That’s the title of my piece in the Fin yesterday, reproduced over the fold. Feel free to discuss, but please take anything related to nuclear power straight to the sandpit, and even there, try to avoid repeating the same old points.
One of the more intriguing sidelights to debates over climate change and energy policy is the idea of Peak Oil. On the face of it, the Peak Oil hypothesis is a straightforward claim. The amount of oil generated by any given field follows a bell-shaped curve, first rising as the field is developed and then declining as the oil becomes harder and harder to pump.
The curve is referred to as the Hubbert curve, after US geologist M King Hubbert[1] who used it to predict the peak of US oil output around 1970. Applying Hubbert’s analysis to the world as a whole yielded the prediction that the global peak in oil production should be happening around now.
On the evidence available, the predictions of the Peak Oil hypothesis don’t look too bad. Despite near-record prices for oil, the output of crude oil has remained broadly constant for the last seven years. Such an apparent plateau is exactly what the Hubbert curve would predict, bearing in mind that commercial production began 150 years ago.
The economic effects of the depletion of oil resources will be mixed. Clearly, since underlying demand is rising with population and income growth, the price of oil must rise to clear the market. That’s good for suppliers of oil, as well as competing energy sources, and bad for consumers. Overall because of the unpriced negative effects of burning oil, the most important of which is the release of carbon dioxide, a reduction in oil output is beneficial for the planet as a whole.
This is all straightforward: economists have been analysing markets for exhaustible resources ever since the pioneering work of Harold Hotelling in the 1930s. The observed outcomes fit Hotelling’s model pretty well – rising real prices are needed to sustain an optimal extraction path.
But discussions around Peak Oil are dominated, not by economic analysis, but by a range of more or less apocalyptic scenarios. In these scenarios, an end to ever-growing output of oil means an end to industrial civilisation as we know it.
There are a number of misunderstandings here. A lot of discussion seems to assume that Peak Oil means an immediate end to oil production, when the Hubbert curve implies a gradual decline over 100 years or more.
More importantly, though, the Peak Oil story is about production. But, if oil is essential to modern civilisation, what matters is not production but consumption.
The Oil Peak that actually mattered was the peak in consumption per person, which took place back in 1980 at 5.3 barrels per person per year. Since then, consumption per person has dropped to 4.4 barrels per person per year. Given the growth of demand in Asia, consumption per person in the countries that were already rich in 1980 has fallen much faster. Meanwhile living standards have risen substantially[2], unconstrained by declining consumption per person of oil, and of energy more generally.
Oddly enough, most people who worry about Peak Oil are also environmentalists concerned about climate change. From this viewpoint, which I share, Peak Oil looks like good news rather than bad. But the optimistic interpretation is trumped by the spurious idea that there is a 1-1 relationship between oil (or energy) and economic activity. This fallacious idea is held both by Peak Oil fans and by the rightwing doomsayers who suggest that reducing emissions of CO2 will destroy the economy.
A particularly interesting subgroup of Peak Oil fans are those who see nuclear energy as the only possible solution, a view that was mooted by Hubbert himself. This part of the discussion is dominated by a belief in something called ‘baseload power demand’ which must be met at all times if disaster is to be avoided. The idea that demand responds to prices and market structures seems entirely foreign to this discussion.
One of the few upsides of the disastrous Fukushima meltdown is that it has allowed a perfect test of this theory. Following the meltdown, Japan has taken 38 of its 54 reactors offline. It’s now midsummer there, and the blackouts predicted by the scaremongers have not occurred. Instead, the reduction in supply has been handled by (mostly voluntary) efficiency measures.
Energy is important, but it is no more ‘essential’ or ‘special’ than many other goods and services in a modern economy. If the supply is reduced, the market will respond to bring demand into line, especially if this response is facilitated by sensible government policy. No single source or technology, such as oil, nuclear or solar is essential, although none should be dismissed out of hand.
fn1. A fascinating guy, by the way. He was associated with the Technocracy movement, which briefly in the 1930s looked like a serious contender as an alternative form of government for the US. Wikipedia has lots on this.
fn2. In the rich world as a whole, and in most of Asia. Those in the bottom half of the US income distribution and in some very poor countries haven’t done so well, but that has nothing to do with oil.
