Stuart McCarthy, Peak Oil and Brisbanes Northern Link Tunnel Project, December 2008

PEAK OIL AND BRISBANE’S NORTHERN LINK TUNNEL PROJECT
Stuart McCarthy, December 2008
Introduction
The Northern Link is a proposed 5.5km-long road tunnel which would connect
the Western Freeway and the Inner City Bypass in Brisbane. A Draft
Environmental Impact Statement (EIS) has been submitted to the Queensland
Coordinator-General by the proponent, Brisbane City Council, and made
available for public comment.1 Clause 2.2 of the Terms of Reference (ToR) for
the EIS requires the proponent to assess "the sensitivity of modelling
assumptions to large changes in global oil availability and oil price
vulnerability over the life of the project."2 The purpose of this paper is to inform
stakeholders of the implications of peak oil for the project and examine
whether the proponent has adequately addressed Clause 2.2 of the ToR.
Peak Oil
The term ‘peak oil’ refers to the maximum rate, or ‘peak’, of production in a
given oil well, oil field, oil producing country or region, beyond which it goes
into irreversible decline. World oil production is already at or near its historic
peak. Oil discoveries peaked in the 1960s and the oil production rate has
exceeded the discovery rate since the 1980s. In 2007 the production rate was
approximately four times the discovery rate (see Figure 1), i.e. only one barrel
of oil is being discovered for every four that are currently being used, even
before the long lead-times for bringing new oil fields into production are
considered.
Oil production has already peaked in as many as 60 countries and most

regions. For example, United States (US) production peaked in 1970, North
America & Mexico production peaked in 1997, OECD production peaked in
1997, North Sea (UK/Norway/Denmark) production peaked in 1999,
Australian production peaked in 2000, non-OPEC, non-FSU production
peaked in 2002, and production in Russia and China has probably peaked.
Prospects for increasing production of crude oil are found in ever more
remote, technically difficult, politically unstable or even hostile locations.
Unconventional oil resources such as shale oil and tar sands, while the
potential reserves are large, are not able to be produced at sufficient rates to
meet the growing gap. Attempts to rapidly scale up the production of
1
Brisbane City Council/SKM/Connel Wagner, Northern Link Environmental Impact Statement,
September 2008, at http://www.northernlinkeis.com.au/EISDocuments.html.
2
The Coordinator-General, Northern Link Road Tunnel Project: Terms of Reference for an
Environmental Impact Statement, Queensland Government, April 2008, at
http://www.dip.qld.gov.au/docs/library/Northern_Link_Road_Tunnel_ToR.pdf.
Peak Oil and Brisbane’s Northern Link Tunnel Project Stuart McCarthy
2
alternative fuels such as biofuels and synthetic fuels are encountering serious
cost, thermodynamic and environmental constraints.
The International Energy Agency (IEA) and other official agencies such as the
US Energy Information Administration (EIA) and Australian Bureau of
Agriculture and Resource Economics (ABARE) have traditionally produced
demand based forecasts of oil production and simply assumed that reserves
and production capacity would meet demand. Typically these have forecast
world oil production continuing to increase until at least the 2030 timeframe at
rates of up to 120 million barrels per day, compared with the current 87 million
barrels per day. Notably, there is already a gap of 1.5 million barrels per day
between the IEA’s World Energy Outlook 2006 reference case and actual
production, i.e. production growth has fallen 50 per cent short of the forecast
over the last two years. Price forecasts based on these production forecasts
have been similarly discredited in recent years, even over the short term.
Figure 1. World Oil Production vs Discovery, Regular Conventional Oil, 1930-

2050.
60
The Queensland Government Oil Vulnerability Taskforce recently examined a
broad range of world oil production forecasts. These were loosely grouped
into ‘early peak’ forecasts envisaging the peak in the 2005-2015 timeframe
and ‘late peak’ forecasts placing the peak beyond 2020. The Taskforce report
published last year (the ‘McNamara Report’) found that “the overwhelming
evidence is that world oil production will peak within the next 10 years.”3
Since the McNamara Report, many of the ‘late peak’ forecasts have been
revised by their authors into the ‘early peak’ timeframe or discredited. A
number of recent independent resource based and project based studies of
3
McNamara et. al., Queensland’s Vulnerability to Rising Oil Prices: Taskforce Report,
50
Queensland Government, 5 April 2007, p. 4, at
http://www.epa.qld.gov.au/environmental_management/sustainability/mcnamara_report/.
3
world oil production have concluded that production is likely to peak in the
2007-2018 timeframe, at rates in the range of around 87-95 million barrels per
day, before declining at around two to three per cent per annum or more
steeply.4 Typical of the reserve based forecasts is the Colin Campbell/ASPO
Oil and Gas Depletion Model shown at Figure 2.5
OIL & GAS DEPLETION PROFILES

2007 Base Case
55
50
45
40
35
Gboe
30
25
20
15
10
5
0
1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050
Regular Oil Heavy etc Deepwater Polar NGL Gas Non-Con Gas
Figure 2. World Oil & Gas Depletion Profiles, ASPO 2007 Base Case.
The project based studies are particularly important as the peak in world oil
production makes its transition from theoretical projection to observed
phenomenon. Given the five to seven year start-up time for a typical major oil
4
These include Werner Zittel and Jörg Schindler, Crude Oil: The Supply Outlook, Energy
Watch Group, October 2007, at
http://www.energywatchgroup.org/fileadmin/global/pdf/EWG_Oilreport_10-2007.pdf; Kjell
Aleklett, Peak Oil and the Evolving Strategies of Oil Importing and Exporting Countries:
Facing the Hard Truth About an Import Decline for the OECD Countries, OECD Joint
Transport Research Centre, December 2007, at
http://www.internationaltransportforum.org/jtrc/DiscussionPapers/DiscussionPaper17.pdf;
Fredrik Robelius, Giant Oil Fields - The Highway to Oil: Giant Oil Fields and their Importance
for Future Oil Production, Uppsala University, September 2007, at
http://publications.uu.se/abstract.xsql?dbid=7625; Chris Skrebowski, Megaprojects Update:
Just How Close to Peak Oil are We?, presentation to the ASPO-USA 2007 World Oil
Conference, 18 October 2007, at
http://www.aspousa.org/proceedings/houston/presentations/Chris%20Skrebowski
%20megaprojects.pdf; and the collaborative, open-source The Oil Drum/Wikipedia Oil
Megaprojects Database, at http://en.wikipedia.org/wiki/Oil_megaprojects.
5
Regularly updated at http://www.aspo-ireland.org/index.cfm/page/newsletter.
4
project, and reasonable estimates of depletion rates in existing oil fields, the
project based studies provide a good indication of actual production capacities
during the period to circa 2015, beyond which time underlying depletion in the
ageing supergiant oil fields will be the main determinant in overall production
rates. Figure 3 shows a likely scenario which incorporates a 4.5 per cent
decline per annum in the world’s existing oil fields, offset by new projects
coming on stream until 2010-2012, beyond which time production enters year
on year declines. In this scenario, world production declines by more than one
quarter from 2010 to 2020.
Figure 3. The Oil Drum/Wikipedia Oil Megaprojects Database, Moderate

Decline Rate (4.5% per annum) Scenario, world oil supply and megaproject
contributions, compared to observed EIA production data.
Despite the evidence, sceptics of the proposition of a near-term oil production

peak have tended to resort to a faith-based argument that increasing oil prices
would ensure increasing discoveries and production. World demand for oil
has continued to surge largely as a result of rapid economic growth in
developing countries such as China and India. Oil industry profits and
spending on infrastructure and exploration have been at record levels.
5
However observed data shows that the rate of world liquid fuel production has
been on a plateau at approximately 85 million barrels per day since 2005 (see
Figure 4). The theory of increasing prices bringing about concomitant
increases in oil production has been discredited. There is little or no evidence
that world oil production can continue to grow beyond the next decade, indeed
the evidence strongly indicates the opposite – a high probability that world oil
production will be declining within several years.
Figure 4. World Oil Production, 1980-2008 (EIA monthly data).
Peak oil is gradually being accepted by the IEA and other agencies. The IEA
undertook a major review of world oil and gas supply prospects for its recent
WEO 2008, including resource based and projects based methodologies
similar to those cited above. This included a detailed field-by-field analysis of
trends and prospects for production and decline rates at 800 of the world’s
largest fields, and a full review of reserves and resources. The key finding of
this review was that the average rate of production decline in the world’s post-
peak oil fields is currently 6.7 per cent per annum and will accelerate to 8.6
per cent per annum by 2030.6
Although WEO 2008 does not conclude explicitly that world oil production will
peak and begin to decline within the outlook period, its reference scenario
production figure of 106 million barrels per day in 2030 is 12 per cent lower
6
IEA, World Energy Outlook 2008, IEA/OECD, Paris, 2008, p. 8, at
http://www.iea.org/weo/docs/weo2008/WEO2008_es_English.pdf.
6
than its previous WEO 2007 reference scenario. The WEO 2008 reference
scenario is based on a number of highly questionable assumptions, including:
• The bulk of the net increase in oil production comes from non-
conventional sources such as tar sands, which face severe production
constraints compared to conventional oil, and natural gas liquids, which are
30 per cent less energy dense than oil.
• The bulk of the increase in conventional oil production comes from

OPEC, with Saudi Arabian production increasing from 10.2 million barrels per
day in 2007 to 15.6 million barrels per day by 2030, despite the likelihood that
OPEC reserves are grossly overstated.
• Future discovery and production of conventional oil reaches an ultimate

recoverable reserve (URR) of 3.5 trillion barrels, despite the 75-year long
discovery and production trend indicating a URR of approximately 1.9 trillion
barrels (see Figure 5).
• Cumulative investment in the upstream oil and gas sector of US$8.4

trillion from 2007 to 2030.
• 64 million barrels per day of additional oil production capacity is

brought on stream by 2030, equivalent to six times the current production of
Saudi Arabia, to offset declining production in existing oil fields.
• 30 million barrels per day of additional oil production capacity is

brought on stream by 2015, equivalent to three times the current production of
Saudi Arabia, to offset declining production in existing oil fields, including all
currently planned projects. This includes 7 million barrels per day of
production capacity in addition to current projects as the capacity additions
from those projects tails off after 2010.7
Notwithstanding the implausibility of these assumptions, WEO 2008 does

emphasise concerns which have been expressed publicly by senior IEA
officials for some time that “there remains a real risk that under-investment will
cause an oil-supply crunch in [the 2010-2015] timeframe.”8
For oil importing countries the prospect of overall production declines is

already being compounded by growing domestic consumption in the key oil
producing and exporting countries, resulting in declining net exports available
on the market. Total net exports from the world’s top 20 exporting countries
have been trending downwards since mid-2005 (see Figure 6). A recent
independent study produced a ‘middle case’ scenario in which exports from
the world’s top five oil exporters decline by 6.2 per cent per year from the
present rate of approximately 24 million barrels per day to approximately 12.5
million barrels per day by 2015,9 i.e. a decline equivalent to one quarter of the
7
Ibid., pp. 6-8.
8
Ibid., p. 7.
9
Jeffrey Brown and Samuel Foucher, “A Quantitative Assessment of Future Net Oil Exports
by the Top Five Net Oil Exporters”, Energy Bulletin, 8 January 2008, at
http://www.energybulletin.net/38948.html.
7
world’s internationally traded oil over the next seven years. This analysis is
reinforced by Jeff Rubin from CIBC World Markets, who recently estimated
that world exports would decline by 2.5 million barrels per day by 2011.10
World Conventional Oil Production

Annual/Cumulative Production vs Cumulative Production, 1930-2007
8%
Annual/Cumulative Production
6%
4%
2%
0%
0 500 1000 1500 2000
Cumulative Production (Gb)
Figure 5. Derivative of Cumulative World Conventional Oil Production.
10
Jeff Rubin, “OPEC’s Growing Call on Itself”, presentation to the 6th Annual International
ASPO Conference, Ireland, September 2007, at http://www.aspo-
ireland.org/contentfiles/ASPO6/2-3_ASPO6_JRubin.pdf.
8
Figure 6. World Oil Exports, 1965-2020 (Luis de Sousa).11

The peak oil phenomenon will be a major historical discontinuity, between the
era of increasing supplies of cheap, abundant energy and an era of declining
supplies of scarce, expensive energy. The fact that few countries have begun
to make any preparations means that the onset of peak oil will bring major,
world-wide socio-economic upheaval.
Socio-Economic Impacts of Peak Oil
Even among those who accept that world oil production is peaking, many tend
to dismiss the problem on the faith-based assumptions that “the market will
sort it out” or that there will be a seamless transition to “something else.” Such
views ignore the importance of oil in the world economy, the enormity of the
transition to alternative fuels and/or technologies, the impact that high oil
prices are already having, and the compounding impacts of peak oil with other
global ecological and economic shocks.
Oil is the world’s most important primary energy source, providing more than
one third of all energy. 80-95 per cent of all transport is fuelled by petroleum.
All petrochemicals are produced from oil. 95 per cent of goods arrive at the
point of sale using oil. 99 per cent of our food involves the use of oil and/or
gas for fertiliser, pesticides, ploughing, cultivation, processing and transport.
For the last half century there has been a close correlation between world
economic growth and growth in world oil production. Robert Hirsch estimates
that a one per cent decline in world oil supply would roughly equate to a one
per cent decline in world GDP, in order of magnitude.12 Four of the last five
global recessions were preceded by sharp increases in world oil prices
(Figure 7).13 In a seminal 2005 report commissioned by the US Department of
Energy (the ‘Hirsch Report’),14 Hirsch et. al. concluded:
The long-run impact of sustained, significantly increased oil prices

associated with oil peaking will be severe. Virtually certain are
increases in inflation and unemployment, declines in the output of
goods and services, and a degradation of living standards. Without
timely mitigation, the long-run impact on the developed economies will
almost certainly be extremely damaging, while many developing
nations will likely be even worse off.15
Much of the Hirsch Report was devoted to scenarios for mitigating the liquid
fuel shortfall following peak oil, with each scenario assuming the
11
Luis de Sousa, “World Oil Exports No. 2”, The Oil Drum, 19 September 2008, at
http://europe.theoildrum.com/node/4513.
12
Robert L. Hirsch, World Oil Shortage: Scenarios for Mitigation Planning, presentation to
ASPO-USA World Oil Conference, Houston, October 2007, p. 3, at
http://www.aspousa.org/proceedings/houston/presentations/HIRSCH%20HOUSTON-ASPO-
USA.pdf.
13
Jeff Rubin and Peter Buchanan, “What’s the Real Cause of the Global Recession?”,
StrategEcon, CIBC World Markets, 31 October 2008, pp. 3-6, at
http://research.cibcwm.com/economic_public/download/soct08.pdf.
14
Peaking of World Oil Production: Impacts, Mitigation and Risk Management, February 2005,
pp., 27-28, at http://www.netl.doe.gov/publications/others/pdf/Oil_Peaking_NETL.pdf.
15
Ibid., p 30.
9
implementation of ‘crash programs’ in fuel efficiency and alternative fuel

production. A crash program to produce substitute fuel equivalent to of one
per cent of world oil production would cost at least $US100 billion and take
more than a decade. The scenario in which crash programs were
implemented 20 years before world oil production peaked offered “the
possibility of avoiding a world liquid fuels shortfall”, whereas “waiting until
world oil production peaks before taking crash program action leaves the
world with a significant liquid fuel deficit for more than two decades”, resulting
in the “world supply/demand balance [being] achieved through massive
demand destruction (shortages), which would translate to significant
economic hardship.”16 Given that no such crash programs have yet been
implemented and declines of several per cent per year are imminent, the most
likely scenario now is one of “significant economic hardship.”
Figure 7. Past Recessions and Oil Price Spikes (Rubin & Buchanan/CIBC).
Despite the notion of Australia as an emerging “energy superpower” which

arose during the recent resources boom,17 this country will not be immune
from the economic hardships arising from peak oil. Australia does indeed
have large fossil fuel and mineral reserves, and is an important exporter of
these commodities in world terms, particularly uranium and coal. In the case
of oil and gas, however, the situation is very different. Domestic oil production
is already in decline and most of our natural gas is being exported very
cheaply while we lack the wherewithal for it to be utilised as a mainstream
16
Ibid., p. 59.
17
See for example former Prime Minister John Howard, Australia’s National Challenges:
Energy and Water, speech to the Committee for Economic Development of Australia (CEDA),
17 July 2006, transcript at
http://ceda.com.au/public/package/howard_200607/howard_200607_speech.html.
10
transport fuel. For many years the dollar value of Australia’s coal exports has
barely offset the value of its petroleum imports (see Figure 8).
Australian Coal Exports vs Petroleum Imports, 1999-2008

(Source: ABS 5368.0, International Trade in Goods and Services )
Coal Exports
Monthly Exports/Imports ($ billion)
4 Petroleum Imports
0
1999
2000
2000
2001
2001
2002
2003
2003
2004
2004
2005
2005
2006
2006
2007
2007
2008
2008
1999
2002
Figure 8. Australian Coal Exports vs Petroleum Imports, 1999-2008.
In the coming years Australia will likely experience serious difficulty securing
affordable supplies of petroleum fuels at present or forecast consumption
rates. With its domestic oil production having peaked in 2000, Australia is
already about 50 per cent import dependent. Based on current Geoscience
Australia (GA) production forecasts and ABARE demand forecasts, Australia
will be two thirds dependent on petroleum imports by 2015 (see Figure 9).
Depending on oil prices, exchange rates and other variables, the petroleum
trade deficit alone could climb from its current level of $12 billion per annum to
the $40-80 billion range in that same timeframe. This is clearly unsustainable.
While there are contingency plans in place to address short-term supply

disruptions through cooperation with other OECD nations and various
emergency mechanisms for controlling domestic demand,18 these will not
address the sort of long-term supply disruptions and highly volatile prices that
will result from the permanent decline in world production. Australia is unique
among OECD nations for not maintaining a 90-day strategic petroleum
reserve, contrary to the fact that it is party to the IEA agreement that
mandates such a reserve, instead relying on the petroleum already coming
through the supply chain to provide a buffer for short-term shocks. This is a
very serious shortcoming, among many others, that will leave the country’s
18
See for example Commonwealth of Australia, Liquid Fuel Emergency Act 1984, Canberra,
at http://www.austlii.edu.au/au/legis/cth/consol_act/lfea1984213/.
11
economy highly vulnerable to the whims of the market during the oil supply
shocks that will likely characterise the peak oil era.
Australian Oil Production vs Demand, 1975-2020

(Source: Geoscience Australia, ABARE)
1.0
Oil Production/Demand (million bbl/day)
0.9 Demand
0.8 Production
0.7 net imports

0.6
0.5
0.4
0.3
0.2
0.1
actual forecast
0.0
75
77
79
81
83
85
87
89
91
93
95
97
99
01
03
05
07
09
11
13
15
17
19
19
19
19
19
19
19
19
19
19
19
19
19
19
20
20
20
20
20
20
20
20
20
20
Figure 9. Australian Oil Production vs Demand, 1975-2020.
The domestic socio-economic implications arising from peak oil will likely be
severe. Recent economic modelling on the impact of a near-term peak in
world oil production by the CSIRO indicated fuel prices as high as $8 per litre
by 2018, a reduction in passenger and freight travel of up to 40 per cent and a
decline in GDP of at least three per cent.19 At the micro-economic level the
combined impact of rising oil prices and high debt levels has been the subject
of extensive ongoing research by Jago Dodson and Neil Sipe of Griffith
University, among others. In Unsettling Suburbia, the most recent in a series
of papers on the subject, Dodson and Sipe find that the car dependent
residents of outer suburbs that are poorly serviced by public transport are
highly vulnerable to the combination of high fuel prices and mortgage debt
(see Figure 10). Notably, a disproportionate impact is being experienced by
sections of the community that are already socio-economically
disadvantaged.20 Further, the historically high debt-GDP ratio (see Figure 11),
raises the prospect of severe debt deflation and protracted recession
independent of any consideration of oil prices.21
19
CSIRO Future Fuels Forum, Fuel for Thought: The Future of Transport Fuels, June 2008, at
http://www.csiro.au/resources/FuelForThoughtReport.html.
20
Jago Dodson and Neil Sipe, Unsettling Suburbia: The New Landscape of Oil and Mortgage
Vulnerability in Australian Cities, Griffith University, August 2008, at
http://www.griffith.edu.au/__data/assets/pdf_file/0003/88851/urp-rp17-dodson-sipe-2008.pdf.
21
Steve Keen, Deeper in Debt: Australia’s Addiction to Borrowed Money, Occasional Paper
No 3, Centre for Policy Development, September 2007, at http://cpd.org.au/deeper-debt.
12
Figure 10. Oil and Mortgage Vulnerability in Brisbane, 2006 (Dodson & Sipe).
13
Figure 11. Australia’s Debt to GDP Ratio, 1880-present (Steve Keen).
The likely impacts of peak oil in Brisbane were examined by Brisbane City
Council’s Climate Change and Energy Taskforce (CCET) in 2006. The
taskforce report, A Call for Action, made numerous findings regarding
prospects for a transition to alternative fuels, changing travel behaviour and
land use patterns, including:
… no ‘magical’ solutions will arrive to permit a smooth transition to, for

example, alternative fuels.
Peak oil will magnify, accelerate and reinforce the need for and the
viability of more efficient land-use and transport patterns.
Council will need to integrate sustainable transport into its land use
planning, giving public transport priority on the roads and in accessing
destinations, as well as expanding pedestrian and cycling facilities and
access.
With peak oil, there is a prospect of rapid change to higher density

living and concentration of population around nodes.
Peak oil also raises questions about the long-term viability of major
infrastructure that is associated with the present dependence on diesel
and petrol, such as industrial areas that only have road access.
Peak oil is likely to impact heavily on freight operations. These impacts

could be mitigated by making rail freight a more viable option for
Brisbane firms.
14
Air travel for people and goods may become unaffordable. … A

reduction in the movement of passengers and goods by air would be a
major change to Brisbane’s economy and the investments that have
been made in airport-related facilities.22
Peak oil is merely one of several systemic socio-economic shocks likely to

eventuate in the coming years. Thomas Homer-Dixon, among others,
identifies five converging “tectonic stresses” that will possibly trigger
“synchronous failure” in modern civilisation, either in isolation or combination.
These include population stress, energy stress (including peak oil),
environmental stress, climate stress and economic stress (for example the
current global economic crisis).23 Homer-Dixon considers energy stress to be
the most serious:
… energy is society’s critical master resource: when it’s scarce and

costly, everything we try to do, including growing our own food,
obtaining other resources like fresh water, transmitting and processing
information, and defending ourselves, becomes far harder.24
Major World Oil Supply Disruptions

(Source: International EnergyAgency)
Nov 1956 - Mar 1957 Suez Crisis
Jun-Aug 1967 Six Day War
Oct 1973 - Mar 1974 Arab-Israeli War and Oil Embargo
Nov 1978 - April 1979 Iranian Revolution
Oct 1980 - Jan 1981 Outbreak of Iran-Iraq War
Aug 1990 - Jan 1991 Iraqi Invasion of Kuwait
Jun-Jul 2001 Iraq Halts Oil Exports
Dec 2002 - Mar 2003 Venezuelan Oil Workers' Strike
Mar-Dec 2003 Iraq War
Sep 2005 Hur. Rita & Katrina
0 1 2 3 4 5 6
Peak Gross Loss of Supply (million barrels/day)
Figure 12. Major World Oil Supply Disruptions.
22
Maunsell Australia and Brisbane City Council, A Call for Action: Climate Change and
Energy Taskforce Final Report, Brisbane, 12 March 2007, pp. 23-24, at
http://www.brisbane.qld.gov.au/BCCWR/plans_and_strategies/documents/CLIMATE_CHANG
E_ENERGY_TASKFORCE_REPORT.PDF?
xml=/BCC:PDFHITXML:1275869355:svDocNum=2.
23
Thomas Homer-Dixon, The Upside of Down: Catastrophe, Creativity, and the Renewal of
Civilisation, Text Publishing, Melbourne, 2006, pp. 9-30.
24
Ibid., p. 12.
15
Bearing these factors in mind, it is likely that the next decade will feature not
only a transition to declining world oil production but periodic oil shocks, i.e.
sudden, serious disruptions to oil supplies. These may be triggered by
geopolitical events, such as the 1979 Iranian Revolution which caused a
sudden decline equivalent to six per cent of current world oil production, or
natural disasters such as Hurricane Katrina in 2005, which shut in the
equivalent of on quarter of annual Gulf of Mexico production and contributed
to substantial oil price increases (see Figure 12). Events such as these will
have severe impacts upon the global, regional and domestic economies.
The ‘Bumpy Plateau’ and the 2008 Global Economic Crisis
For several years Colin Campbell, Jean Laharrère and others have posited
that the economic impact of peak oil would transpire as a ‘bumpy plateau’,
triggering a severe shock in world financial markets and a cycle of oil price
shocks and recessions. Oil prices would rise steeply as increasing demand
exceeded production capacity, eventually reaching a point at which ‘demand
destruction’ would trigger a recession, then possibly collapsing as the market
over-reacted to small imbalances between surplus and shortage. As the
economy recovered, increasing demand would see prices increase once more
and the cycle would continue (see Figure 13).25
Figure 13. Oil Price Behaviour on the ‘Bumpy Plateau’ (Campbell).
25
See for example Jean Laharrère, Peak Oil and Other Peaks, Presentation to CERN
Meeting, 3 October 2005, at http://www.hubbertpeak.com/laherrere/CERN200510.pdf; Sonia
Shah, “Peak Oil’s Bumpy Plateau”, New Matilda, 6 July 2005, at
http://newmatilda.com/2005/07/06/peak-oil%2526%2523039%3Bs-bumpy-plateau; and
Michael C. Ruppert and Michael Kane, The Markets React to Peak Oil, From the Wilderness
Publications, 2006, at
http://www.fromthewilderness.com/members/100406_markets_react.shtml.
16
In relation to the impact on the world financial system, Campbell wrote in

2005:
It is becoming evident that the financial and investment community

begins to accept the reality of peak oil, which ends the first half of the
Age of Oil. They accept that banks created capital during this epoch by
lending more than they had on deposit, being confident that tomorrow’s
expansion, fuelled by cheap oil-based energy, was adequate collateral
for today’s debt. The decline of oil, the principal driver of economic
growth, undermines the validity of that collateral which in turn erodes
the valuation of most entities quoted on stock exchanges.
The investment community however faces a dilemma. It desires to

protect its own fortunes and those of its privileged clients while at the
same time is reluctant to take action that might itself trigger the
meltdown. It is a closely knit community so that it is hard for one to
move without the others becoming aware of his actions.
In this situation, interest shifts to commodities and to short term trading

to benefit from daily or hourly fluctuations in price, implying that there
are few valid genuine long-term investments left.
The scene is set for the Second Great Depression, but the
conservatism and outdated mindset of institutional investors, together
with the momentum of the massive flows of institutional money they
are required to place, may help to diminish the sense of panic that a
vision of reality might impose. On the other hand, the very momentum
of the flow may cause a greater deluge when the foundations of the
dam finally crumble. It is a situation without precedent.26
Speaking at the Brisbane Institute in March this year, Queensland

Sustainability Minister Andrew McNamara called peak oil the “hidden dragon”
of global sustainability, “truly the unseen threat that will confront us all soon
enough, whether we choose to see it or not.” With oil prices at $100 per barrel
and climbing, McNamara argued that “we now stand on the threshold of an
upswing in global oil prices that will have a significant impact on the economy
of the world and for which we are seriously unprepared.”27 The hidden dragon
appears to have struck the world economy in mid-2008, corroborating the
bumpy plateau thesis and heralding the onset of the peak oil era. Peak oil
began to affect the real economy before the US sub-prime mortgage crisis,
and is now exacerbating the global economic crisis in a positive feedback
loop.
From early-2005 to mid-2008 oil prices quadrupled as strong economic

growth in China, India and other developing nations drove increasing world
26
“Financial Consequences of Peak Oil”, ASPO Newsletter No 53, May 2005, p. 5, at
http://www.peakoil.net/Newsletter/NL53/newsletter53.pdf. See also a May 2005 video
interview with Campbell at http://www.energychallenge.tv/index.php/archives/226.
27
“Highway of Diamonds”, speech to the Brisbane Institute, 4 March 2008, transcript at
http://www.energybulletin.net/node/40234.
17
demand for oil but production entered a plateau (see Figure 14). Increasing oil
prices first affected the developing world, with as many as 100 developing
countries experiencing fuel and/or energy shortages, while demand for biofuel
feedstock from food crops contributed to an emerging world food crisis. From
2007 rising fuel prices began to significantly affect developed economies,
particularly in the road transport and airline industries. Rubin observed that
the Japanese and European economies entered recession in the first half of
2008, largely due to their relatively high dependence on oil imports.28 Vehicle
mileage in the US, which in 2005 broke a 25-year long trend of constant
increases, began to fall in absolute terms in late 2007 (see Figure 15), while
car sales declined by almost 50 per cent over the same period. Demand for
air travel and air freight began to fall “precipitously” in early 2008,29 and for a
period of several months North American airlines were filing for bankruptcy at
a rate of one airline per fortnight. The impact of rising oil prices on global
transport costs effectively offset all of the trade liberalisation efforts of the past
three decades.30 During this period the IEA observed “devastating” demand
destruction in the US and other OECD countries, contributing substantially to
a slowdown in the global economy.31 Oil demand in the OECD, which
consumes three quarters of total world oil production, declined by
approximately eight per cent since the beginning of 2006 (see Figure 16).
Although the global economic crisis was ostensibly triggered by the US sub-
prime mortgage crisis, this merely combined with existing problems in the real
economy to create a ‘perfect storm’ of rising inflation, slowing growth and
over-valued financial instruments. The value of the US dollar steadily declined
through 2007 as the economic outlook worsened. As oil prices rose through
the US$100 per barrel mark in late 2007 and early 2008 the mainstream
media began to cover the peak oil story and reputable market analysts
forecast prices of up to US$200 per barrel in the near to medium term. The
loss of confidence caused by the collapse of several major investment banks
and the worsening economic outlook in late-2007 and early-2008 saw a flight
of capital from financial and equities markets to commodities. Oil prices rose
sharply to as high as US$147 per barrel in mid-2008, an increase of more
than 500 per cent in five years, three times higher than previous oil shocks
(see Figure 17). The prospect of a global recession and falling demand for oil,
combined with worldwide government intervention to stabilise financial
markets and stimulate economic activity, then saw a collapse of the oil price
to 2005 levels (see Figure 18).
28
Rubin and Buchanan, op. cit.
29
International Air Transport Association, Airlines Financial Health Monitor, October-
November 2008, p. 2, at http://www.iata.org/whatwedo/economics/index.htm.
30
Jeff Rubin and Benjamin Tal, “Will Soaring Transport Costs Reverse Globalization?”,
StratagEcon, CIBC World Markets, 27 May 2008, pp. 4-7, at
http://research.cibcwm.com/economic_public/download/smay08.pdf.
31
See IEA, Medium Term Oil Market Report, July 2008, at http://omrpublic.iea.org/mtomr.htm.
18
World Crude Oil Production vs Price, 2002-2008

(Source: US Energy Information Administration)
100 $150
World Crude Oil Production (million barrels/day)
Oil Production
Oil Price
80 $120
World Oil Price (US$/barrel)

60 $90
40 $60
20 $30
0 $0
2002 2003 2004 2005 2006 2007 2008
Figure 14. World Crude Oil Production vs Price, 2002-2008.
Vehicle Miles Travelled, Moving 12 Month Total, All Roads,

United States, 1995-2008
(Source: US Dept of Transportation, Traffic Volume Trends )
3,100
3,000
Vehicle Miles Travelled (billion)
2,900
2,800
2,700
2,600
2,500
2,400
2,300
95
96
97
98
99
00
01
02
03
04
05
06
07
08
19
19
19
19
19
20
20
20
20
20
20
20
20
20
Figure 15. Vehicle Miles Travelled, United States, 1995-2008 (US

Department of Transportation).
19
OECD Oil Demand, 2003-2008

(Source: EIA, International Petroleum Monthly , November 2008)
70,000
60,000
Oil Demand (thousand barrels/day)
50,000
40,000
United States
Japan
30,000 OECD Europe
Other OECD
South Korea
20,000 Canada
United Kingdom
Italy
10,000
Germany
France
0
2003 2004 2005 2006 2007 2008
Figure 16. OECD Oil Demand, 2003-2008.
Figure 17. Recent Oil Price Spike vs Past Spikes (Rubin & Buchanan/CIBC).
20
Oil Price, US Dollar and Dow Jones Industrial Average,

Jan 2006 to Dec 2008
160 16,000
Oil Price (US$/bbl) and US$ (Major Currencies
Oil
USD
140 14,000
Dow Jones Industrial Average

DJI
120 12,000
Index)
100 10,000
80 8,000
60 6,000
40 4,000
07
06
08
8
06
08
8
l- 0
l-0
l- 0
-0
-0
-0
-0
n-
n-
n-
r-
r-
ct
ct
ct
r
Ju
Ju
Ju
Ap
Ap
Ap
Ja
Ja
Ja
O
Figure 18. Oil Price, US Dollar and Dow Jones Industrial Average, Jan 2006
to Dec 2008.
Although coordinated government efforts managed to avert a systematic

collapse of world financial markets, the economic outlook continues to
deteriorate as the impact of several years of high inflation and the loss of
consumer confidence flows into the real economy. The US, European Union
and Japan are already in recession and there is a significant slowdown in the
economies of many of Australia’s other key trading partners, including China.
In Australia, the outlook is for a protracted recession or possibly a depression.
World demand for oil has eased as the economic outlook has worsened. As of
December 2008 the IEA expects world demand to contract by 0.2 million
barrels per day in 2008, the first contraction since 1983, then return to
moderate growth in the second half of 2009 as the global economy gradually
recovers.32 With demand easing and prices falling, many commentators have
concluded that the peak in world oil production has been postponed, however
the paradox is that these circumstances will likely hasten the onset of peak oil.
Much of the enormous capital investment needed to complete the large new
oil projects that would marginally increase production over the next several
years is falling victim to the combined impact of falling prices and the credit
crunch. Rubin is now warning of “supply destruction” and a return to high
prices:
Although capacity is ample for now, we expect supply strains to

emerge beyond mid-2009 as GDP growth and global demand turn the
32
IEA, Oil Market Report, 11 December 2008, at http://omrpublic.iea.org/.
21
corner, setting the stage for a return to the $100-barrel mark by year-
end (2009) … In the Alberta oil sands alone, we estimate that project
cancellations and delays, affecting $100 billion of investment, will
shave over 800,000 barrels from daily new capacity, roughly half of
earlier projected growth in the next five years. And what is happening
there is occurring in Brazil, West Africa and the Middle East itself.33
With production in the world’s existing oil fields declining at approximately 4.5
per cent per annum, possibly higher, and new projects needed to offset this
decline being postponed or cancelled, there is a strong argument that the mid-
2008 production peak could be the all-time production peak.
Regardless whether oil production peaks in the very near term, in WEO 2008
the IEA finds that fluctuations in the tight supply-demand balance are likely to
see oil prices remain volatile for some time and continue to increase over the
long term:
In nominal terms, prices double to just over $200 per barrel in 2030.
However, pronounced short-term swings in prices are likely to remain
the norm and temporary price spikes or sharp falls cannot be ruled out.
Prices are likely to remain highly volatile, especially in the next year or
two … Beyond 2015, we assume that rising marginal costs of supply
exert upward pressure on prices through to the end of the projection
period.34
While most economists are predicting a return to business-as-usual economic

growth in the world economy in the 2009-10 timeframe, the above analysis
indicates that this would merely trigger the next oil price spike and perpetuate
the bumpy plateau. This new cycle of oil price shocks and temporary recovery
will therefore likely continue for the foreseeable future, even before the impact
of physical oil supply disruptions is considered.
Traffic Forecasting for the Northern Link
The core premise of the Northern Link rationale is that Brisbane will
experience perpetual growth in motor vehicle traffic. Even before considering
the specific implications of peak oil, there are at least three serious flaws in
the traffic forecasting methodology on which this premise is based.
The first flaw is that growth in motor vehicle traffic is based on observed data
up to and including 2004, with the assumption that historic trends will continue
into the future. Modelling assumptions provided in Chapters 2 (Project
Rationale) and 5 (Traffic and Transport) of the EIS include:
• