CURRENT HIGH PRICES for oil cause immediate concern to motorists who fear increases in driving costs. Economists also fear that sustained high prices will lead to recession. However, few people realise that oil plays a critical and irreplaceable role in powering the “green revolution” that feeds an ever-increasing human population.
In the US, one kilogram of oil is used to produce one 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 about 1500 litres of oil a year.
Australia’s agriculture is similarly extensive and energy dependent. Rising oil prices feed though directly into the price of food as well as plastics, drugs, fertilisers, manufactured goods and just about anything in our economy that requires energy. Crude oil is the lifeblood of our technological civilization. As a very concentrated and easily transported source of energy, it can be transformed into a myriad of materials and products. Plentiful and cheap oil powers 90 per cent of the transport that makes globalisation possible.
However, contrary to popular belief, statistical analysis indicates that the world’s production of oil will soon begin to decline.
The exploitation of any natural resource tends to follow a pattern. It begins at a low rate and then increases rapidly as the easily accessible material is mined. Peak production tends to occur when about 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.
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 – but it proved to be very accurate. Since peaking in 1970, US oil production has declined by more than 30 per cent.
Estimates of the world’s reserves of recoverable oil by British Petroleum and by the Uppsala Hydrocarbon Depletion Study Group in Sweden, and statistical projections based on current production statistics by Professor Kenneth Deffeyes of Princeton University, all indicate that the total amount of oil we may ever extract from the Earth is somewhere near two trillion barrels. In the past 150 years, since modern oil extraction began, we have used nearly one trillion barrels. Now, as we approach the mid-point and peak of world production, we see demand beginning to outstrip supply, forcing up the price. Soon the inexorable decline in oil production will begin. If demand does not decrease correspondingly, the price of oil will skyrocket. Within five years, probably sooner, the price of oil will trend continually upward. It will only stabilise when a price is reached that causes demand to decrease at the same rate as oil production is decreasing. However, no alternative energy technology has been found that comes anywhere close to substituting effectively for oil, especially for transport.
This means that demand for oil is very inflexible and our economy will have extreme difficulty adjusting. Indeed, our current economic model is based on the precept of continuous growth. Economic growth is closely tied to increased energy use. Therefore, decreasing energy availability means negative economic growth and an inability to support our current lifestyle. What happens then depends on our political leadership. While no–one will escape the effects of greatly increased oil prices, those effects will be felt first in SA’s mortgage belts where young families on lower disposable incomes are located and where dependence upon car use is greatest. As economic growth turns negative and unemployment, food and fuel costs rise, mortgage defaults will become commonplace. However, eviction of these families and the forced sale of their houses by the banks will be pointless since there will be few buyers in the marketplace to purchase them. Unemployment benefits and child allowances will be unable to cover the increased food costs of these families. There will be widespread hunger and unrest unless the government intervenes to provide food. With very high fuel prices and the banking sector in crisis, farmers may find it very difficult to continue their vital work. This will be a critical moment. The government must do anything and everything necessary to ensure that agriculture continues. The supply of fuel and financial support to farmers must be the government’s highest priority. If it fails to act on this in good time then societal collapse is the only possible outcome.
If we are fortunate enough to receive the leadership we will need from our government, what form of society can we move towards that will be sustainable in a world without cheap and plentiful oil? Sustainability will only be possible if a number of conditions are met. Food production must become much more local in nature and must use techniques that do not require large inputs of chemical fertilizers. A great number of the people who lose their jobs in the coming oil crisis will find employment as human labour resumes its traditional place in agriculture.
The end of cheap, rapid, oil-fuelled transport will mean the end of globalisation. Thus, we will need to recreate our manufacturing industries to provide basic needs such as clothing, bicycles, farm tools/machinery and books. Some of Adelaide’s population will need to disperse to rural areas and a greatly expanded public transport sector will be needed to provide mobility for the rest. Long-distance transport between Adelaide and other regions and capitals should be by rail which is far more energy efficient than road freight. The cost of air travel will be beyond the reach of most people and the era of mass tourism will be at an end. Finally, computer modelling performed as long ago as the 1970s has shown that the only way for a society to be sustainable in the longer term is if its population numbers do not increase. (In our finite world, the ultimate result of continuous population growth can only ever be misery and starvation.)
To ensure that SA’s environment can continue to sustain us with less energy, we will need strict population control and possibly even an initial reduction in population. This will not be popular with some religious groups but its enforcement will be critical to our long-term success. In considering the impact of the coming oil crisis the first reactions can be shock, dismay and a degree of panic – so it is important to highlight some of the very positive aspects of surviving this crisis in SA. We have a well-educated population, a good resource base and not all our manufacturing capacity has yet been relocated offshore. Innovative companies, such as Origin Energy, are investing heavily in alternative energy sources.
We currently produce a food surplus and, while our climate is dry, Adelaide has a reliable source of water in the Murray River. Adelaide already has a limited local rail service and our parklands and other open spaces provide future sites for part of the local food production that we will need.
Our chances of survival here are good – if we can see the coming crisis for what it is and make the necessary plans before the storm is upon us.