All the signs are pointing to a coming revolution in how we source our energy. Fossil fuels will be the losers. [3 March 2015 | Peter Boyer]
Let me get this off my chest: I was wrong. Oil prices haven’t done what I said they’d do after the world passed peak oil about a decade ago.
Back in May 2011, I advised readers to get ready for steadily rising fuel prices “driven by the fact that world oil production is past its peak and is now on a terminal, irreversible downward slope.”
I thought I was on firm ground. None other than the International Energy Agency’s chief economist, Dr Fatih Birol, had just declared that “the age of cheap oil is over”, advising us all to be prepared for higher prices and more restricted mobility.
Birol’s assessment seemed fair enough then. Crude oil prices were continuing to trend upward after their historic low point in 1998 and the short-lived shock of the global financial crisis in 2008.
But they’d no sooner reached US$100 a barrel in 2012-13 than they headed south again. They’re now around $50 and are projected to stay there throughout this year. What happened?
The rising oil price had encouraged increased development of high-cost reserves in North American shale and tar sand deposits. This added to income pressure on low-cost Middle East oil producers already hit by a very large and sustained reduction in US oil imports.
Saudi Arabia, the prime mover for a low price, knows that its own vast reserves can be exploited cheaply and that sustained low prices would make the new North American sources unprofitable. If it can keep this up for another couple of years, that might just kill them off.
Besides affecting the North American industry, this is also damaging more vulnerable high-cost producers like Brazil, Venezuela, Nigeria, Algeria and Russia. For these countries, falling oil revenue is likely to have political as well as economic repercussions.
Even without low prices, another influence now in play could see off all but lowest-cost producers, not just oil but gas and coal too. November’s US-China agreement to work together to slash carbon emissions was an ominous warning to the entire global fossil-fuel market.
A 2014 assessment by the European broking firm Kepler Chevreux, led by energy specialist Mark Lewis, concluded that realising the agreement envisaged for the Paris summit this December would cost the world’s fossil fuel industry over A$30 trillion, two-thirds of this lost by oil.
With the prospect that climate action will cause some very expensive assets to be stranded, the fossil fuel industry is lobbying hard in the lead-up to the Paris meeting to ensure that any deal struck is ineffectual.
A continuing global plunge in the price of photovoltaic solar energy is another threat to fossil fuel futures, affecting plans for liquefied natural gas infrastructure and for opening up massive new coalfields in Queensland’s Galilee Basin.
Australia’s coal and gas exports are highly susceptible to the renewable revolution both here and abroad. Lobbyists for these industries have put a massive effort into persuading the federal parliament to cut the Renewable Energy Target, so far without success.
A decade ago it seemed that Australia might lead the world in developing renewable energy, but shifting policies put paid to that. Other countries have been able to maintain consistent policy positions, and among these Germany and China have been crucial.
Germany’s Renewable Energies Act benefited the world by mandating development of wind and solar power 15 years ago. In turn, China’s vast industrial muscle has seen that achievement put into effect on a massive, cost-effective scale both domestically and around the world.
Ironically, Australia has been a big beneficiary of these efforts. Wind and solar power are now able to compete directly with coal and gas, with or without government subsidies to either side. All the new energy now coming on line in Australia is renewable.
With new developments in battery power now promising to deliver 24-hour solar and wind energy, investors are getting nervous about fossil fuels. Increasingly, governments are recognising this.
That throws another light on last week’s decision by the Tasmanian government to put a stop to hydraulic fracturing of rocks to release natural gas (“fracking”) in the state until 2020, prompting an angry protest from one fracking proponent.
Labor leader Brian Green implied it should have been an outright ban with no time limit. But five years is a long time in today’s fast-changing energy scene. By 2020 there’s a high chance that gas will be much lower on the economic agenda, or off it altogether.
I’d like to think that in forming his view energy minister Matthew Groom took account of failing economic prospects for fossil fuels. In any case it shows he and the Hodgman government have listened to legitimate community concerns about this dubious practice.