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Thinking ahead of the curve on oil depletion - tradeable fuel entitlements

Program Transcript

Oil has now reached record prices and growth in demand, particularly from China, is predicted to rise faster than OPEC can increase supply. In fact, a number of European scientists who have formed The Association for the Study of Peak Oil and Gas predict that world crude oil production will peak this year and then begin a slow and irreversible decline. If you believe these scientists then we will see even higher prices in the near future as oil supply falls further behind demand. If you do not yet believe these scientists then - you soon will.

So, here we are near the peak of oil production, a moment predicted by the Shell company geophysicist M. King Hubbert in 1974. Since oil provides the energy that drives almost all of the modern world’s transport and food production this is an auspicious moment. What does the world look like on the other side of the peak?

In the energy-poor landscape spread out before us are a number of alternative destinations. The easiest one to get to is the bleakest. If we continue straight ahead and try to maintain “business-as-usual” for as long as possible then societal chaos is the only possible outcome. An ever decreasing group of the once wealthy and powerful members of our society will grab an ever larger share of the declining resources while skyrocketing transport, food and other costs mean unemployment, bankruptcy and deprivation for the rest.

Ultimately, all will lose but, on the way there, the very first to suffer will be young families with large mortgages on the outer edges of our sprawling cities – some of John Howard’s most nervous supporters.

There is another destination on the energy slope down from Hubbert’s peak. It is a long way off but getting there is worth the effort. This alternative destination is a simpler place than the one in which we live now. There are fewer of today’s luxuries but there are compensations – more time with our families, healthier food and a fitter, safer and happier community.

Nearly everything is recycled in some way or other and most food and manufactured goods are produced locally. Much of our time is spent growing our own food but there is also time for sport, debate, listening to the radio and maintaining the most valuable aspects of our culture such as our knowledge of the universe that was won in the former times of energy surplus.

This is a world free of the tyranny of “economic growth”. It has a stable population living in a healthy environment with a steady-state economy operating at a level that can be maintained by renewable sources of energy. In fact, the monetary system used in this world is based on energy availability.

How do we get to this better place? The fork in the road is what we do when fuel shortages become critical and the Commonwealth Liquid Fuel Emergency Act is enforced. The business-as-usual crowd, the economic rationalists, will say that the most economically efficient policy is for fuel to go to those with the greatest ability to pay. So, the rich will continue to live comfortably for a time while the rest – well, its their own fault for being poor. That is the path to disaster.

The alternative path starts with fuel rationing where every person receives a modest, but tradeable, entitlement to fuel at an affordable price. Vital services can receive extra basic fuel entitlements and anyone can purchase additional entitlements at a higher price. People who choose not to use their basic fuel entitlement can trade it to those who need more fuel. The trade in fuel entitlements will evolve into an economy where the entitlements are, in effect, a form of money based on available energy. This new energy economy will operate in parallel to, and eventually replace, our current paper-money economy.

Economic and population growth cannot be supported without increasing supplies of energy. A steady-state economy with a currency based on available energy is the only truly sustainable option in our oil-depleted future.

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