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Monday, 27 February 2006
Page: 99

Senator ALLISON (Leader of the Australian Democrats) (7:53 PM) —I rise to speak on the Offshore Petroleum Bill 2005 and the five related bills that are being considered by the Senate today. The Offshore Petroleum Bill 2005 is an extensive revamp of the longstanding Petroleum (Submerged Lands) Act 1967, which the government has argued needed rewriting to reduce compliance costs for the industry and for the state and territory governments. The Democrats note that the bill, in addition to reducing complexity, makes some minor changes to the current regime, the majority of which we do not have a strong objection to. We do, of course, have some concerns with the principal act, which enables petroleum exploration in marine parks, a matter which my colleague Senator Bartlett will talk more about later.

I want to say tonight that we are very critical of the fact that efforts have gone into this major rewrite of offshore petroleum policy instead of addressing the more critical issue of the impending oil crises and rising petrol costs. The latest research shows that oil peaking presents the world with a risk management problem of global proportions. There is now an energy security planning vacuum in Australia, as there is in other countries.

When oil consumption begins to exceed production by even a small amount, the price of oil could soar to well over $US100 a barrel, greatly increasing the cost of transport fuels and the petrochemicals used to make thousands of plastic products, fertilisers and pesticides for food production. Within a year or so this could create a global recession. The impact on the wellbeing of Australians, particularly those with outer suburban lifestyles hinged on two-car families and constant car trips to work, school and supermarkets, will be disastrous. I think people need to realise that oil production is not just about transport and the cost of getting to work; it is also about manufacturing, farming and the availability and cost of everyday products and food. Oil decline will have a huge impact on world food production and will have a devastating effect on developing countries in particular.

Since 1980, the gap between oil demand and oil supply, once considerable, has steadily narrowed, and today it is almost negligible. Since 1965 the amount of oil discovered each year has inexorably plunged despite all our advances in technology. Because of the lack of access to accurate data, there is no certainty about when oil production will peak and then decline. Some governments are very concerned about this uncertainty but our government is either unaware or is choosing to ignore the serious threat of reduced oil supplies as we reach 2025.

We know that the United States hit peak oil in 1971; the United Kingdom with its North Sea oil peaked in 1999; and Australia peaked in 2000. The Middle East remains one of the only areas that has not reached peak oil. Many of these countries do not release details about how much oil is extracted from the reservoirs or what methods are used to extract that oil. Nor do they permit audits by outsiders. Indeed, the condition of the Saudi and other OPEC oil fields is a closely guarded secret. According to a report published in the New York Times, Sadad al-Husseini, one of the most respected and accomplished oil men in the world and ex-director of Saudi Aramco, revealed that the Saudi government was seriously overstating its reserves. The report states:

“You look at the globe and ask, ‘Where are the big increments?’ ... if demand and depletion patterns continue, every year the world will need to open enough fields or wells to pump an additional six to eight million barrels a day—at least two million new barrels a day to meet the rising demand and at least four million to compensate for the declining production of existing fields. “That’s like a whole new Saudi Arabia every couple of years,”... “It can’t be done indefinitely. It’s not sustainable.”

Husseini’s message, like that of the Association for the Study of Peak Oil and Gas, is that the world is heading for a devastating oil shortage and contradicts the calming speeches of the Saudi oil minister and predictions of the US Energy Information Administration.

The US Department of Energy called for an investigation. The report, entitled World oil production: impacts, mitigation and risk management, states that action must start 20 years before peak oil to adapt to declining oil supplies. It says:

Prudent risk management requires the planning and implementation of mitigation well before peaking. Early mitigation will almost certainly be less expensive and less damaging to the world’s economies than delayed mitigation.

Based on estimates of peak oil, several scenarios have been identified: (1) that oil production peaks then declines around 2010 inducing a world-wide depression, wrecking the Australian economy and producing mass unemployment; (2) that oil peaks between 2015 and 2025, making a less painful adaptation possible, provided that most developed nations agree to reduce oil dependence with strong government market intervention, the introduction of fuel rationing, fuel efficiency standards and so forth; (3) that oil peaking after 2025 allows a timely adaptation with mutually agreed supply and demand side oil conservation measures recommended by the International Energy Agency.

While many governments are banking on a peak after 2025, the Association for the Study of Peak Oil and Gas predicts that oil will actually peak around 2010. The association’s data shows world oil production increasing by 2.2 per cent per year, which is the rate at which it increased in 2004, according to IEA, and then peaking between 2008 and 2012 followed by a 2.2 per cent per annum decline in production to 2045. Further, as conventional oil production begins to peak, the light, sweet crude gets used up first and the remaining conventional oil gets heavier and more sour with more impurities reducing the energy return on the energy invested and producing more greenhouse gas emissions. Non-conventional oil produces far more CO emissions than conventional oil.

The Energy research Centre in the Netherlands supports the hypothesis that an oil peak sometime in the period 2010 to 2020 is far from impossible, saying:

While there are many events that could postpone an oil peak till after year 2020 there are equally many events that could lead to an oil peak before the year 2020.