John Quiggin 
I’m in the “moderate disaster” camp. I agree that markets can respond to reduced supply by reducing demand, or bringing new technologies to bear, but these things take time. In the long run we can all live in more compact cities and commute by train, but for the moment residents in outer-suburbs will be in trouble. We can all eventually transition to electric cars, but we can’t replace a $20 trillion vehicle fleet over night.
One of the good effects of the Great Recession has been to flatten out the peak, meaning people have reduced their driving simply by being too poor. This would have been a good time to invest in petrol-displacing infrastructure, like fast trains. Unfortunately, most governments have passed up this opportunity.
If we are on the Peak Oil plateau we may be having an easy time of it by trimming the fat. When the PO downslope occurs, perhaps as early as 2015, we will eating into muscle. The possible good/bad news is that reduced oil supply may reduce coal demand since making stuff complements movement. Some peakists with access to climate models say this will limit AGW to under 3C and definitely not the IPCC high emissions scenarios that see man made CO2 increasing beyond 2050.
There seems to be little acknowledgement of Peak Oil by the government, other perhaps than to hint increasing coal exports will pay for increasing oil imports. Our currently abundant natural gas and coal seam gas could be used as diesel fuel replacement in heavier vehicles. However the government wants to both export gas and use it to replace coal fired powers stations. In that case it won’t seem so abundant by 2030 or so.
Oil might be running short but new technology seems to be making gas more plentiful.
In terms of dooms day stuff I’m in the camp that believes that peak oil won’t end civilization, global warming won’t end civilization and a carbon tax, whilst a bit dopey but less dopey than nearly all the competing public policy initiatives also won’t end civilization. An overnight ban on fossil fuels as proposed by the Greens would however come close to ending things if it were actually achieved. It would certainly be far more catastrophic than for instance the US defaulting on it’s debts. That people vote for such utter stupidity is sad.
In terms of base load power I think we could live without it but we would be at a huge invonvenience if we had to live without dispatchable power. Solar and wind electricity is a tragically inferior product.
I think on balance the Greens have fewer economically stupid policies than the major parties.
“One of the few upsides of the disastrous Fukushima meltdown is that it has allowed a perfect test of this theory. Following the meltdown, Japan has taken 38 of its 54 reactors offline. It’s now midsummer there, and the blackouts predicted by the scaremongers have not occurred. Instead, the reduction in supply has been handled by (mostly voluntary) efficiency measures”
That is an extremely interesting observation.
I’d be ineterested in more detail.
The more plentiful gas is, I assume, that produced by ‘fracking’. It is another environmental disaster for the cornutopian Right to deny. Not only does it apparently not actually represent an improvement on coal in greenhouse terms, but it also involves the great use of water resources, much of which becomes polluted with a range (many kept secret on the spurious ‘commercial confidentiality’ grounds)of toxic substances, and little of which seems to be recycled, but it also pollutes groundwater with these same toxic chemicals. And it is being used, in a lavishly financed PR disinformation campaign, to undermine real renewables. All of which, naturally, is simply denied.
Just how ‘gradual’ the downward slope of oil production will be is contestable. The rate of depletion of giant fields like Cantarell in Mexico is pretty rapid, as the IEA admitted some time back. New resources are not being discovered, and if so, like the sub-salt Brazilian fields, are pretty hard to extract. Prices must rise, and efficiency efforts, particularly in vehicle fleets, have been long delayed particularly in the USA. Coping will for some time be essentially a matter of demand destruction, which means, yet again, that the poor will suffer the most.
Efforts to replace the easy hydrocarbons will be tremendously destructive, as the oil sands monstrosity in Alberta shows, and other mad projects to turn oil into liquid fuels and mine submarine methane clathrates are becoming more economically feasible. Already the ethanol and other bio-fuel efforts have been tremendously detrimental, utilising food crops, adding to price pressures in the case of corn, and furthering rainforest destruction in regard to palm oil. While appealing to the iron laws of supply and demand might offer the prospect of a self-correction towards lower consumption and resource substitution, we, of course, do not live in a free market.
