WHY ASK THIS QUESTION
“With the known reserves of oil predicted to run out in about 40 years, the world has to start considering alternatives”.1

There are three good reasons why the Australian community and its leaders should give serious consideration to the future of liquid hydrocarbon supplies.

§ Firstly, the USA economy is the driving force of the global economy.  In general, if they sneeze, much of the rest of the world gets a cold.  In the USA in recent years, rapid growth in domestic consumption of petroleum products and declining domestic production of crude oil have meant rapid growth in liquids imports.  From 1985 to 2000 USA production of liquids dropped by about 1.5 mn b/d.  At the same time consumption rose by some 3.5mn b/d.  Very simply, if the cost of this growing import component rises rapidly or if there is a supply disruption, there will be a slowing in economic growth rates in the USA.  The implications for the rest of the world and particularly for economies like Australia with a large traded goods sector will be profound.
§ The second reason is that the East Asian economy is a key export market for Australia.  Economic contraction in that market has major ramifications for Australia’s balance of payments.  Both Japan and most of the developing Asian economies are heavily dependent on imported supplies of liquid hydrocarbons.  Perhaps more importantly, both Japan and the growing economies have become more dependent on the Middle East as a supply source in recent years.  Over the past ten years Japan’s dependence on this source has grown 79%.  Again, if there is a rapid price increase or a significant supply disruption, the implications for the Australian economy of the flow on effects from Asia are serious.
§ Thirdly, Australia is rapidly moving into a liquid fuels self sufficiency crisis. The problem will become acute about 2005 and critical by 2010 (see Figure 1 – Liquid Hydrocarbon Self Sufficiency in Australia).

Effectively, for Australia it is a transport fuels issue governments are facing.  The outcome will be particularly critical for sectors of the economy such as personal transport, road freight, sea freight, airlines, tourism, fishing and agriculture and for non metropolitan communities.

Whichever way one looks at it, if governments don’t do something about it, Australia (and economies on which it is critically dependent) will be importing more oil in the future.  That inevitably leads to two questions.

§ Are the liquids available and if so where – is there enough available that we don’t have to worry about doing anything except pay the import bill?
§ What else can we do?

Let’s look at both these questions with what I hope is a degree of objectivity.
 
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