy of Right'

peak oil folks « Previous | |Next »
May 27, 2008

The atmospherics around the politics of petrol prices in Australia is increasing by the day as the realization dawns that cheap oil, which was arguably, the most important driver of prosperity in the industrial world during the 20th century, is coming to an end. Expensive energy will be the only significant driver of the economic development in the 21st century.

Hovering in the background is the date when global production of oil peaks. How would we know? One possibility being canvassed is 2017. Others argue that oil production and supplies will steadily decline by 2 percent annually for the time being. However, it is hard to take the political debate about cutting excise on petrol seriously:

WorstWing.jpg Worst Wing

A key factor is the growth in demand in emerging markets such as China and India. This implies that worldwide demand for oil will out pace worldwide production of oil by a significant margin. As a result, the price will continue to increase.

What we do know is that to a large extent it depends on the Saudi’s. Political peaking it occurs if they decide to no longer increase production. Geological peaking occurs when they cannot increase production.

FinancialTimesPenn.jpg Ingram Pinn

Martin Wolf in the Financial Times says that it would be a mistake to focus in shock only on the short-term jump in prices since the bigger issues are longer term:

Here are three facts about oil: it is a finite resource; it drives the global transport system; and if emerging economies consumed oil as Europeans do, world consumption would jump by 150 per cent. What is happening today is an early warning of this stark reality. It is tempting to blame the prices on speculators and big bad oil companies. The reality is different.

It looks increasingly hard to expand supply by the annual amount of about 1.4m barrels a day needed to meet demand. This means an extra Saudi Arabia every seven years. What is sobering is that we cannot burn oil that does not exist. We are no longer living in an age of abundant natural resources.

What we have in Australia is a debased standards political debate concerned with the petty point-scoring between the Opposition and the Government about easing the burden of petrol prices. This political debate seems to have reached a new low, one pushed down by the road lobbyists. Would the Rudd Government cut the GST on petrol while continuing to impose the GST on rail, tram and bus fares?

The Rudd Government is not set up for this kind of policy. Two weeks ago, the Government committed in the Budget to $3.2b worth of transport infrastructure projects. Of that, $192m was going to rail - primarily rail freight. The rest was for roads. It did also announce $75m for a joint Commonwealth-State process to study projects to relieve urban congestion, although a number of those are roads projects. This is not long term policy thinking. That would begin with a shift in the funding for roads to be reallocated to include all transport, with half going towards public transport. This should support the installation of high quality, high-speed passenger rail links between the major centres in a city.

| Posted by Gary Sauer-Thompson at 8:51 AM | | Comments (13)


--you say it is hard to take the politcal debate seriously. We have the Opposition moving a censure motion against Kevin Rudd for letting down Australians by "quitting" over the rising cost of petrol.Then we had Rudd launched a counter-attack, mending the censure motion to force the Opposition to vote on whether they supported the Fuel Watch scheme.

This century was predicted to belong to China and India. What will happen to those two countries if the world's supply of oil starts to run out in 2017? Will China and India be denied the chance to experience the anticipated eudaemonia?

Good question Rumpole. It will be interesting to see whether they use their industry base to solve these problems or whether, like us, they just sit back and let it happen.


Rudd has had the crappest week imaginable. As Gary points out the whole political argument is a sham, but it's worked in the opposition's favour. Rudd is using our fuel excise money to swan around with his butler while Nelson wants something done for the struggling family with a wheelchair and 5 kids in the back seat sitting in the gutter at 3 in the morning.

We are not going to suddenly run out of petrol when we pass the peak ie we won't fall over the edge of a cliff. However, remaining oil reserves will be more costly to access and "dirtier" to process. Both of these factors will put cost pressures on the supply side at the same time as demand is increasing from developing nations. That is why we need to be looking at clean alternative energy now.

