Letter to Garnaut: Implications of Oil Production Decline

This is an open letter from Stuart McCarthy of ASPO Australia in Brisbane to Professor Ross Garnaut, who is conducting a public review "to examine the impacts, challenges and opportunities of climate change for Australia".

Dear Professor Garnaut,

Implications of Oil Production Decline Forecasts for Copenhagen 2009

Thank you for providing the opportunity for comment on the Review following the release of your Targets and Trajectories Supplementary Draft Report. ASPO-Australia has followed the Review with interest as oil depletion is very much the ‘other side of the coin’ regarding anthropogenic climate change.

We are deeply concerned that your Draft Report explicitly rejects the notion that oil depletion will constrain economic growth within the next 50 years despite very strong evidence to the contrary. In our view the resulting analysis, conclusions and policy recommendations are flawed and will probably exacerbate the climate change mitigation problem.

Figure 1. Colin Campbell/ASPO World Production Profile, Oil and Gas Liquids, 2007 Scenario

The purpose of this letter is to draw your attention to growing acceptance of oil depletion in the scientific community and even by the IEA in its revision of the energy forecasts and emissions scenarios in the forthcoming World Energy Outlook 2008, a document intended in large part to inform negotiations in Copenhagen. Our view is that this will substantially improve the prospects for an effective agreement around a target atmospheric CO2 concentration of 450ppm.

The IEA and other agencies such as the US Energy Information Administration and Australia’s ABARE have traditionally produced demand based forecasts of oil production and simply assumed that reserves and production capacity would meet demand. Typically these have forecast world oil production continuing to increase until at least the 2030 timeframe at rates of up to 120 million barrels per day, compared with the current 87 million barrels per day. Notably, there is already a gap of 1.5 million barrels per day between the WEO 2006 forecast and actual production, i.e. production growth has fallen 50 per cent short of forecast growth over the last two years. Price forecasts based on these production forecasts have been similarly discredited in recent years, even over the short term.

By contrast, a number of recent and ongoing resource based and project based studies of world oil production have concluded that production is likely to peak in the 2007-2018 timeframe, at rates in the range of around 87-95 million barrels per day, before declining at around two to three per cent per annum or more steeply. These include:

The project based studies are particularly important as the peak in world oil production makes its transition from theoretical projection to observed phenomenon. Even with observed data from the IEA and EIA showing that world oil production has been essentially flat since 2005, sceptics of the proposition of a near-term oil production peak have tended to resort to a faith-based argument that increasing oil prices would ensure increasing discoveries and production. These have simply failed to materialise despite world oil prices having increased by 30 per cent per annum for the last seven years.

Figure 2. Wikipedia Oil Megaprojects Database, Moderate Decline Rate (4.5% per annum) Scenario, world oil supply and megaproject contributions, compared to observed EIA production data

Figure 3. Wikipedia Oil Megaprojects Database, Moderate Decline Rate (4.5% per annum) Scenario, including new discoveries and unconventional oil

Given the five to seven year start-up time for a typical major oil project, and reasonable estimates of depletion rates in existing oil fields, the project based studies provide a good indication of actual production capacities during the period to about 2018, beyond which time underlying depletion in the ageing supergiant oil fields will be the main determinant in overall production rates. Furthermore, while new oil discoveries continue to be made, the inexorable downwards trend in conventional crude oil discoveries has continued since the annual volumes discovered reached a maximum and started declining four decades ago (see Figure 4). There is little or no evidence that world oil production can continue to grow beyond the next decade, indeed the evidence strongly indicates the opposite – a high probability that world oil production will be declining within several years.

Of particular concern to oil importing countries such as Australia (see Figure 5) and most of the OECD is declining world exports. A recent study by oil industry analysts Jeffrey Brown and Samuel Foucher produced a ‘middle case’ scenario in which exports from the world’s top five oil exporters decline by 6.2% per year from the present rate of approximately 24 million barrels per day to approximately 12.5 million barrels per day by 2015,7 i.e. a decline equivalent to one quarter of the world’s internationally traded oil over the next seven years. This analysis is reinforced by Jeff Rubin from Canadian Imperial Bank of Commerce (CIBC) World Markets, who recently assessed that world exports will decline by 2.5 million barrels per day over the next three years.8

Figure 4. World Oil Production vs Discovery, Regular Conventional Oil, 1930-2050

Figure 5. Australian Domestic Oil Production (Geoscience Australia, actual and P50 forecast) vs Total Demand (ABARE), 1970-2030

A similar approach to combining resource based and projects based methodologies has been taken by the IEA in its review of oil and gas supply prospects for WEO 2008. This assessment has included a detailed field-by-field analysis of trends and prospects for production and decline rates at more than 400 of the world’s largest fields and a comprehensive review of reserves and resources.9 A first draft of WEO 2008 was due to be released for peer review on 1 August. While we are not privy to the contents of the report, IEA Chief Economist Dr Fatih Birol has for some time been openly signalling a major downwards revision from previous reports. In March, for example, Birol wrote in The Independent: “we need to leave oil before it leaves us.”10 IEA reports since WEO 2007 have warned of a “supply crunch” in the 2010-2012 timeframe. Given that many of your key assumptions are based on projections from WEO 2007, we strongly recommend that you obtain the draft WEO 2008 prior to completing your final report.

