1. 1 The Global Oil Crunch We should be preparing in advance Bruce Robinson, Convenor 30th June 2009 ? ? Look out !! Something serious is looming on the radar Senate Select Committee on Fuel and Energy

2. 2 Outline This is about oil, not energy in general. Transport Energy, not Stationary Energy Global oil supply, not just Australia's ● What is Peak Oil ? the time when global oil production stops rising and starts its final decline We will never "run out of oil" ● When is the most probable forecast date ? ? 2012 +/- 5 years "Peak Exports" is even more important, and sooner ● Oil vulnerability assessment and risk management crucial to many policies 1930 1970 2010 2050 Peak Oil but when?

3. 3 Two analogies for Peak Oil risks 1. Hurricane Katrina (New Orleans, 2005) 2. US Financial Crisis (World, 2008-09) Can we learn to prepare for probable events rather than just hoping business will be as usual ? KOSPI Jeremy Leggett The Guardian, UK, 29-Oct-2008 "We have seen with the credit crunch, the banks and governments failed to see a massive problem coming. With the oil crunch, oil companies and governments are failing to see a massive problem coming. The difference is we have five years to gear ourselves up to do something about it this time.

4. 4 Hurricane Katrina New Orleans US Federal, State and local Governments were shown to be shortsighted, ill-prepared, uncaring and disorganised. Most governments and investors are much less prepared for Peak Oil

5. 5 "Grappling with Energy Risk" Matthew R Simmons, Chairman, Simmons & Company, Investment Bankers to the Energy Industry ASPO-USA conference Sept 22nd 2008 www.simmonsco-intl.com/files/ASPO%20USA%202008.pdf

6. 6 www.csiro.au/resources/FuelForThoughtReport.html

7. 7 August 2008 Unless there is a collapse in oil demand within the next five to ten years, there will be a serious oil 'supply crunch' - not because of below-ground resource constraints but because of inadequate investment by international oil companies (IOCs) and national oil companies (NOCs ). www.chathamhouse.org.uk/publications/papers/view/-/id/652/

8. 8 Jeremy Leggett October 29 2008 Time for an energy bail-out Peak oil is just five years away, and we must start to plan now to avert a truly ruinous crisis Today, eight British companies are warning of a ruinous oil crunch five years from now. Previously unimaginable policy interventions in financial markets have suddenly become imperative, and similar interventions in energy markets today may be worth their weight in gold tomorrow. www.peakoiltaskforce.net

9. 9 World Energy Outlook 2008: The world’s energy system is at a crossroads. Current global trends in energy supply and consumption are patently unsustainable — environmentally, economically, socially. But that can — and must — be altered; there’s still time to change the road we’re on. "Fresh sources of oil equivalent to the output of four Saudi Arabias will have to be found simply to maintain present levels of supply by 2030, one of the world's leading energy experts has said. Fatih Birol, chief economist of the International Energy Agency (IEA), the developed world's energy watchdog, told The Times The IEA "estimates that the average production-weighted observed decline rate worldwide is currently 6.7% pa for fields that have passed their production peak. In our Reference Case, this increases to 8.6% in 2030. The current figure is derived from our analysis of production at 800 fields, including all 54 super-giants (< 5 Gbbl) in production today"...

10. 10 Even if oil demand were to remain flat to 2030, 45 m barrels/day of gross capacity -roughly four times the capacity of Saudi Arabia - would be needed just to offset the decline from existing fields 2008

11. 11 Prof Kjell Aleklett Global Energy Systems Uppsala University, Sweden Australian lecture tour June 5th-12th 2009 Plenary lecture Supply Chain and Logistics Conference Sydney Canberra, Senate Hearing Energy White Paper, Dept of Infrastructure, Transport etc University of Technology, Sydney University of Adelaide

12. 12 2008 International Energy Agency (OECD) WEO 2008 and Uppsala Oil Outlook 2008 2008 Uppsala Global Energy Systems group Using the same IEA data fields to be developed and yet to be found, and the same natural gas production Different conclusions. IEA production forecasts are "outside reality", not possible. (because IEA have assumed impossible production rates from the reserves)

13. 13 Oil production,OECD Europe (EnergyWatch Group, 2007) Oil Production UK, field by field (EnergyWatch Group, 2007) Alaska's giant Prudhoe Bay (Simmons) Mexico's Cantarell giant (Simmons) Oilfields and oil provinces "peak". Their production rises, reaches a maximum and then declines 54 of 65 most important oil producers have peaked.

14. 14 US oil peak 1970 US economic and military power was built on its rising oil production, What might happen down the decline side of the graph?? ( ? financial crisis ?)

15. 15 Dr. Sadad I. Al Husseini, ex Saudi Aramco Oil and Money Conference, London, October 30, 2007...predicts a 10 year plateau a structural ceiling determined by geology 100 90 70 80 Production M b/day Price $/barrel The economic mantra is that as prices rise, production will increase. Clearly not true from these data.

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17. 17 Germany, October 22 2007 Fig. 7 Oil production world summary 2008 www.energywatchgroup.org/fileadmin/global/pdf/EWG_Oilreport_10-2007.pdf IEA WEO 2008

18. 18 Chris Skrebowski Editor, Petroleum Review, London The practical realities Worry about flows not reserves "Deliverability" “It isn't the size of the tank; it’s the size of the tap” (ASPO-USA)

19. 19 A simple observation -- or why peak will be earlier than most people expect ‘Global production falls when loss of output from countries in decline exceeds gains in output from those that are expanding.’

20. 20 THE GROWING GAP Regular Conventional Oil Billion barrels of oil per year Longwell, 2002

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22. 22 Million barrels per day 80 60 40 20 0 2009 www.PeakOil.net ASPO 2008

23. 23 Perth’s Central Park building is 249 m high, to top of tower Australia uses 51,000,000,000 litres of oil each year a cube of about 370 metres size 80% of Australia’s oil usage is in transport If Australia’s 20 M tpa wheat crop → ethanol = ~10%

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26. 26 Australia China United States 1 km l l Million barrels/ day 2007 BP Statistical Review, 2008 Australia uses 0.9 China7.9 US20.7 World85.2 US 1 cubic km oil / year

27. 27 0 5 10 15 5 0 25 Years After Crash Program Initiation Impact (MM bpd) 20 35 EOR Coal Liquids Heavy Oil GTL Efficient Vehicles Worldwide Crash Program Mitigation of Conventional Oil Production Peaking A Study for US DOE NETL Hirsch, Bezdek and Wendling, 2005 Delay / Rapid growth. Roughly 35 MM bpd at year 20. 2005 Study

28. 28 COST AS A FUNCTION OF START TIME (Notional) Time Cost of Error Premature Start Peaking Scenario I - 10 Years Scenario II - 20 Years Scenario III

29. 29 Actual Forecast Australia } $17.8 billion 2007/08 P50 Consumption Production

30. 30 Failure to act now will prove incredibly costly Oil vulnerability assessment and risk management should be a central part of most policy decisions www.ASPO-Australia.org.au Bruce.Robinson@ASPO-Australia.org.au 0427 398 708 08-9384-7409 Hint: Check your superannuation is not being invested into urban toll-roads, tunnels and airports. General priorities for facing Peak Oil 1: Awareness and engagement 2: Frugality 3: Efficiency Last: Alternative fuels and technologies

31. 31 a few more slides follow, in case they are needed for questions

32. 32 1: “Talk about it, Talk about it” 2. Engage people, “Participatory democracy” 3. Dismantle the "perverse policies" that subsidise heavy car use and excessive freight transport. Australian Government Policy and Action Options 4. Encourage frugal use of fuel, and disadvantage profligate users. Fuel taxes should be incrementally raised to European levels to reduce usage. 5: SmartCard tradable personal fuel allocation system. A flexible mechanism for short- term oil shocks, as well for encouraging people to reduce their fuel usage.. 6. Concentrate on the psychological and social dimensions of automobile dependence, not just “technological fixes” 7. Implement nationwide "individualised marketing" travel demand management. 8. Railways, cyclepaths and public transport are far better investments than more roads. 9. Give priority for remaining oil & gas supplies to food production, essential services and indigenous communities, using the Smart-Card system. 10. Review the oil vulnerability of every industry and community sector and how each may reduce their risks.

33. 33 Australian petrol & diesel rationing using 2008 technology Smart-card based, scalable, tradeable, flexible, quick to change, equitable, transparent. Fuel allocations should be per person, not per vehicle, and depend on Location (inner or outer suburb, public transport access, regional or remote) Health status (elderly or infirm, expectant mothers with toddlers), less for the fit who can ride a bicycle 20kms if needed Job importance (defence, essential services, hospitals, food) People are encouraged to conserve by being able to trade unused allowances electronically and automatically. Martin Feldstein, Chief Economic Advisor to President Reagan, now at Harvard, (WSJ 2006) "tradeable gasoline rights are more efficient than fuel economy standards or gasoline taxes"

34. 34 A rational pricing system Perth domestic water Renewable scarce resource A personal fuel SmartCard system could tax petrol and diesel on a sliding scale like water. People could trade unused allocations to those who want more fuel. Water Analogy for Fuel Pricing Perth domestic water prices per kilolitre 2008 Consumption range kilolitre/year

35. 35 to roads, 4WDs profligate vehicle users heavy inefficient vehicles Supermarkets subsidise CO2 $18/tonne with their fuel dockets Supermarket petrol discounts People who walk to the supermarket are subsidising those who drive in the big SUVs There are innumerable “Perverse” subsidies FBT tax on cars as part of salary

36. 36 Petrol taxes OECD IEA Dec 2003 Korea UK Australia US € 0.80 0.60 0.00 0.20 0.40 Au$ cents/litre

37. 37 The UK Fuel Tax Escalator Margaret Thatcher Australian fuel taxes should be raised to European levels on a fuel tax escalator 1988 1990 1992 1994 1996 1998 Nominal tax per litre (pence) Real tax 10 30 50 40 20 0 pence

38. 38 China US Australia

39. 39 www.ASPO-Australia.org.Au Bicycles are powered by biofuel, renewable energy, either Weetbix or abdominal fat No shortage of either

40. 40 140 120 100 80 60 40 20 0 Million barrels per day (equivalent) 2009

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