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Alternative fuels begin to look economic
In the closing days of 2005 when international oil prices were being quoted at above $US 57 a barrel, the US Energy Department discarded its earlier long-term predictions of a price drop and instead forecast that oil would stay above $US 50 a barrel "for years".
If the assessment proves more accurate then a prolonged period of high oil prices could well accelerate trends already being seen. Larger 4-wheel-drive vehicles will continue to decline in popularity and the shift to smaller more fuel-efficient cars can be expected to grow.
But just as importantly, a prolonged period of high oil prices could be the stimulus needed to grow alternatives, like LPG and biofuels.
If the original assessment by the Federal Government's Taskforce on Biofuels is correct then the high oil prices should now make it economic for local companies to manufacture ethanol - without the help of government subsidies.
When the taskforce published its findings in early 2005, there were still some economists - including those advising the taskforce - who were predicting that oil prices would flatten out at around $US 32 a barrel.
Using this lower price for its assessment on biofuels, the taskforce stated that "the long-term world price of oil would need to average $US 42-47 per barrel in 2004-05 dollars for a new ethanol producer to be viable post-2015 without government assistance."
If the latest US predictions are right then Australia will start 2006 with strong prospects for a viable replacement fuel industry.
Here in Western Australia the State Government has already backed biofuels as part of the future energy mix and recently the State's Department of Agriculture became the first government organisation in the country to add biodiesel vehicles to its fleet.
The department has also been touring its mobile biodiesel plant to country districts to show farmers how the technology can help them.
"Nobody is claiming there is one simple answer to future energy needs but biodiesel has potential as part of a long-term strategy to reduce our reliance on fossil fuels and reduce our greenhouse gas emissions," said Agriculture Minister, Kim Chance.
In Perth in March, the University of Western Australia is also sponsored a series of workshops on biofuel alternatives.
Around the world the scan has shown that many governments are now giving added support to fuel efficient vehicles and the encouragement of biofuel development.
Of course the pressure to find alternatives to oil is not simply a matter of price. Apart from the impact fossil fuel has on global warming and the harm done to health, the world's rapidly expanding economies are causing available oil supplies to deplete even faster.
As canvassed in previous editions of TransScan, there is now widespread concern that world oil production may soon peak - and set off an international clamour for available supplies. (See: "New strategies for when oil supplies peak" TransScan June 2005 pp 11-12.)
But the Paris-based International Energy Agency has now provided a new twist to the scenario of the peak oil scramble. The IEA firmly believes that there are in fact sufficient oil resources in the ground to satisfy world needs until 2030.
The trouble is that developing the oil fields and supporting infrastructure could prove just as problematic. IEA calculates it would cost $US 17 trillion to find and develop.
But burning all that oil will send CO2 emissions soaring to 52% above what they are today.
"These projected trends have important implications and lead to a future that is not sustainable - from an energy-security or environmental perspective," says the IEA's deputy executive director, William Ramsay.
But IEA has found another conundrum. By not investing the trillions, oil prices will rise still higher and cause yet greater uncertainty and market inefficiencies.
The scan also showed:
Peaks on the horizon
As reported in earlier editions of TransScan, there are numerous predictions for when world oil production will "peak" but the Association for the Study of Peak Oil and Gas (ASPO) reckons the due date is just four years away.
(In fact the tipping point may only be as far away as tomorrow. According to former CIA director, James Woolsey, a well aimed terrorist attack in Saudi Arabia could send world prices to $US 100 a barrel immediately. Depending on the extent of the damage and how long it took to put right, the impact could be much the same as reaching oil's peak.) The ASPO has now established an Australian office in Perth with, Bruce Robinson, as convenor. He says Perth was chosen because Western Australia is home to the country's "remaining major oil province" and because the State is the most dependent on oil-fuelled transport. ASPO is currently briefing government and industry leaders on the likely impacts on Australia when oil peaks.
"We need to start implementing practical alternatives that will enable business and society to continue to prosper after the oil peaks," say Mr Robinson.