As an aside, you should bear in mind that the IEA was established by the OECD to counter-balance OPEC and represent the interests of major oil-consuming nations. Unlike the IPCC it is not a broad-based international organisation and in the past there have been serious grounds for doubting the objectivity and reliability of IEA oil forecasts. Although recently the IEA has become more open to oil depletion methodology, Australia should not rely on IEA information alone while neglecting other more independent assessments such as those of Energy Watch Group and ASPO.

The emissions scenarios in WEO 2008 would likely reflect any downwards revision in forecast oil and gas production. You will be aware that the IPCC emissions scenarios discussed in your Draft Report pre-date much of the contemporary literature on oil depletion and therefore take no account of this factor. However a number of published scientific papers now include emissions scenarios based on realistic oil reserve and production estimates. The first of these is Prof. Kjell Aleklett, Reserve Driven Forecasts for Oil, Gas and Coal and Limits in Carbon Dioxide Emissions, OECD Joint Transport Research Centre, December 2007,11 which concludes:

This paper is based on realistic reserve assessments, and CO2 emissions from resources that cannot be turned into reserves are not allowed. … we can conclude that CO2 emissions from burning oil and gas are lower than what all the IPCC scenarios predict.

IPCC emission scenarios for the time period 2020 to 2100 should in the future not be used for climate change predictions. It’s time to use realistic scenarios.

The second paper is Drs. Pushker A. Kharecha and James E. Hansen, “Implications of Peak Oil for Atmospheric CO2 and Climate”, Global Biochemical Cycles, Vol. 22, GB3012, August 2008.12 Kharecha and Hansen present five emissions scenarios, four of which are broadly consistent with the resource based oil production studies cited above. Notably, these four scenarios see peak fuel CO2 levels in the 428-446ppm range. The fifth scenario is a business-as-usual scenario in which fossil fuel emissions are unconstrained.

Even before considering Copenhagen, our view is that this disparity between your emission scenarios and resource limitations discredits much of the analysis in the Draft Report, in particular:

The Review’s ‘Platinum Age’ projections are based on the IEA’s WEO 2007 production forecasts, which have likely undergone significant downwards revision in WEO 2008. The WEO 2007 reference case sees fuel-related CO2 emissions reaching 41 Gt per annum by 2030 (including world oil production at 116 million barrels per day) and continuing to climb, while the high-growth scenario sees emissions reaching 44 Gt per annum in the same timeframe and also continuing to climb. This is completely unrealistic.

Assumptions regarding fossil fuel emissions in the Review’s no-mitigation reference case are not yet published, however the projection (Draft Report, Figure 4.10) appears to be demand based and continues to climb beyond 2100, unconstrained by resource limits, exceeding even the higher IPCC scenarios. This too is completely unrealistic.

The no-mitigation scenarios exclude the very serious economic impacts of peak oil on the world economy. The result is that the mitigation scenarios grossly overestimate the cost of mitigation while omitting the severe costs of delaying mitigation until the onset of peak oil. These are described in a 2005 report commissioned by the US Department of Energy (“Hirsch Report”):

How Oil Supply Shortfalls Affect the Global Economy

Oil prices play a key role in the global economy, since the major impact of an oil supply disruption is higher oil prices. Oil price increases transfer income from oil importing to oil exporting countries, and the net impact on world economic growth is negative. For oil importing countries, increased oil prices reduce national income because spending on oil rises, and there is less available to spend on other goods and services. Not surprisingly, the larger the oil price increase and the longer higher prices are sustained, the more severe is the macroeconomic impact.

Higher oil prices result in increased costs for the production of goods and services, as well as inflation, unemployment, reduced demand for products other than oil, and lower capital investment. Tax revenues decline and budget deficits increase, driving up interest rates. These effects will be greater the more abrupt and severe the oil price increase and will be exacerbated by the impact on consumer and business confidence.

Implications for the World Economy

A shortfall of oil supplies caused by world conventional oil production peaking will sharply increase oil prices and oil price volatility. As oil peaking is approached, relatively minor events will likely have more pronounced impacts on oil prices and futures markets.

Oil prices remain a key determinant of global economic performance, and world economic growth over the past 50 years has been negatively impacted in the wake of increased oil prices. The greater the supply shortfall, the higher the price increases; the longer the shortfall, the greater will be the adverse economic affects.

The long-run impact of sustained, significantly increased oil prices associated with oil peaking will be severe. Virtually certain are increases in inflation and unemployment, declines in the output of goods and services, and a degradation of living standards. Without timely mitigation, the long-run impact on the developed economies will almost certainly be extremely damaging, while many developing nations will likely be even worse off.

