A thirsty world is running dry -


Australia could profit hugely from the imminent end of world oil supplies, writes Paul Sheehan.
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The world's biggest oil company, Exxon Mobil, made a profit of $A13.6 billion last quarter. That works out at $54 billion a year, or $1 billion profit a week.
Last week, all five global oil giants reported their quarterly results and all told the same story: Royal Dutch $9.5 billion profit (up 40 per cent); BP $9.5 billion (up 30 per cent); ConocoPhillips, $6.8 billion (up 65 per cent); and Chevron, $5.7 billion (up 19 per cent). That's a collective quarterly profit of $45 billion - almost $3.5 billion a week.
The announcements came at exactly the same time that the coast of Lebanon was being despoiled by a large oil spill after Israel bombed a power plant near Beirut. As if the only true democracy in the Arab world needed another catastrophe.
The symbolism speaks for itself.
All this at a time when the world is paying record oil prices, fuel production is experiencing bottlenecks caused by a shortage of oil refineries, which suggests Big Oil must have good reasons not to expand supply. And the high cost of oil - required in the production and supply of nearly everything we buy - has rippled through the global economy, pushing up inflation and interest rates.
"Our society is in a state of collective denial that has no precedent in history, in terms of its scale and implication," writes scientist Jeremy Leggett in a book, Half Gone (2005), about the imminent arrival of "peak oil", when global oil reserves begin to run down. Half Gone argues that "peak oil" has already arrived, and we are not prepared for the consequences.
Even if Leggett has overstated his case, innumerable scientific reports have urged the need for a move away from oil dependence. In 2004 a unit of the United States Department of Energy warned: "A serious supply-demand discontinuity [shortage] could lead to worldwide economic chaos."
Yet there remains a breathtaking gap between the rhetoric of the war on terrorism and the absence of common sense. As Leggett writes: "Of America's current daily consumption of 20 million barrels, 5 million are imported from the Middle East, where almost two-thirds of the world's oil reserves lie in a region of especially intense and long-lived conflicts.
"Every day, 15 million barrels of oil pass in tankers through the narrow Straits of Hormuz, in the troubled waters between Saudi Arabia and Iran. The US Government could wipe out the need for all their 5 million barrels [from the Middle East] by requiring its domestic automobile industry to increase the fuel-efficiency of cars and light trucks by a mere 2.7 miles per gallon.

"But instead it allows [the manufacture] of ever more oil-profligate vehicles. Many sports utility vehicles (SUVs) average just four miles per gallon. The SUV market share in the US was two per cent in 1975 [the last oil shock]. By 2003 it was 24 per cent. In consequence, the average US vehicle fuel efficiency fell between 1987 and 2001, from 26.2 to 24.4 miles per gallon. This is at the same time as other countries were producing cars capable of up to 60 miles per gallon."
The short-term thinking, the unworldly macho posturing, has been mind-boggling. The invasion of Iraq tops the list of examples. The war on terrorism has to start at the petrol pump. Where do Hezbollah and the mullahs of Iran get the billions needed for waging jihad and building a nuclear weapons program? From oil.
All this leaves Australia at a very significant crossroads. The world is clearly running out of oil, running out of time, and running into global warming. Every feasible alternative for generating energy has to be considered - bio-fuels (ethanol), geothermal energy, solar energy, coastal wave energy, wind farming, liquid natural gas and nuclear power.
For a long time, most people, including me, believed the best thing to do with yellowcake was to leave it in the ground so it couldn't be turned into something that creates toxic waste for a thousand years. But events have conspired to make uranium, which produces about 6 per cent of the world's energy output, appear less evil than the oil-coal status quo.
This is what puts Australia at a moral and economic crossroads. When it comes to nuclear power, Australia is to uranium reserves what Saudi Arabia is to oil. Just three countries, Australia, Canada and Kazakhstan, control 60 per cent of the world's viable uranium reserves.
With so much demand for energy, led, as usual, by China, which plans an unprecedented expansion in nuclear power plant construction, what is being debated at the highest diplomatic levels is an international system for the production, sale and storage of uranium. In effect, a benign cartel which would oversee the supply and production of enriched uranium to meet energy demands and prevent rogue elements from getting their hands on dangerous material.
Australia would be the No. 1 player in such an arrangement. It would require the creation of a vertically integrated industry which mines and processes a value-added product.
The enriched uranium would then be leased to users on long-term contracts, before being returned to Australia for safe disposal (which may appear an oxymoron when it comes to radioactive waste). In other words, we mine it, manufacture it, sell it, and monitor it for the duration of the life-cycle.
For this Australia would charge a premium, and pay an environmental price.
We become the world's leading uranium cop. All in the name of addressing two greater evils - global warming and global terrorism - while expanding economic growth.
That's why the Prime Minister wants a debate on uranium. I think that's what John Howard means when he says Australia could become "an energy superpower".
And that's why Kim Beazley wants to open up the possibilities for the Labor Opposition on uranium.
Because the stakes are huge. Because the world's oil addiction is going to hit the wall sooner rather than later.