The Oil Drum

Today's SMH has a prominent article on the impact of rising petrol prices on Sydney suburbs featuring a study by Peter Rickwood of UTS (one of Garry Glazebrook's students (pdf) by the look of it). ASPO Australia's David Bell gets a mention too.

There is a good graphic accompanying the article (Update: 3 images now included) which shows the sensitivity to petrol prices (in terms of proportion of gross income) across the metropolitan area under 2 scenarios - $1.50 a litre petrol and $2.00 a litre petrol. Under the second scenario most of western Sydney will be devoting more than 6% of their income to fuel consumption.

The results look somewhat similar to the charts in the Griffith University report on Oil Vulnerability in Australian Cities from a couple of years ago.

Image 1 - % of household income at $1.50 per litre

A related personal impact story looks at the impact of fuel prices and lack of public transport on one western Sydney family - though their refusal to share vehicles and large petrol guzzling cars do reduce the amount of sympathy generated somewhat...

The pdf is a short report written by Robert F. Wescott and published in April 2006 by Securing America’s Future Energy. It was written when oil was ~$60 a barrel and addressed a scenario where the price of oil surged to $120 due to coordinated terrorist attacks on global oil transport infrastructure. Well, here we are, two years on at $120 oil (without the attacks) so it’s worth revisiting the analysis in light of the conclusion: The main conclusion of this note is that $120 oil would have profound negative effects on the world economy and global financial markets. ... Such oil prices would almost certainly precipitate a global recession.

Click to download pdf

Quite a few people believe that if there is a decline in oil production, we can make up much of the difference by increasing our use of electricity--more nuclear, wind, solar voltaic, geothermal or even coal. The problem with this model is that it assumes that our electric grid will be working well enough for this to happen. It seems to me that there is substantial doubt that this will be the case.

From what I have learned in researching this topic, I expect that in the years ahead, we in the United States will have more and more problems with our electric grid. This is likely to result in electrical outages of greater and greater durations.

The primary reason for the likely problems is the fact that in the last few decades, the electric power industry has moved from being a regulated monopoly to an industry following more of a free market, competitive model. With this financing model, electricity is transported over long distances, as electricity is bought and sold by different providers. Furthermore, some of the electricity that is bought and sold is variable in supply, like wind and solar voltaic. A substantial upgrade to the electrical grid is needed to support all of these activities, but our existing financing models make it very difficult to fund such an upgrade.

If frequent electrical outages become common, these problems are likely to spill over into the oil and natural gas sectors. One reason this may happen is because electricity is used to move oil and natural gas through the pipelines. In addition, gas stations use electricity when pumping gasoline, and homeowners often have natural gas water heaters and furnaces with electric ignition. These too are likely to be disrupted by electrical power outages.

Another week, another record.

Closing price for Tapis this week: US$131.43 (A$139.56) per barrel.

On theoildrum.com, we discuss the particulars of our energy supply/consumption situation. Less frequently do we have content outlining potential macro solutions that may be necessary to mitigate problems facing human systems. This is such a post - adapted from a paper from last week's Sustainable Development Commission written by Herman Daly, who popularized the term "Steady State Economy" over 3 decades ago. While it doesn't discuss energy per se, it does get at the heart of how we value and use energy - for growth - and the systems underlying this growth.

It is doubtful we can adequately inform energy policy without addressing the linkages between equity, the environment, finance, and our end goals. I post this on theoildrum not only because Herman is one of my tribal elders but because his eloquence, courage and foresight on these issues have historically been, and continue to be, ahead of the curve. During his resignation speech from the World Bank, Herman recommended the Bank take "a few antacids and laxatives to cure the combination of managerial flatulence and organizational constipation giving rise to such a high-pressure internal environment." To improve interactions with the external world he prescribed "new eyeglasses and a hearing aid."

Nearly 15 years later, here is Professor Daly's current synopsis of the state of economics and his prescriptions for change.

Alan Kohler presented the key oil Discovery/Production graph on the ABC news. He also covers the BG bid for Origin Energy and US house price declines: Peak Oil and its impacts in thirty seconds, but he didn't call it that.


(video clip below the fold)

Another day, another record.

The price of rice is going gangbusters too - I'm seeing stories about rationing in US stores now as well, not just in Asia...

I was complaining about the "Australian disease" in my post about coal to liquids last week, as it became clear just how much King Coal is coming to dominate the local economy.

Ross Gittens can see the sunny side of this though in today's Sydney Morning Herald, as he idly contemplates the de-industrialisation of the economy and the transformation of the nation into a giant quarry in "Everything's coming up roses", in which he predicts that we'll be "riding on the back of a coal truck" for the next few decades.

Global warming apparently isn't a problem in his eyes - or at least not one that people will bother to try and mitigate by burning less coal.

This is a guest post by Rob Dietz and Brian Czech. Rob Dietz is the executive director of the Center for the Advancement of the Steady State Economy (CASSE). He received a master of science degree in environmental science and engineering from Virginia Tech and an undergraduate degree in economics and environmental studies from the University of Pennsylvania. Brian Czech, the founder of CASSE, is also a professional biologist in civil service and an adjunct professor of Ecological Economics at Virginia Tech. Czech has a Ph.D. in Renewable Natural Resources ( University of Arizona, 1998) and is the author of "Shoveling Fuel for a Runaway Train". (note: Herman Daly, who helped me choose my Phd path, first wrote about the steady state economy in 1977 - he is on CASSE's board)

When pundits, talking heads, and government officials debate policies related to oil consumption (e.g., gasoline taxes), they invariably ask, “Will it hurt economic growth?” This statement could be broadened to a whole range of policy debates on the environment, from climate change to endangered species. But since this is the Oil Drum, let’s stick with the topic of oil and economic growth.

I have been asked to give a short talk about the expected economic impact of an energy downturn. The talk is to be part of public health program called "Converging Environmental Crises: A Teach-in on Energy, Climate Change, Water, Agriculture and Population." I expect that the audience will be university students plus physicians and others in the public health field. The talk will be recorded, and will appear on the internet. I have added some to the talk, since my first draft. These are the PowerPoint slides I show. This is a link to the recorded version of my talk.

Good afternoon. My name is Gail Tverberg. Some of you know me as "Gail the Actuary" on TheOilDrum.com web site. The Oil Drum is a web site about energy and our future.

Today, I will be talking to you about The Expected Economic Impact of an Energy Downturn. If, after this talk, you would like to learn more about peak oil and about resource depletion issues of all types, TheOilDrum.com is a good site to go to for more information.

Let's talk a bit first about the energy downturn. As everyone is aware, the price of gasoline and diesel has been rising recently. The reason the price is rising is because the world's supply of oil cannot keep up with demand.

Figure 1