Read the whole report here. Also see the Community Information Paper, also released by the Queensland EPA in September 2008.

by Mike Waller
Heuris Partners Ltd

Executive Summary

In October 2007 a report from the Queensland Oil Vulnerability Taskforce was tabled in Parliament¹ (The Report). In the light of this Report, the Government has commissioned the development of an oil vulnerability mitigation strategy and action plan.

This research paper provides an overview of a range of critical issues relevant to the development of such a strategy, including: possible broad principles and approaches to manage the inherent risks
and uncertainties surrounding the timing and net impacts of peak oil on Queensland; projections of Queensland’s vulnerability to the potential impacts of peak oil, drawing on currently available data
and modelling; and suggesting the further work required to evaluate and refine possible initiatives to reduce Queensland’s vulnerability to rising/more volatile oil prices and to the potential supply disruptions.

Analysis to date of the possible impacts of oil demand outstripping supply suggests that:

• At a broad macroeconomic level, Queensland’s rich resource endowments of gas and coal provide a natural hedge against the oil price outlook that would be consistent with a nearer term plateauing of global oil production. Absent a major global recession, the general
  upward movement in energy prices would be reflected in improved terms of trade, economic activity and higher government revenue for Queensland;
• Higher prices would likely generate adverse sectoral impacts for industry sectors unable to pass on these higher input prices to downstream markets and/or exposed to end markets that are particularly sensitive to higher oil prices (such as air transport).

For households, there is some evidence that such a high oil price environment could combine with other proximate factors (location and low household income) to generate adverse equity impacts that would require consideration in terms of offsetting policy measures.

Detailed modelling of the road transport impacts of high oil price scenarios indicate a major response in terms of reduced oil‐based liquid fuel use, delivered primarily via sharply increased fuel
efficiency and fuel switching. Further work is required:

• To test and validate these assumptions, particularly those that involve large scale capital investments under conditions of significant uncertainty about future oil and carbon prices;
• To develop and test policy packages in the transport sector for robustness, cost effectiveness and coherence in relation to reducing liquid fuel demand and CO2 emissions and meeting other policy objectives for the sectors.

Physical supply risks, impacts and mitigation options have not been evaluated via either economic modelling or detailed interaction with critically exposed sectors.

Initial analysis suggests that Queensland’s coal seam gas (CSG) resource provides a significant source of liquid fuel diversification away from conventional oil, both via compressed natural gas (CNG) and
gas to liquids (GTL). Further work is required to validate/evaluate options in this area compared with a range of other supply side options.

Most of the work to date has been drawn on existing sources of data without the benefit of input from agencies with detailed knowledge of key sectors outside the transport sector and with broader oversight of economic issues/expertise. Interaction with these agencies would:

• Assist in generating deeper understanding of sectoral exposures to oil risk and approaches to oil risk mitigation.
• Clarify possible risk management objectives in relation to oil price and/or supply risk.

Clarifying and delineating an oil risk mitigation strategy for Queensland requires an extension and deepening of analysis and evaluation of risks and potential mitigation measures involving:

• Macroeconomic and sectoral modelling to understand future risks/impacts with and without policy interventions;
• Consultation and joint working between the Environmental Protection Agency (EPA) and key agencies (Department of the Premier and Cabinet, Department of Tourism Regional Development and Industry, Treasury /OESR, Department of Mines and Energy, Department of Primary Industry and Fisheries, Department of Planning & Infrastructure); and
• Finalisation of a strategy and action plan.

1. ^ Queensland’s Vulnerability to Rising Oil Prices Taskforce Report (April 2007)