Keith Suter: Plan to be less reliant on oil

Keith Suter

One of the biggest challenges in the coming years will be how to handle the growing shortage of oil.

Historians looking back over the past 150 years will call this Age of Oil (in much the same way as earlier eras have identified the importance of, say, canals or railways).

Oil meets 40 per cent of the world's energy needs and nearly 90 per cent of transportation needs. It is also important for fertiliser, DVDs, rubber, plastics and metals.

The United States remains the number one consumer but it is no longer the top producer; it has gone from being the top producer to the top importer. Meanwhile, US consumers are reluctant to utilise conservation methods and there is no political leadership to do so. American motorists consume nearly half the world's daily supply of oil.

China is now the number two consumer, taking over Japan's position. The dramatic growth of the Chinese economy makes it difficult to predict global oil demand.

India and other Asian countries are also growing rapidly as their own industrialisation process picks up speed. Debate over how quickly oil is being exhausted is has focused on the "Hubbert Peak".

Under this theory, oil production reaches a peak where about half of the supply of the find is used - after which production become more difficult and more expensive. There is a difference between actually running out of oil - and no longer finding oil at the same rate it is being drilled. This is like getting apples off a tree - there may be apples right at the top but would you want to make the effort to get there?

This theory was coined in 1956 by American M. King Hubbert, a Shell geologist, who predicted that US oil production would peak around 1970 (he was proved right) and global output would peak in 1995 (he got that wrong) there is continuing debate on when the earth overall reaches the Hubbert Peak. The basic question for the Hubbert Peak theory is: has most of the world's oil been found - or are companies just not working hard enough to locate and drill?

We do not know what is happening in those countries (for example in the Middle East) that control foreign involvement in their industry and so it is difficult to get accurate information.

Do the oil suppliers exaggerate their reserves so as to discourage other countries from looking harder to find alternative energy sources?

We do know that there have been no major oil finds in recent years. The biggest one recently - in Kazakhstan five years ago - will only produce enough oil for the world to last four months.

On the other hand, the technology of exploration has improved considerably. Engineers are drilling in areas such as the depths of the cold and windy North Sea that would have been unthinkable a few decades ago.

Meanwhile, the higher oil prices encourage greater attention to finding new fields. Also, new countries are being opened up, such as the former Soviet republics in Central Asia (Azerbaijan, Kazakhstan, Turkmenistan).

Meanwhile China is also increasing its purchase of Middle East oil. It is improving relations with Iran. The US regards Iran as part of the Axis of Evil but China sees it as a valuable trading partner and will look after its interests in the UN Security Council (and will veto any US action against it).

China is also encouraging Canada to build east-west pipelines to get oil to the Pacific coast, and not just north-south down into the US. Therefore, China is needling the US.

The lesson from all this is the need for diversity: do not have all your energy eggs in the one basket. On the one hand, aim for greater efficiency of existing energy supplies. On the other hand, look at alternative potential sources such as solar, hydroelectric and wind.

With the greater sense of urgency created by speculation over the Hubbert Peak theory, it is necessary to educate New Zealanders not to be so reliant on oil. Here are some recommendations:

* Change the superannuation laws so that superannuation funds can be used for New Zealand venture capital to finance alternative energy sources.

* Encourage research and development - including making as much fuss of energy scientists in the media as we do of sporting personalities.

* Set an exciting national target. For example, "New Zealand will become a major exporter of alternative energy sources by 2015" or "By 2010 foreign visitors will be stunned by how well New Zealanders conserve energy".

* Keith Suter is a member of The Club of Rome, a global think-tank that believes each individual can contribute to the betterment of society.