With the world oil production trend merely on a plateau rather than in decline, i.e. even before there is conclusive evidence of it having peaked, the IEA has already observed “devastating” demand destruction in the US and other OECD countries, contributing substantially to a slowdown in the global economy,15 while Jeff Rubin has calculated that the impact of rising oil prices on global transport costs in recent years has effectively offset all of the trade liberalisation efforts of the past three decades.

The no-mitigation scenarios also exclude the economic impacts of peak oil on the Australian economy, while the mitigation scenarios similarly overestimate the cost of mitigation and omit costs of delaying mitigation. Based on a near-term peak in world oil production, recent modelling for the CSIRO Future Fuels Forum indicated fuel prices as high as $8 per litre by 2018, a reduction in passenger and freight travel of up to 40 per cent and a decline in GDP of at least three per cent,17 which dwarfs the deviation between your reference case and ambitious 450ppm mitigation scenario in Targets and Trajectories. Observed data indicating the impact of rising oil prices includes an increasing petroleum trade deficit that already exceeds $10 billion per annum, the combined impact of rising oil prices and personal debt in the car-dependent outer suburbs of Australia’s cities,18 high inflation and slowing economic growth.

Numerous unsubstantiated assumptions are made regarding energy resource substitution. Constraints imposed by the laws of thermodynamics, time and scale appear to have been ignored. The magnitude and urgency of the “energy transformation” (Draft Report, Chapter 20) is grossly underestimated.

While we accept that the purpose of the Review is to develop a policy response to climate change rather than peak oil, we believe that failing to respond to the latter will preclude an effective response to the former. Placing a price on carbon via the cap and trade system proposed in your Draft Report is important, however this in itself will be grossly inadequate as there is little evidence to support the assumptions regarding timely energy resource and technological substitution. The Hirsch Report examined the specific problem of developing alternative liquid fuels to mitigate a liquid fuel shortfall following peak oil. Three mitigation scenarios were developed, based on different timings for the implementation of comprehensive supply-side and demand-side “crash programs” including enhanced oil recovery (EOR), heavy oil production (such as tar sands), gas-to-liquids (GTL), coal-to-liquids (CTL) and fuel efficiency gains. The conclusions are instructive:

Waiting until world oil production peaks before taking crash program action leaves the world with a significant liquid fuel deficit for more than two decades.

Initiating a mitigation crash program 10 years before world oil peaking helps considerably but still leaves a liquid fuels shortfall roughly a decade after the time that oil would have peaked.

Initiating a mitigation crash program 20 years before peaking appears to offer the possibility of avoiding a world liquid fuels shortfall for the forecast period.

The obvious conclusion from this analysis is that with adequate, timely mitigation, the costs of peaking can be minimized. If mitigation were to be too little, too late, world supply/demand balance will be achieved through massive demand destruction (shortages), which would translate to significant economic hardship.

When the combined peak oil and climate change mitigation problem is given even precursory consideration, compounding problems emerge, for example competition for liquid fuels between the transport and stationary energy sectors, or attempts at large-scale substitution of petroleum fuels with emissions-intensive coal-to-liquids or biofuels from food crops. A useful “cost comparison” between climate change mitigation and peak oil mitigation is to be found in the CSIRO Future Fuels Forum modelling, which found that a very high carbon cost of $100 per tonne would increase the cost of petrol by 25c per litre, whereas a near-term peak in world oil production would see the cost of petrol increase as high as $8 per litre.

Without urgent, comprehensive intervention, a purely market based response to climate change will most likely fail to deliver the necessary energy and transport infrastructure before declining oil production precludes such a transition. Even without considering the broader economic consequences, the construction costs alone arising from an increase in fuel prices to anywhere near $8 per litre would be prohibitive. Our dependence on existing, fossil fuel dependent transport and energy infrastructure would likely become more deeply entrenched, thereby exacerbating the already “diabolical” emission reduction challenge.

There is a large overlap in potential policy responses to climate change mitigation and peak oil mitigation. One of the key differences between the two, however, is that there is no “prisoners dilemma” to prevent unilateral peak oil mitigation. Indeed most peak oil mitigation measures would be ‘no regrets’ policies with positive socio-economic outcomes. Several Australian constituencies, including the Queensland Government, have for this reason already begun the process of proactive, unilateral peak oil mitigation.20 Given that Australian domestic oil production peaked in 2000 and we are already almost 50 per cent dependent on petroleum imports, the Commonwealth Government has nothing to lose in following Queensland’s lead.

The Copenhagen negotiations will be occurring at a time of growing awareness of peak oil. Most countries are becoming increasingly aware of the economic and security problems arising from their growing dependence on oil imports, notably the US, the UK, China and India. The imperative for unilateral peak oil mitigation in concert with a cooperative climate change mitigation effort is becoming more widely understood, even within the climate science community. The IEA’s reserve based energy and emissions forecasts are being revised towards realistic scenarios more consistent with a 450ppm emissions target. Prospects for an effective agreement in Copenhagen around this target appear to be improving by the day.

