I wish to draw the attention of this house to scientific evidence that the world production of oil and gas will soon begin to decline and the devastating consequences that this will have on the world economy and that of South Australia.
The Association for the Study of Peak Oil and Gas (also known as ASPO) is a network of scientists affiliated with European institutions and universities that have an interest in determining the date and impact of the peak and decline of the world production of oil and gas due to resource constraints. Modelling by the Uppsala Hydrocarbon Depletion Study Group in Sweden indicates that we are close to having used up half of the oil that can ever be extracted from the earth.
Professor Kenneth Deffeyes of Princeton University has made statistical projections based on current and historical production rates that indicate the same thing. Indeed, the Statistical Review of World Energy, which is published yearly by British Petroleum and which is accepted as the industry’s standard reference, shows oil reserve figures that are broadly in line with these estimates.
The production of a natural resource tends to follow a bell-shaped curve. It begins at a low rate and then increases rapidly as the easily accessible material is mined. Peak production tends to occur when around half of the useable resource has been extracted. Production then declines continuously as ever more energy and ingenuity are required to access the remaining material.
The best studied example of this is oil production in the USA. In 1956, the US was the world’s leading oil province with more than double the production capacity of Saudi Arabia. At that time a geophysicist employed by Shell Oil, Dr M. King Hubbert, predicted that US production would peak around 1970 and then begin an irreversible decline. This claim was mocked at the time; it proved to be very accurate. Since peaking in 1970, US oil production has declined by over 30 per cent.
What do nations do when they run short of critical resources? They tend to go to war and plunder other nations if they are not able to trade their way through to get what they want. That is what has happened, of course, with the US invasion of Iraq. If human civilisation has consumed half of the world’s available oil reserves, then we should be near the top of the bell-shaped production curve. The production rate of oil should begin to decline within a few years if not sooner.
We are currently seeing record levels of oil production but, apparently, little ability to increase production levels further to meet burgeoning demand. A decline in oil production appears imminent. It is also disturbing that two-thirds of the world’s remaining oil reserves are in the Middle East, one of the most politically unstable regions in the world. Further wars in the area of the Persian Gulf could lead to rapid declines in deliverable oil.
If oil production decreases while world demand is rising then the price of oil will skyrocket. In fact, the only way for the price of oil to remain stable will be for world demand to decrease at the same rate as the oil supply. Unfortunately, that is inconceivable. A skyrocketing oil price will not just be a problem for motorists.
Few people appreciate how totally dependant our economy, and indeed our technological society, is upon oil. Oil is the feedstock for most plastics and pharmaceuticals. Oil is the cheap and versatile energy source that powers globalisation including mass international tourism and global manufacturing supply chains. Cheap oil allows South Australian industries to export commodities at competitive prices to the rest of the world. However, most importantly, our modern extensive agriculture is critically dependent upon oil.
The agriculture of North America is similar to that of Australia in its highly mechanised, extensive nature, and its widespread use of fertiliser and pesticides. Earlier this year, Dale Allen Pfeiffer, an editor of the US-based internet journal From the Wilderness Publications published a study entitled `Eating fossil fuels’ on the absolute dependence of North American agriculture on oil.
For example, one kilogram of oil is used to produce every kilogram of food, and that figure does not include the fuel used to transport produce from the farm, process it, hold it in cold storage, package it, distribute it and then cook it. Growing food for each American requires around 1 500 litres of oil per year per person.
Thus, if oil prices multiply the price of food must follow. Of course, although we are enjoying high levels of affluence in South Australia and Australia at this time, dramatically increasing oil prices will present the South Australian economy with a storm of recession, and that is going to include an impact on the people in my electorate.