The Case for Rail

Peak Oil, Public Transport and Social Equity


Peak oil is not the end of oil, but the point at which extraction rates cannot be increased. It is the half way point in the extraction of all available oil. The rate of discovery of oil fields has been in decline since the early 1960’s. Annual discoveries have been lagging behind the dramatic growth in annual consumption. If consumption of oil continues to grow in China, India, Russia and Saudi Arabia, as it has been, they will consume all oil production by 2017. The Lloyd’s of London 2010 report by Sussex University and Goldman Sachs predicts that prices for a barrel of oil will be over $200 a barrel by 2012, barring another global financial shock. Production has flat lined since 2006. The International Energy Agency, who originally said that peak oil was off in the future in the 2030's, in 2010 said that we are likely to be close to peak oil and that production has plateaued since 2005.


The price of Tapis crude, which sets the price Australia pays for crude oil, has risen from $30 a barrel in June 2000, to $38 in June 2004, $142 in June 2008, $80 in 2010 and $121 in September 2011. While there is oil available, the price of extracting it rises as more difficult fields are explored and tapped. The energy return on energy invested (EROEI) measures how much energy is available after energy costs of production. The original fields developed had a return of energy of over 200 units per one unit of energy invested. These have declined to as low 1:10 for new fields and 1:3-4 for the Alberta tar sands. Professor Newman (Infrastructure Australia Board Member) argues that the peak oil price in 2008 was one of the triggers of the global financial crisis and indeed the rapid growth in public transport usage and investment globally. Families, particularly in the outer suburbs, with increasing energy, housing and petrol costs choose, in rapidly increasing numbers, to use public transport.


While public transport usage has grown rapidly in Australia in response to rising prices of petrol in the last year, we have been shielded from the impact of prices rising again by the rapid rise of the Australian dollar. In September 2011 the dollar was priced around $1.06 per US dollar and the price of a Tapis barrel of oil was $120. If our dollar was priced at $0.70 as it was in the early 2000’s, we would be paying $1.65 per litre. Similarly if the price rose to $160 a barrel we would be paying in $AUS at $US0.70 a price of over $3 a litre.


Estimated Price Per Litre Table


Developing the rail infrastructure for South and West Gippsland is crucial to ensuring competitive business and insulating families against escalating private transport costs.


Global Oil Production and Price Chart