We would be pleased to discuss this matter with you at your convenience and look forward to your final report.

Stuart McCarthy

You can download the full document including references from ASPO Australia.

This letter makes a good case for Australia to start reducing the impact of peak oil, but I think it is to the Australian Government not Professor Garnaut that this letter needs to be directed.
The Garnaut Report made a good case that Australia's very higher per capita CO2e is due to our use of coal for 78% of our stationary energy consumption. Agriculture is the other big greenhouse gas emitting activity.
As you pointed out, raising CO2e permit costs to even $100 per tonne CO2, would only have a minor effect on the cost of petroleum based fuels, but would have a drastic effect on the use of coal for electricity production.
It would be useful to list some possible proposals that would reduce reliance on petroleum based fuels and assist in reducing CO2e.
Three possible measures that the government could accelerate would be 1)the conversion of trains trucks and passenger vehicles from diesel and petrol to CNG 2) much higher fuel efficiency standards for all new vehicles ( I don't think we have any)3) replace NG and electric hot water heating by solar assist.
There may be other areas that will have a big impact on both reducing oil dependence and reducing CO2e.

Hi Neil,

We (ASPO) have sent plenty of letters and submissions to the Federal Government, believe me! The main purpose of this letter was to alert Professor Garnaut to the flawed analysis in his draft report. Garnaut's BAU energy and emissions projections, and the resulting economic analysis, is based on data in the IEA's WEO 2007. There is a real risk that it will be discredited with the release of WEO 2008 in November, which will include the results of their oil & gas production review. The proposed ETS will likely be overtaken by real world events, i.e. the socio-economic impact of peak oil. Both problems (climate change and peak oil) need to be considered together in order to formulate a coherent response.

I would encourage everyone reading this to send it to both the Minister for Climate Change and their local MP to highlight the problem of looking at climate change in isolation.



Hi Stuart,

Great article.

When you say (in your comment above) "I would encourage everyone reading this to send it to both the Minister for Climate Change and their local MP to highlight the problem of looking at climate change in isolation."

Do you mean just copy past and email off????



In my experience emails to politicians are usually ignored, particularly if you just copy and paste other stuff without telling them what you want. What I suggest is:

1. Write a letter to your local MP and include a copy of our original letter above (http://www.aspo-australia.org.au/References/Bruce/Letter-Garnaut-Sep-200...). You can email if you like but letters are usually more successful.

2. Explain to your MP that you applaud the Rudd Government's ratification of the Kyoto Protocol, but that you believe merely establishing an ETS and leaving the "invisible hand of the market" to reduce emissions is completely inadequate. Tell him/her that you believe the situation requires urgent intervention.

3. Make some specific proposals for government expenditure in your area, e.g. public transport infrastructure or direct investment in renewable energy infrastructure. You could also suggest that existing fossil fuel subsidies totalling approximately $10 billion per annum be phased out and replaced with equivalent subsidies for renewable energy.

4. Explain that climate mitigation policies that ignore the socio-economic impact of peak oil will be ineffective. Explain that peak oil is even more urgent than climate change. If we don't get cracking with urgent peak oil mitigation we won't be able to afford to build the renewable energy and transport infrastructure we need, i.e. we will be stuck with what we've got.

5. Tell him/her that peak oil mitigation requires urgent action. Tinkering around the edges of the problem, i.e. subsidising Toyota to build hybrid cars is totally inadequate.

6. Include a copy of the Queensland Government's "Towards Oil Resilience" paper - http://www.epa.qld.gov.au/environmental_management/sustainability/oil_vu.... Tell him/her that the Federal Government needs to take its head out of the sand and follow Queensland's lead. All the better if you're a Queenslander.

7. Ask for an appointment to meet him/her face to face in order to explain peak oil and the resulting problems.

8. Send the same to the Ministers for Climate Change (Penny Wong), Energy (Martin Ferguson), Transport & Infrastructure (Anthony Albanese) and Prime Minister Kevin Rudd. Do not spam their email inboxes. Send them polite but insistent letters and or emails which explain the problem and ask for replies.

If you're really keen you can arrange a film night featuring Australia Pumping Empty - http://www.aquilaproductions.com.au/. Invite your local Federal & state MPs, local government Councillors and community groups. Don't wait for other people to do it for you, it will never happen. Rest assured that nothing will happen until real leaders "ave a go" and do this sort of thing on their own initiative.

Let me know how you go. TOD could be a good forum for posting emails and replies to/from politicians.




Thanks for crafting such a high quality posting, and providing helpful instructions on how we should make best use of your hard work. Your letter does a great job of pushing peak oil back onto the discussion agenda. Back in April Ian Dunlop, myself and others built our various Garnaut submissions around peak oil messages, but none of us seems to have succeeded in influencing the outputs of the Garnaut enquiry as far as I can see. Taking a second shot at the target seems a very good idea.