We live in a capitalist market where the interests of the ruling pluto-kleptocrats come first. The fossil fuel business is worth trillions, and, when the Koch Brothers can spend chump change to create an army of Tea Party Mad Hatters and throw the US into a moronic inferno, every cent of those trillions will be extracted, come what may. The coal will be burned, the clathrates mined, and, if the Tea Party gains more ground, energy efficiency, greater fuel efficiency for vehicles, the EPA and more besides will be outlawed in the USA. Moreover, if the second leg of the debt deflation implosion brings Abbott to power, you can forget carbon taxes and renewable energy here. The real problem is that resource depletion, ecological collapse, financial implosion and the increasing mental and moral derangement of the Right are all synergistic. We must above all fear the unknown unknowns, the nasty surprises that the law of unintended consequences tells us must occur.
Oil use is not just about energy. You need to factor in replacements for synthetic fertilisers, plastics, industrial petrochemicals, etc. Most of these will be very hard to replace.
Dwindling oil supplies also have a significant negative impact on carbon emissions due to projected increase in use of dirty oil alternatives such as tar sands and brown coal during the post-oil interregnum.
@sam
Perhaps but the stupid ideas from the Greens are stupid on a stupendous scale. As in monumentally dumb. It’s a good thing they are not running the country. Or are they?
@TerjeP
Which stupid ideas do you mean? Can you give more detail?
To repeat myself, the peak in oil consumption per person was 30 years ago. We are well and truly on the downward part of the curve, with no obvious problems.
I meant to say ‘..mad projects to turn coal into liquid fuels..’. And TerjeP, your contribution looks a little on the insubstantial side. A couple of bland assertions with a little nice invective, then an excursion into paranoia. Is that the best you can manage?
Well, John, was the rise in oil prices to $147 a few years back not connected to the global financial crisis? A number of people have asserted that it was ‘the straw that broke the camel’s back’ when it came to sub-prime mortgage holders meeting their obligations. And the lethargic recovery in demand as the Western recovery gets lost in the sands of debt deflation is keeping demand subdued yet oil hovers around $100 a barrel, contributing to Tea Party angst (but not that of their creators, the Kochtopus, who are doing nicely, thank-you). By the by, do you think Saudi figures on their reserves are genuine?
Relative to average incomes, I would think oil is probably still cheap compared with many decades far enough back. On top of that, miles per gallon, or kilometres per litre, have improved significantly. Maybe someone can find a graph. Given what is already known about substitutes, which have been demonstrated by use in various countries, in various times, peak oil is hardly a concern.
The Saudi reserves may not be genuine. It is in their interests to lie because propagating the belief that they have large reserves dissuades exploration because the risk of Saudi Arabia cranking up production would make the exploration investment premature. However, also having those reserves would serve the same purpose, so who knows? If Saudi Arabia bluff’s successfully it could end up getting more revenue for its reserves. But anyway, technical change and improvements in being able to identify and access reserves, as well as increasing prices would all tend to make reserves larger.
Oil price movements were a consequence, not a cause of the bubble and bust. The people who claim otherwise are making stuff up.
JQ, oil price movements must then be both a consequence and a cause of the bubble and bust. A consequence as a result of speculative trading, and a cause as a result of absorbing consumers funds as Mulga said.
Krugman disagrees that the oil price high was a result of speculative trading. He thinks there wasn’t significant hording, and the $145 per barrel price was right given the underlying supply and demand pressures.
@Greg G
At the risk of violating our host’s request to avoid going over old ground, making fertilizers, pesticides, and lubricants is the least of our concerns.
You can get pretty much any hydrocarbon you want from any other, if you’re prepared to pay the costs. Whether this is going to make economic sense for transport fuel is unclear, particularly given emissions pricing.
However, it’s going to be perfectly practical for non-energy uses.
To take just one example, the “we need oil for fertilizer” argument seems to be based on the fact that the hydrogen for producing ammonia comes from natural gas. However, we can get hydrogen from electrolysis powered by renewable (or the n-word) energy. It’ll be a little more expensive, but not drastically so.
@Salient Green
The speculative trading stuff is pure bunk. “Hoarding” is not at all cheap and is easily detected and at best might be used very short-term to make a quick dollar, (best way is by slowing tankers in transit down), but even then is too easily detected, and entails large risks. Oil is not a commodity that lends itself to ready manipulation of the market by speculators. The producers can restrict supply; but they weren’t. The quantities supplied, delivered and so on, are not easily hidden. The reason the price went up is as JQ suggests, demand (with occasional supply problems like Libya also). And when the demand goes down, down the price goes.