                  …         …           …

… an oil peak in the near future is indeed plausible and … it would be very useful to consider the possible consequences for global energy markets and the resulting drive for system innovations.

… we are referring to the period up to 2020 rather than any one particular year. … scenarios with limited availability of oil and sharply rising prices deserve serious attention in terms of the consequences for European energy transitions and related energy research, demonstration and development strategies.

Eric Streitberg, Managing Director of ARC Energy, asked participants at the Australian Petroleum Production and Exploration Association conference to put up their hands if they thought that we had reached peak oil. Fifty per cent of the people in the audience put up their hands, saying that they believe we are at peak oil. These are practising petroleum industry professionals.

Chevron, the US’s largest energy group with a good environment record, has set up a website warning of the pressures of high demand and fewer fields, and offering a forum for discussion. On the website, Chevron says:

One thing is clear: the era of easy oil is over.

It also says:

We call upon scientists and educators, politicians and policymakers, environmentalists, leaders of industry and each one of you to be part of reshaping the next era of energy.

Chevron has also said, ‘Inaction is not an option.’ Even Exxon Mobil, the world’s largest energy group with a bad environmental record, said in a recent advertisement:

The world faces enormous energy challenges. There are no easy answers.

Just last week President George Bush, in his State of the Union address, for the first time admitted that America’s reliance on oil is a real problem. He said:

America is addicted to oil …

He also said:

Keeping America competitive requires affordable energy.

President Bush then went on to announce a 22 per cent increase in clean energy research. He recognised the need to change how we power our homes and offices and invest more in solar and wind technologies. He also argued that Americans must change how they power their automobiles, and promised greater research into better batteries for hybrid and electric cars, and into pollution-free cars that run on hydrogen. He said:

We’ll also fund additional research in cutting-edge methods of producing ethanol, not just from corn, but from wood chips and stalks, or switch grass. Our goal is to make this new kind of ethanol practical and competitive within six years.

While there were some criticisms about the practical effects of President Bush’s announcement, it did signal an important shift in energy policy for the United States.

The question now is: where does that leave Australia? Transport predictions to the year 2010 in Australia for single-occupant car commuting, car travel generally, air passenger travel, intercity road freight and intracity commercial vehicle traffic all show an unsustainable growth in oil dependency. Over the last 40 years, Australia has become addicted to cheap oil, especially for transport, which uses almost 80 per cent of Australia’s petroleum. Fifty-five per cent of road transport fuel is petrol; 39 per cent, diesel; and six per cent, LPG. The oil-dependent transport sector is responsible for 76 per cent of oil consumption; that has to be reduced, as it poses a very serious threat to Australia’s future economy.

Achieving energy efficiency in all sectors of the economy requires action to be taken by individuals, companies and governments, but it is government who can encourage and discourage energy efficiency in so many ways. A key priority in guaranteeing Australia’s energy security is, in our view, to reduce the transport sector’s overdependence on oil. It does not matter that there is uncertainty about when peak oil will occur; what matters is the consensus that that peak will occur. We must act now.

We suggest the following initiatives be undertaken by government. Firstly, the government should develop car fuel efficiency standards to ensure that, by 2015, the average fuel consumption of the car fleet, including most four-wheel drives, be four litres per 100 kilometres and, for the SUV and light truck fleet, 6.5 litres per 100 kilometres, giving an overall 50 per cent increase in fuel efficiency. Secondly, we should conserve oil reserves through the use of natural gas as a transition fuel, the manufacture of energy-efficient hybrid electric cars and LCVs, and the building-up of a strategic six-month reserve of diesel and petrol. Thirdly, we should absorb the costs of oil depletion into the price of diesel, petrol and aviation fuel and utilise other green taxes designed to decouple the growth in oil consumption from the growth of GDP, and use the green taxes to rebuild and enhance rail infrastructure in all urban areas.

Fourthly, the government should promote and fund the uptake of telecommuting, eco-driving, car-pooling and TravelSmart programs in all urban areas. Fifthly, the government should change current land-use planning practice to eliminate residential sprawl, and provide public transport services in new residential and industrial areas. Sixthly, the government should change the constitution of road planning and building agencies to make it their responsibility to reduce the demand for road space and travel by car. Finally, the government should build urban bikeway networks for bicycles and electric bicycles, provide secure bicycle parking at all modal interchanges and railway stations, and encourage the use of electric bicycles with solar electric and/or overnight battery charging.

To implement these recommendations, an Australian energy security policy, with both demand- and supply-side measures should be produced to mitigate oil dependency. As Professor Peter Newman, a transport academic from Murdoch University, pointed out on the television show Catalyst late last year:

We have lots of preparedness for terrorist attacks; but where’s the plan for peak oil? We don’t have one.

In my contribution to the debate on the energy efficiency bill during the last sitting week, I called on the government to make the 2006 budget about the future of Australians and Australia and to invest in energy efficiency schemes, renewable energy, water and other areas in which energy efficiency can be found. Today I add to this list and call on the government to invest in an energy security policy with both demand- and supply-side measures. This is a matter of urgency.