Cheers, Mark

If I could make a suggestion, simplify your case down to the barest essentials (oil supply forecast is wrong, thus any climate change policy coming from it is wrong as well). Wait till the report is due to hit the press and then send out a press release with the simple message and links to a nice simple pretty graph just before the report release (eg night before).

Journalists are always looking for the story and you have a good chance of getting coverage from someone or other. Remember, essentially write the story for them, in the style journalists tend to use.

You would be amazed how well that works.

Oh, and the report will be reviewed by politicians, find the name of one who is contrarian and feed them questions that will make them look on the ball.

Our future energy scenarios are largely looked at in an academic way - by people who are alienated from the natural world. It is only when you really understand the limits of human and animal energy by actual manual farm work it really hits home.

Working animals can only exert a draw bar pull equal to roughly 16% of their body weight - so our 200 kg donkey can pull 32 kg for eight hours with an hour break half way through. A big draught horse will more than double that effort,but be able to work only for 6 hours per day - and a human under half of the donkey output... which makes us pretty efficient!

Take out the fossil fuels that will all be gone in 50 years we will be left with the pasture economy, and its scale is so small it would hardly register to modern eyes - but rest assured it will be enough to feed, cloth and house human beings who are prepared to go the physical hard yards..

Our ability to sustain higher energy level usage than that provided by sunlight on grass cannot be sustained much longer. It is something you just have to get used to

Garnaut is an economist (unreconstructed price theory utopian), he was appointed by Labour when still in opposition; and he is towing the KRudd line (growth forever and nothing must come between him and winning the next election). He can hardly open the can of worms that is Peak Oil in this context.

That does not mean that his report is intellectually honest, or an accurate forecast of what may happen. Its aims are surprisingly short term - they are only to provide the context for the introduction of the ETS.

Just had a reply from a well-known Aussie MS finance commentator (I'm delighted he replied at all!) - to Chris Martensen's "Crash Course" series; in particular the chapters on economic growth...

"In brief Matthew, he may be right ... but I have always noted that those who preach either a new paradigm (where we go into a never ending boom) or armageddon never get it right. That's because people and governments might be slow-moving, but they do move. The current problems in the US will cause enormous volatility - and probably its cycles between boom and bust will be shorter - but remember that 94 per cent of its working age population are employed and most are repaying their mortgages on time. Many will have cash and if the assets get cheap enough they will buy them and profit as the economy reflates. China and India emerging (China has $2.1 trillion in reserves) create big opportunities here in the next 20 years. And you forget that the world has to find (and will find, its only a matter of cost) an answer to the oil shortage in the next 30 years. The commercialisation of that will produce enormous amounts of economic pain, but also benefit. Exponential growth is always unsustainable. But so too is abject failure. If you can double long term inflation rates after tax in your portfolio (and that's only 6-8 per cent average) over the long term, you will lead a happy life. Try averaging 12-15% a year after tax and life will become significantly more stressful. Cheers".

Any thoughts (from anyone)? Will "an answer to the oil shortage" arrive in time?

Regards, Matt B

Matt, here's my two cents worth and i wouldn't even pay that much. It seems many pundits here at TOD are forecasting the peak between 2005 and 2013 so there is very little time for "an answer" to arrive in time to prevent huge changes.

I see very little action by our "leaders" to take action, after all how difficult is it to say no more gas guzzlers starting from next month? It doesn't need any breakthrough technological changes or huge amounts of capital. In the UK our main opposition party who will probably win the next election have just said no third runway at Heathrow (the main London airport) but high speed rail and as a result have been condemned by business. Similar snail like progress in the EU. Politicians don't really lead but follow public opinion since democracy allows people to think they can just vote for more and more.

We are at the complacency stage and i guess we will have to wait for the panic stage when it becomes apparent to all that there is a problem with peak oil or climate catastrophe.

Thanks, Tony. I reluctantly agree with all you've said (averting Climate Change has fallen to number five on the to-do list over here). Oh well, BAU for a while then.

Regards, Matt B...
...still in the "bargaining (for more time)" stage


I think that the above poster is right: We are most likely out of time.

There is a silver lining, however.
We've made massive progress on solutions technically in the last ten years.
We have (costly) high EROEI solutions, but they have to be built.
We ARE building them, though it's likely we're going to suffer a large shortfall and a concurrent crash in our standard of living, but I personally doubt (big wars and fast collapses notwithstanding) that we will see a complete crash down to mad max or even kunstler levels.

What that means for most of us is getting used to a 1970s European style standard of living. (e.g. take the bus, take-out food instead of restaurants, apartments instead of suburbia, high unemployment, high inflation etc etc). It will only be the upper middle class who will still be able to afford to drive.

In the meantime, more renewal, nuclear and coal fired electrical capacity will continue to be built.

IF and I will repeat IF the upper middle class go for electric cars in a big way then the manufacturers of those vehicles will eventually be able to ramp up production and (electric) car ownership will eventually come back to the masses and we then may be faced with (was it Stuart Staniford?) the 4 billion car scenario.

This is a big if, however. We could just as easily do *everything* wrong and end up with the majority of the 1st world as 3rd world hell holes with no hope of recovery.

Here's hoping for good choices and lots of good luck.

You are expressing an opinion that we can have a dramatic reduction in oil use and still have a reasonable standard of living. This seems to make sense if you look at your own and your neighbors life-style and options to change.
Almost all of us could cut back on vehicle use and in time manage with a vehicle getting twice the fuel economy, we could either take public transport more or at least drive to the nearest bus or rail line, or at a pinch car pool.
I don't see how we have to economize on restaurant meals, as most of their cost is labor, or give up vehicle ownership, as long as we drastically reduce VMT. Our economy has become very service based, and there is no reason why energy intensity will not continue to decline.
I am not sure what we would have to do wrong to end up as a 3rd world hell hole ? Australia had a fairly low standard of living in 1950's , imported all their oil, and most people didn't have cars and yet we were definitely not a 3rd world country.

Thanks, Dan. Certainly it's hard to remain optimistic these days, with all that's going on... And all that's not! Having said that (and perhaps because I work from home) I've always liked the idea of solar-charged golf carts and 40km/hr speed limits - cheap and enviro-friendly batteries are the first obstacle though, right?

Regards, Matt B
Perhaps Generation-Y may save the day? :)

"I have always noted that those who preach either a new paradigm (where we go into a never ending boom) or armageddon never get it right. That's because people and governments might be slow-moving, but they do move."

He's right, but... sometimes events move faster than governments. Thus massive defeats in war, collapsed economies, natural disasters killing thousands, and so on. Civilisations do collapse entirely - it's just that it takes a couple of centuries to happen.


Great DD shedding light on the implication for Peak oil, not only in Australia but on a world wide scale.

I think we will see trend of carbon taxes to address the Co2 issue. I believe in order to address the peak oil theory the carbon taxes will be pooled into a fund that will be the main source of funding for alternative energies in the future. Someone has to pay for it right? & existing taxes can only stretch so far.

The Fed needs to take heed to ASPO and LISTEN before its too late. An open discussion is not only free, it brings out new ideas, and concepts that are still lingering in the minds of those who are just too shy or embarrassed to share them. I support promoting brainstorming and holding an open forum, what will it hurt.

I read a post today on a summary of the US economy, and I got a good chuckle, thought I’d share:

‘Wall Street’ broadly is being painted as the ‘villain’ that got the U.S. citizenry into the current mess – much like the ‘Pied Piper of Hamelin’ who led the children from their village like ‘lemmings over the cliff’ Source

The take-home message seems to be that GW or not we have to decarbonise anyway. However that message needs to go to politicians not Garnaut as he is now out of the picture.

My understanding is that Hansen and Kharecha say that levels exceeding 500 ppm are possible with unconstrained coal use. I think all coal output scenarios need to be re-examined in light of growing imports by China and India. Combine that with price doubling times of less than 18 months for both thermal and coking coal.

I'm not sure that rapid fuel substitution is that difficult using compressed natural gas in vehicle engines. I think an astonishing change could occur in just a few years. That is why I think Australia must declare a form of depletion protocol or strategic reserve for natural gas.

Finally I question whether the ETS will be such a lame duck. I think its main role will be to kick start the green economy. Think thousands of jobs installing solar water heaters, converting trucks to CNG or wiring houses for smart meters.

Finally I question whether the ETS will be such a lame duck. I think its main role will be to kick start the green economy. Think thousands of jobs installing solar water heaters, converting trucks to CNG or wiring houses for smart meters.

It depends a bit on what the revenue from carbon permits is used for and how these will be distributed. For example compensation to householders should come in the form of subsidised soalr water heaters in the first instance with this only being paid fro Australian made solar.

CNG conversion is much trickier however with a great deal of research and safety standards yet to be established. The governemnt has to set the goal and then back it up with plenty of money. This may mean making engineering degrees HECS free to encourage more engineers rather than more MBA's.

As a sparky, I'm not sure if the cure is worse than the disease by rewiring homes for smart metering. Insulating homes and buildings, double glazed windows, active solar heating panels, have devices etc may have a greater EROEI than junking perfectly good wiring. Teaching people how to track there total daily household power using the existing meters may have a pretty good EROI without the additional expense.

If Garnaut gets a flat $20 per tonne of CO2e on say 400 Mt for the first year 2010/2011 that's $A8bn in revenue. For more big bucks add a carbon tax to coal exports.

I guess a small LCD screen watt meter inside the house can help people work out which appliances are sucking the juice. If it's a heating and cooling problem then appropriate tradies can revisit later, all paid for by the carbon revenue.

I'd like to see a life cycle comparison of CNG retrofitting SUVs vs replacement by plug-in hybrids. I suggest a speed limiter also be installed. Soccer mom gets a big people carrier but can't go anywhere fast. CNG buses and trucks probably need to be factory fitted as some fleets are now doing. To help truck and bus operators plan long term the govt should commit on rebates for inhouse fuelling equipment, whether there will still be guaranteed CNG in 15 years time and how much it will be taxed.

While we're depriving people of free choice, how about banning the 50w downlight. I was staggered to see in a new display home the other day, 71 of these lights, all on and drawing about 3.5Kw by my estimate. Then, because of the heat load, the reverse cycle air-conditioing had to be on. It was a beautiful spring day outside and thre was no need for any of this!

I would like to see mandatory energy audits on all new homes after completion. Those that don't reach a minimum energy efficiency rating don't get a final occupation certificate. The next step would be audit existing houses whenever there is a change of owner/tenant and the electricity and gas tarrif determined by the relative energy efficiency of the property. Low efficiency means high tarrifs so you get whacked from both ends if you are an energy glutton. The vendors or landlords would be required to provide this audit to prospective buyers/tenants so the running costs must be disclosed. This has the effect of putting a real market based incentive to buildi in energy efficient measures. Carbon trading on top of that is just another stick, albeit a blunt one IMO.

We are deeply concerned that your Draft Report explicitly rejects the notion that oil depletion will constrain economic growth within the next 50 years despite very strong evidence to the contrary. In our view the resulting analysis, conclusions and policy recommendations are flawed and will probably exacerbate the climate change mitigation problem

50 years? That's 10 years more than mentioned in Howard's energy white paper of 2004. The fact is that crude oil production has constrained economic growth already since 2005.

I personally handed over oil statistical reports to Prof. Garnaut, twice in fact, including a copy of the table of ex-Saudi Aramco chief Sadad al Husseini from the oil & money conference in London last year
in which he crossed out 300 Gb of oil reserves and re-classified them as less usable "resources". These are the famous OPEC paper barrels. Another 400 Gb OPEC reserves have never been AUDITED, as repeatedly warned by Matthew Simmons, a problem which will soon explode and is similar to the current debt crisis, which was discussed yesterday evening in Lateline:

US political experts discuss financial crisis

I also made Prof. Garnaut aware of following articles I wrote together with Gail the Actuary, from Atlanta, Georgia, a town with petrol shortages right now:

The Disconnect Between Oil Reserves and Production

Bumpy Crude Oil Plateau in the Rear View Mirror

So there can be no case that he was not properly informed. He received information not on the basis of my personal views, but on the basis of "very strong evidence" as Stuart rightly says.

What's worse, crude oil production in Western Australia will decline by -11% over the next 8 years after which we'll only see a tail end production at 10% of peak levels.


This information has just come out on Sept 24th, but was not surprising given earlier PWA reports, which I also had handed over to Prof. Garnaut.

And Gippsland is in terminal decline for a long time now.

It will be very difficult, if not impossible, to replace declining Australian oil production with increasing imports as global crude production is peaking since May 2005.

However, the Turrum oil field (around 2 GL pa) will come on-stream in 2011. This morning I wrote an email to the Federal Resource Minister and to the Federal Climate Change Minister with copies to other State Ministers and all climatologists mentioned in the open letter to Kevin Rudd, that legislation be passed in Parliament to set aside production from this field for the sole purpose of serving as an energy input into all projects needed to de-carbonise our economy.

We are now facing the worst case scenario that by the time the world wakes up on global warming and starts massive civil works to REPLACE coal with carbon free energies and later EXTRACTS CO2 from the atmosphere, that these projects all get stuck in diesel shortages.

Unless the electorate puts pressure on our politicians to accept peak oil facts and act, we are sliding into a real disaster.

You seem to be focusing on the BAU assumption of the Garnaut Report. This is clearly a straight line extrapolation of past trends. Its not considered seriously as an option by Garnaut, in fact even if there was unlimited oil, the BAU case would have such a dramatic effect on climate that the economy could not continue to grow.
It makes more sense to focus on either the preferred 450ppm or the next best 550 ppm CO2 internationally negotiated outcome. How would peak oil in 2010-12 influence this outcome? If peak oil causes a massive improvement in vehicle fuel economy and a reduction in VMT then this is going to help achieve these targets. If the growth in the world economy slows or declines this is going to help achieve these targets, but if there is a massive shift into CTL or EV using coal fired electricity this is going to make it harder to reach the targets. If targets are set by a ETS with a fixed number of permits then the targets will be achieved, at either a lower or a higher CO2e cost.
Switching to renewable energy is going to help reduce CO2e but only help a liquid fuel shortage if EV, CNG vehicles , or direct injection coal diesels are used instead of oil.

It makes more sense to focus on either the preferred 450ppm or the next best 550 ppm CO2 internationally negotiated outcome

Preferred? James Hansen writes:

Target atmospheric CO2: Where should humanity aim?
Paleoclimate data show that climate sensitivity is ~3 deg-C for doubled CO2, including only fast feedback processes. Equilibrium sensitivity, including slower surface albedo feedbacks, is ~6 deg-C for doubled CO2 for the range of climate states between glacial conditions and ice-free Antarctica. Decreasing CO2 was the main cause of a cooling trend that began 50 million years ago, large scale glaciation occurring when CO2 fell to 450 +/- 100 ppm, a level that will be exceeded within decades, barring prompt policy changes. If humanity wishes to preserve a planet similar to that on which civilization developed and to which life on Earth is adapted, paleoclimate evidence and ongoing climate change suggest that CO2 will need to be reduced from its current 385 ppm to at most 350 ppm. The largest uncertainty in the target arises from possible changes of non-CO2 forcings. An initial 350 ppm CO2 target may be achievable by phasing out coal use except where CO2 is captured and adopting agricultural and forestry practices that sequester carbon. If the present overshoot of this target CO2 is not brief, there is a possibility of seeding irreversible catastrophic effects.

I am posting now the graphs on that steep crude oil decline in Western Australia. 90% by 2016, in just 8 years.

Condensate helps but for diesel, crude is more important.


These graphs don't tell us anything about what the Australian economy is going to be doing without knowing NG production, NG liquids, crude available for oil import, petrol available for import and world crude oil prices.
One thing we do know is that we are not going to run out of NG or coal before 2050, and it's more likely CO2e reduction targets or international prices will limit their use after 2050.

.... without knowing NG production, .....

Our natural gas is mainly exported as LNG and not - as we should - used locally as compressed natural gas (CNG) in the construction, mining and transport sectors. If we had a diesel shortage tomorrow, 100s of buses would remain in their depots, for example.

...NG liquids....

If you mean GTL (gas to liquids) this will be very expensive. It will not drive your average family car.

...crude available for oil import, petrol available for import and world crude oil prices.

Australia imports crude:

5 GL each from Vietnam and Malaysia, both countries which already had their net oil export peak
3 GL from Indonesia which is now an oil net importer
3.5 GL from UAE, supply which is highly vulnerable to armed conflicts in the Middle East

Our liquids exports do NOT pay for our liquid imports. Even our Resource Minister concedes:

MARTIN FERGUSON, RESOURCES MINISTER: Australia's got a huge challenge. We've got huge problems on the trade front, but also importantly, a real problem in terms of energy security and our economic future by 2015....

MARTIN FERGUSON: We've got to find another Bass Strait, because if we don't by 2015 we will go from importing about 20 per cent of our needs in the 1990s to actually importing 80 per cent of our oil and related product needs, effectively contributing to a $27 billion per year trade deficit.

and that will be difficult and expensive to finance.

GREG HOY: But there are those who remain unexcited, including the recently retired CEO and president of Canada's largest oil and gas producer Talisman Energy, Australian expatriate Dr Jim Buckee.

JIM BUCKEE: In my mind, not very excited, because as a broad overview, we have tended to see Australia as a gassy place, so big gas, small oil. The bigger fields tend to be found earlier, but there may be surprises. But the particular sedimentary basins, the particular charge mechanisms I would think are not prone to large oil discoveries.

....One thing we do know is that we are not going to run out of NG...

You will be surprised when you read the "Magic Pudding" paper from Brian Fleay

..... or coal before 2050....

We actually already have run out of CO2 absorption capacity of the atmosphere to burn these fuels more than 20 years ago.

..., and it's more likely CO2e reduction targets or international prices will limit their use after 2050.

Mate, by that time the game is over.

Your comments demonstrate that you have not read and/or understood the links I have provided in my previous posts

When I said NG liquids, I meant the liquid fractions( ethylene, propane butane etc) that are recovered from LNG processing. These will become more abundant if planned LNG projects proceed.

I don't claim to have read all of the Garnaut Final Report, but I did read chapter21(transportation).
In this chapter Professor Garnaut has modeled the impact of higher oil prices and accelerated adoption of CNG and electricity replacing petrol and diesel. Both of these would help to reduce CO2e(providing electricity generation is less carbon intensive). CTL technology would make CO2e worse, but he doesn't seem to think that this technology will be adopted( because of CO2e costs).

If the point you are making is that we will have a world depression and perhaps total economic collapse before 2030 due to post peak oil, then there is no point in considering CO2e( or any other long term planning). I think its more likely that even if we have passed peak oil before 2013, and real oil prices increase to $400-500 /barrel, CO2e from oil, NG and coal will still be a significant danger because demands for electricity production will still be maintained.
Australia uses 75% of oil for passenger vehicles, light and medium trucks. While Garnaut is projecting that most of these will not convert to CNG or EV until beyond 2050 this is on the assumption that oil prices are stable. He projects a more rapid adoption with the CO2e target for 450ppm and/or higher oil prices.
No one can predict what oil prices will be in 2020, even if you accept that oil production will be lower than today, because we cannot predict how x2 or x4 higher prices will influence economic growth, VMT, vehicle fuel efficiency and petroleum substitution. About all we can guess is that higher prices will push all of these variables towards petroleum demand destruction.

I'm just wondering why the Oilwatch Monthly with the IEA and EIA figures isn't published any longer? The last one seems to be from august. Is it because the IEA are holding back the numbers?