Economy
What Peak Oil will mean …
Actually I was thinking of none of those specifically, but I can’t see any real conflict between the vast majority of current or likely future businesses in Tasmania *subject to proper zoning of land use*.
Nobody is going to stay away from Hobart if someone builds a pulp mill at Hampshire. The residents of Claremont won’t be kept awake at night by a noisy event on the Watefront. Etc. We just need to move beyond this silly idea of cramming factories, residents and general business all into the same places – this island isn’t huge but it’s not *that* small.
My real point here is indeed related very much to the oil situation. We are not likely to be the ones to revolutionise transport or world trade of our own accord. We are 2% of a country that itself is pretty much irrelevant in world affairs.
The best we can really hope to achieve is to afford to keep paying the market price for oil until such time as solutions naturally emerge. I have little doubt that those long term solutions involve re-localisation (ie a reversal of globalisation) and a shift to more sustainable means of transporting things combined with less general movement of goods and people. But in the meantime, I’d rather Tasmania be in the group that can afford the oil than in the group that is priced out of the market.
Thinking of the practical response of the average person I, like most, will continue making reasonably necessary car trips even at $10 per litre and I’ll continue eating food as well. Something has to give however, and that will be “discretionary spending”.
Every extra Dollar the average person spends at the bowser, will be a Dollar less they spend on something else. They’ll continue paying the mortgage as long as they can, they’ll continue eating food and paying electricity bills too. But they won’t be getting on too many planes, staying at too many hotels or eating at restaurants. Something has to give.
From the perspective of the average person, peak oil is essentially an inflationary event. The price of a necessary expense increases sharply, also likely precipitating a reduction in real incomes as business struggles to cope. The end result being that most end up considerably poorer than they are today.
In other words, *the middle class gets wiped out* just as it has in practically every economic disaster since the beginning of time. The poor are unaffected, they stay poor, and the rich remain rich. It’s the middle class which bears the brunt of it.
Hence my concerns about Tasmania’s situation. Practically everything we do is either reliant on cheap transport to be competitive in the marketplace or is clearly in the “discretionary spending” category. It’s not as though we’ve producing huge amounts of staple food (eg bulk wheat) which for the foreseeable future has a reasonably assured market.
Nor do we produce much in the way of true luxury goods – we’re aimed largely at the middle and upper middle class (who are set to be obliterated by peak oil) rather than the genuinely wealthy.
There will, of course, always be *some* very wealthy individuals. Someone will still be cruising the streets in a Rolls even if it does cost $1000 to fill the tank. So if we’re going be in the “premium” business, then we need to be in that market which will still exist post peak. That is the very top of the market, not those who earn $100K working in an office somewhere in Melbourne and who like the idea of spending a week or two in Tasmania. They won’t be coming once their day to day living costs have soared, jobs are insecure and nobody but the truly rich spend on anything “discretionary”.
Think better airport facilities for private jets, not how to get Jetstar to add flights. Think 6 star resorts, not 3 star cabins. Etc. Either that or focus on bulk commodities – it’s the middle class which gets wiped out in any inflationary episode. The very rich will still be rich (but not flying Jetstar or staying in a cabin) and the rest will be poor (eating basic foods etc). That’s what usually happens in an economic crisis – and have no doubt that peak oil is essentially an *economic* issue in terms of practical implications.
Do you think the average person in Greece is interested in a holiday or some truffles right now? Was there much of a market for such things during the Great Depression? The very rich will carry on largely unaffected, but not the other 99%.
We’re starting to see the effects of this already. Conventional crude production has topped out, oil prices have risen, the economy has suffered and wallets / purses are increasingly shut. A few years ago it was all spend, spend, spend but now the attitude of consumers has noticeably changed. Just ask practically anyone in retail, tourism or any other non-essential business and you’ll find they’re struggling right now.
and,
#26 Agreed and I actually think we’re a lot closer to being on the same page than it may appear.
There are certainly some things we can do to lessen our oil imports now and into the future. Realistically however, I doubt that we’ll see any real progress until it becomes economically viable to do so. That is, we’ll endure a crisis before we actually do something about it meaning that we’re going to be buying quite a bit of oil at high prices for many years to come.
The fleet turnover period (as distinct from average age) of cars is about 20 years in Australia. That is, if we stopped making petrol engined vehicles in 2020 then we’d see a roughly linear decline in petrol sales through to 2040 by which time pre-2020 vehicles would be relatively small in number.
That’s pretty much what happened with the transition from leaded to unleaded – it took 20 years until the demand for leaded / LRP was sufficiently low as to make continued production and sale uneconomic.
For other consuming devices, the turnover period is often longer. For example, I’m told that Metro buses last 25 years unless something abnormal happens (eg written off in a traffic accident etc).
For industrial equipment, the lifespans are even longer. Typically 30 years at a minimum, double that if the technology is still relevant such that a major mid-life overhaul is worthwhile.
Right now in 2012, there is no real ability to mass produce cars that run on anything other than petrol / diesel. Anything else is absolutely a niche product, production of which can not readily be scaled up at this point in time.
It seems fairly safe to assume that virtually all new cars sold in Tasmania to at least 2020 will have petrol / diesel engines. It thus follows that until at least 2030, the majority of cars on the road will be needing petrol / diesel in order to operate and that there will still be many people needing to buy petrol through to at least 2040.
Much the same applies to buses. Even if Metro switched to buying only CNG powered buses from, say, 2015 onward then we’ll still have 50% diesel buses in use 15 years fron now, and the last ones won’t be off the roads until 2040.
Now, how confident is anyone that petrol / diesel will remain affordable for the next 30 years?
I sense a business opportunity converting existing cars, buses and especially trucks to run on CNG at some point. An idea which brings another question – what about the Tamar Valley Power Station?
Just how affordable is gas really going to be over the 30 year life of that plant? Personally, I’m fully expecting it to end up every bit as much of a financial millstone as Bell Bay was before it. Bell Bay was built, originally intended for use beyond being solely a backup, just before the first 1970’s oil crisis. Now Tamar Valley has been built just as gas markets are tightening and prices are rising. Hmm…