Alan Wood, the economics editor of The Australian (the one who hates greenies and thinks global warming is a myth) says:

When it comes to petrol prices, good policy means letting higher oil prices flow through to higher petrol and other petroleum product prices in order to encourage changes in behaviour by consumers and industry that will reduce the growth in demand and increase the efficiency of oil use.

Brendan Nelson's irresponsible proposal to cut 5c from the excise on petrol goes in precisely the opposite direction. It is an opportunistic exploitation of the rapid rise in oil prices, and Nelson no doubt feels it has paid solid political dividends.
I rarely agree with Woods. He talks sense this time. Referring to Nelson's "policy" he says:
It is a short-sighted view, because it will do longer term damage to the Opposition's economic credentials, which in a different context it has seen as a valuable political asset. No doubt Nelson is operating over a short political horizon, with survival as Opposition Leader his primary objective.

As Wood says higher oil prices are the canary in the coalmine, pointing to global geopolitical and economic trends that will dominate international and national politics as this century unfolds.

the stark reality is that citizens of rich countries, such as Australia, must adjust to the higher prices of resources that the industrialization of the emerging countries (India and China) entails. So we just have to find ways to live with dearer oil. Use our brains for once and become cleverer about how we live in our cities and design our transport systems.

I've given up listening to the petrol price debate. It's all been tailored around focus groups and not good policy.

the political commentary gets worse. The politicians are having a debate about cutting the price of petrol by five cents a litre versus cutting it by two cents when the rising price is forcing people who have access to public transport to switch to it.

Meanwhile we have Dennis Shanahan in The Australian saying that:

The Rudd Government's credibility on petrol prices is in tatters, its ability to function as a sophisticated modern federal government is under question, and it's stretching credulity on economic management.For two days in a row the inner workings of the Government have been dramatically exposed to show deep rifts between ministers, a divided cabinet, good policy sacrificed for political expediency and the nascent outbreak of factional warfare.

Shanahan is talking in terms of deadly factional accusations, threats of payback and faction warfare.

What a beatup about the poverty of the current politics of peak oil. It's depressing.

what is of more concern for the Federal Government than the attack on its fuel policy (FuelWatch) is the leak of sensitive Cabinet documents that indicated four Government departments, including Prime Minister and Cabinet, had advised that the FuelWatch policy could lead to higher petrol prices.

There is another leak --the rebuttal notes prepared to help defend the adoption of FuelWatch. These talking points inform ministers to talk up the ACCC's most recent advice, and they say that ministers should get around concerns about added regulation, by instead referring to FuelWatch as a policy about competition

Six months into Government and Cabinet is leaking like a sieve. I assume that the leakers are the Howard loyalists from the upper echelons of the Public Service rather than a cabinet minister.

All this fuss about FuelWatch when it seems little more than window dressing. Even on the best view, it won't do much for prices. Despite the flaws--red tape, rigidity etc--Rudd + Co are seen to be trying to do something about petrol prices. I guess the problem Rudd + Co have is that they raised expectations before the election when they gave the impression they could ease cost of living pressures. Once in power it is turning out that they cannot do very much at all. Hoisted by their own spin.

As Peter Hartcher said in the SMH that Rudd could have knocked off this impression of easing cost of living pressures, treated voters as grown-ups, explained economic reality, and let Nelson weave the economic fairytales. Instead we have a national debate over a five-cent cut in excise versus the possibility of a 3.8-cent cut in petrol prices. It's a joke.

Rudd seems to be regaining control of the petrol price narrative. The line is that the opposition are spruiking for big oil while Labor are backing the consumer.

wonderful. Mickey Mouse could not have done a better job in parliamentary composure. A whole week arguing about a website ends with the PM telling the public servants to eak cake, an appeal to family values and a lurch to censorship.

Populism overrides evidence based policy and frank and fearless advice is dismissed as academic in the name of sound common sense.

It all sounds so like the Howard regime.

That pretty much sums it up Gary. We live in a democracy. What else is there to do?