I think the ecological economics insights are very valuable for the peak oil debate. The applicable one is that as you exploit more of a resource the quality goes down and the amount of waste generated by the resource extraction goes up. So as oil prices because the easy supplies run out yes there is a reduction in quantity demanded but the high price pushed exploration into more expensive and dangerous fields that generate much more waste which == environmental externalities. So the danger of peak oil isn’t running out and zombie apocalypse but that the higher prices will drive us to more and more environmentally costly extraction like the alberta oil fields etc.
So peak oil is not the environmentalist’s friend because those high prices are going to lead to more externalities.
2nd post, Do you have a reference on the baseload power idea. I’ve run it by some utility types in the U.S. and they say you don’t understand the engineering requirements of the distribution system and that you really do need baseload. So I want a paper where your idea is worked out.
thanks,
https://johnquiggin.com/2009/07/22/the-myth-of-baseload-power-demand/
I meant to add this link when I posted, and will do so now
A comment on the effects of the normal distribution.
It is conjectured that median incomes in China are drawing near the point where car ownership becomes feasible. Japan in the 60s-80s and South Korea in the 80s- both experienced a very quick rise in the proportion of households operating a car, when median incomes rose to a certain point. China, it is asserted, is drawing near this point.
If a Japan-style takeoff in car ownership occurs in China, and I can’t see why it wouldn’t, given the car’s social role as a status symbol, there will be increasing demand for oil and its nearby substitutes: tar-sands oil, LPG, CNG, and synfuel from coal gas. (Despite the hype, electric and plug-in hybrid vehicles are a negligible proportion of the new car fleet, and they won’t affect the situation for two or three decades – at best.)
This demand will call forth supply.
Won’t efficiency improvements save us? No. It seems that current best practice in car-making is within tens of percent of feasible aerodynamic and thermodynamic limits. Efficiency improvements have to stop.
And after China, there is the rest of the developing world.
Without brisk government action, the medium term outlook for carbon emissions from transport is for continued increase, irrespective of peak oil.
@TerjeP
I’m curious. When / where have The Greens advocated “An overnight ban on fossil fuels”? I’ve had a look at their energy policy (here http://greens.org.au/policies/climate-change-and-energy/climate-change-and-energy) and can’t see anything that looks like an overnight ban.
Have I misread their policy? Is there some other document that I’m unaware of? Are you referring to Green parties in other countries?
Ah, the ever sanguine Prof. John Quiggin! Well, I hope you are right but I fear you are wrong. The claim that energy is not a special resource is empirically/thermodynamically wrong and demonstrably so. I wrote and posted a long piece a while back on thermoeconomics. I won’t rehash everything here.
I did say that the one resource needed to utilise to every other resource is energy. Thus it is a crucial resource. What will really count is peak energy not peak oil. Nevertheless, oil as a convenient to handle and high energy density fuel is very important and currently crucial to transport and agriculture.
Claiming correctly that energy does not have a precise 1 to 1 relationship with economic activity (measured by Gross Income I assume) is not the same as establishing energy has a 0 to 1 relationship with economic activity. You cannot say that energy (abundance or scarcity) has no impact on economic activity. In plain terms, it is clear that energy and lots of it (namely 475 exajoules per annum) is now still essential to a modern industrial and high tech economy.
Hermit made a good starvation analogy. Yes, it is ok while we are trimming fat but once we start to catabalise muscle we are in trouble.
The key points for successful civilization survival are;
1. Can we stabilise population before natural world events do it for us?
2. Can we prevent catastrophic* global warming?
3. Can we prevent catastrophic* species extinction rates?
4. Can we transition from non-renewables to renewables (including energy sources)?
5. Can we avoid destructive competition (wars)?
My predictions for these questions are five noes unfortunately.
* By catastrophic, I mean catastrophic to human global civilization. The earth itself will likely recover from both of these events as it has done so several times before. However, the recovery timscale is of the order of 100,000’s to millions of years. This is a not a recovery rate that will save human global civilization.
According to IEA Monthly Electricity Stats, electricity supplied in April 2011 in Japan was just 6% down on April 2010. Baseload demand is not dead and buried yet. Production from combustible fuels was up 6.6% and I’d bet that the latter will rise further as gas turbines are installed.
Click to access mes.pdf
@quokka
As I understand it, they’ve taken more nuclear plants off-line since then
Japanese demand for LNG has helped drive up the spot price up towards $1000 a tonne up from $400 a year ago. It seems ironic that the country that includes Kyoto the birthplace of the climate change movement will most likely increase emissions.
“the peak in oil consumption per person was 30 years ago”
Well that would explain the huge rise in debt then. ah well might as well keep going into more debt and pretend the problem will sort itself out. nothing like borrowing from the future to offset declines. win win.
“If the supply is reduced, the market will respond to bring demand into line”
yer nothing like shrinking demand (less growth) to help with all that debt servicing. it should be fun watching markets bringing demand into line. i should avoid mentioning EROI here and just stick with the cornucopian theme. 🙂
surprised i am.
the proponents of the inevitability of nuclear steam kettles are not lining up to book their tickets to Fukushima to help with the clean up.
maybe they can’t find the queue.
the greens have no intention of cutting fossil fuels “overnight”. they do advocate a gradual transition towards renewables over the next 50 years.
please read their policies direct from their website. it seems likely that you have been manipulated by the murdoch press.
Does that “peak in consumption per person” in 1980 include the entire population of the planet? If so, the “per person” fall disappears with the additional 3 billion people, doesn’t it?
I fully understand Peak Oil and I can’t comprehend how anyone could claim not to. I don’t accept the terms ‘hypothesis’ or ‘fan’, if they are intended to imply that oil production might increase indefinitely or never decline.
The best place for anyone to hear the people in the oil industry talk about it is:
http://www.theoildrum.com/
Here is part 2 of a great analysis of the economic questions being discussed here,
http://www.theoildrum.com/node/8185
Recent articles in The Oil Drum have argued that a high debt economy merely requires a prolonged non-increase (ie not necessarily a decline) in oil supply to run into problems
The Link Between Peak Oil and Peak Debt
PB – in an interview with Fran Kelly the leader of the Greens, Bob Brown, said we urgently need to close down the coal industry. He said to her it was a critical issue and the sort of thing that should be completed in the single term of a government. He also wrote an opinion piece for one of the major newspapers (The Australian I believe) in which he said much the same thing. Most of the media has let it slide although he was grilled on the point in a recent 7:30 interview.
http://www.crikey.com.au/2007/02/09/bob-browns-coal-stance-sends-politicians-into-a-panic/
The man is a raving lunatic. And he fronts a party of even bigger lunatics. If we abolished the coal industry within three years the disruption to our energy supplies and to our economy would be catastrophic.
@Megan
Well, yes. That’s what “per person” means. So, if you take out all the extra people (100 million more Americans for example), but leave in the oil they consume, you are back with production.
@TerjeP
Well, he’s talking about coal *exports* TerjeP, not consumption. He’s not advocating the immediate shutting down of all domestic coal power plants. I imagine that could wait quite a bit longer and be in step with the scaling up of other sources.
Also, he probably doesn’t mean coking coal, which doesn’t have high emissions associated. Just thermal coal. The industry doesn’t employ that many people, and most of the capital is from overseas. It would certainly worsen our balance of payments but a floating exchange rate would work that out. Plenty of other countries get along OK without a coal export industry. It certainly isn’t politically practical of course, but only because of attitudes like yours.
@TerjeP
Did you read your own quote Terje?
To suddenly ban coal exports {…} {Terje} If we abolished the coal industry within three years
Abolishing coal exports would make no difference to local energy supply. Abolition of coal exports is a regular theme of those trolling the cap and trade policy from the right. We’re not serious unless we do it, they chant, disingenuously.
The level of cognitive dissonance you show above is truly breathtaking. It underlines the point that mere facts are no antidote to those with a cultural fixation.
NB: As I understand the original claim, Brown wanted to phase out coal exports, possibly by 2020, or by 2030. Some estimates by ABARE suggest that Australian coal, at 2% pa growth rates will be exhausted by 2040-2050, so one might argue the case on energy security grounds. Then there are the Dutch Disease grounds as well. An increasing tax on such exports -ne that took account of growth in sales) might well be a good idea.
Perhaps I ought to be more specific but brief about the energy problem facing us.
In 2004, we got the following percentages of global energy use (by human civilization) from these sources;
Oil 34.3%
Coal 25.1%
Natural gas 20.9%
Biomass and waste 10.6%
Nuclear 6.5%
Hydro 2.2%
Other 0.4%
Since oil, coal, natural gas and nuclear are all non-renewable, only 13.2% of our current power sources can be relied on long term. Some estimates are that we only have until 2050 to fully transition away from fossiles to prevent dangerous and perhaps runaway climate change.
On the other hand some estimates for the potential of renewables are very high.
“In 2008, total worldwide energy consumption was 474 exajoules (474×1018 J=132,000 TWh). This is equivalent to an average energy consumption rate of 15 terawatts (1.504×1013 W)[1] The potential for renewable energy is: solar energy 1600 EJ (444,000 TWh), wind power 600 EJ (167,000 TWh), geothermal energy 500 EJ (139,000 TWh), biomass 250 EJ (70,000 TWh), hydropower 50 EJ (14,000 TWh) and ocean energy 1 EJ (280 TWh).” – Wikipedia.
Most of these estimates seem reasonable to me but the biomass estimate i would mark as very dubious. I doubt it will be anywhere near as high in practical reality. The geothermal also seems much too high and ocean energy too low although ocean energy may simply prove too difficult to harness. The high estimates of solar and wind may well be reasonable if the extensive collection infrastructure can be built and not constrained by material resources.
The issue is can we change over in the timespan, can all the bottle necks be oercome and can we meet the continuing needs of an exponentially increasing population?
It is clear the world will be very different if we make these changes and a catstrophe if we don’t.
People don’t realise the high cost of private transport. According to the RACV the average cost of running a car is about $10,000 per year. Melbourne has 3 million+ active cars, meaning the combined total is $30 billion a year. What sort of public transport could we get with that money?
On the capital side, the train system could be completely grade separated for $20 billion. All bus systems could be replaced with electric trolley buses for about $20 billion ($7 million per km). On the operating side, Melbourne currently spends a half billion on buses (which have good coverage but lousy frequency) each year which run on average about every thirty minutes. So to increase that to every 4 minutes would cost an extra 3.5 billion per year. Throw in a billion a year for the train system to increase from 10-15 minute frequency to 4 minute frequency and a similar amount for the trams.
Adding that all up and converting the capital costs to interest costs, we get the figure of $8 billion per year. So, by moving from mostly private transport to a state of the art, 4 minute frequency, public transport system, we save $22 billion per year.
On a personal note, as a person who doesn’t drive, peak oil is already benefiting me. Trains and buses I use are running more frequently and some routes have been added. Roll on peak oil.
I wouldn’t be surprised by either a peak oil scenario or by another humungous discovery (of oil) – just that this would be in the previously inaccessible polar regions; ironic, that.
As for peak oil and/or climate change apocalyptics, one thing that some history shows is that humans adapt to changed circumstances quite rapidly, once a sustained price signal is present. Adapting rapidly does not necessarily mean adapting rapidly and pleasantly. A rough ride may well be expected in some cases – witness local retailers and their grappling with online competition; or, telegraph vs radio communication (or even just vs telephonic communication). In so far as climate change goes, oil is a significant but minor player; substitution of the easiest-to-substitute uses of oil may well draw out the oil resource for a long time to come.
Excellent points Daniel,
But who thinks that the industries who currently take that $20billion (oil, finance, insurance, road maintenance/construction, tolls and car sales) are going to give it up without a war?
Presumably Murdoch with his stranglehold on Oz media would decide to take one side or the other in such a war, gee – wonder which side he’d go with?
I’m a big fan of FREE public transport. No cash, no ticketing/enforcement, no road congestion for people who actually need to drive, lower polution/GHG, massive boost for all businesses which rely on incoming customers, great for tourists etc…
Regarding The Oil Drum, it’s worth noting that, while there are a handful of oil industry professionals who contribute to that site (mostly on technical issues like how tar sands are extracted, etc), there are virtually no contributors who are economists or people with expertise in energy other than oil. The one major exception, a finance expert who deals with wind energy in the European market, doesn’t share the apocalyptic views of the other contributors. The article about “peak oil and debt” linked to above was not written by an expert on the oil industry, or an economist, or an energy industry expert, or a finance expert, but by an actuary. The Oil Drum does contain some interesting information, but it’s not a source for unbiased expert information on peak oil. Most of the information is provided by non-experts peddling a belief system.
Personal attack deleted, nothing more like this please – JQ
Could it be that academic economists are asleep at the wheel? Recall the 2008 GFC was accompanied (perhaps instigated) by $147 oil. In Australia only fringe academic Steve Keen predicted mayhem.
I’ve flicked through economic texts that attribute growth solely to due the right fiscal and monetary policy without mentioning resource inputs. However since WW2 we’ve bred like rabbits, plundered mineral deposits, forests and rivers while paving over the best farmland. That has to have a limiting effect on our future prospects. If anything the natural world’s payback time seems overdue. I’d like mainstream economists to explain if it isn’t so.
Daniel @40,
The basic cost for running a car is under $2000 per year. Re work your calculation on that figure, and see how public transport looks. Then you have to derate your outcome by the number of people whose interests are not able to be served by the public transport system. That is the problem. Our country is simply not suitable for the high efficiency London style public transport system. But,…..the looming world recession might just apply a very different value to the things that we currently take for granted.
I see upthread that I have short-circuited between the high oil prices being the cause of bursting the financial bubble and the different but connected subject of oil price movements. I claim end-of-week overload.
BilB, if you included depreciation, even our little Getz costs $118 a week to run according to Cars Guide.
SalientGreen,
The cost of a vehicle does not come into the running cost mindset. Only an accountant thinks about the depreciation cost of a vehicle on a day by day basis. The cost of payments on >new< vehicles is important, but again this is claculated into the cost of "setting up" ones life rather than the daily running cost. The other basic flaw in Daniel's thinking is the notion that people will hand over that $10,000 a year budget to the government in return for "free" public transport. That was the premise of the evaluation
"Melbourne has 3 million+ active cars, meaning the combined total is $30 billion a year. What sort of public transport could we get with that money?"
…public transport in place of private transport paid for by shifting the private ownership budget to public ownership, while presuming that equal or better functionality would be achieved. This is just not realistic, however well intentioned. Melbourne has the best mix of public transport and private transport in Australia today, I believe. Melbourne's tram system is a real asset for that city, and I hope that they continue to build on it.
The best future direction for transport is the electrification of personal transport. The second is the complete automation of this. California has just directed their road regulators to prepare for the arrival on their roads of autonomous vehicles (google those words to be brought up to date) and determine what the standards will be for AV's to obtain their road lisenses. I expect that during this process of vehicluar transition some unforeseen new realities will arise which very much support the primary features of public transport, albeit in very different ways.
The beauty of all of the change under way is that it is appealing even if there was ultimately no peak oil threat. Electric vehicles are just far better and more satisfying. Cycling is a wonderful activity, and a far healthier exploit than the sedentiary life that we have drifted into. Solar power and the independence that it offers is very satisfying. There is an opportunity here to escape from being "battery humans" and become free range beings, at least as far as our energy consumption is concerned.
I would say that the average cost of running a car pa is closer to $10K than $2K. When factoring in repairs, service, parking fees, tolls and the dreaded depreciation fuel costs become less significant.
Rog,
I have 3 vehicles. I assure you that I do not spend anything like $10,000 pa running all of them. You can inflate the cost of operating a vehicle all you like, but that sort of costing is only relevent to governments who have to operate by strict rules or face the wrath of News Limited.
If a person buys a new vehicle, uses it extensively, uses tollways and parks their vehicle in paid parking regualrly, and services the vehicle fastidiuosly, then yes $10,000, and perhaps more, is realistic during the payment period for that vehicle. But that represents only a small percentage of Australia’s national car fleet.
If one is going to do a realistic comparison between private transport and public transport please use realistic figures, particularly when they are going to be multiplied out across the full spectrum of vehicular options.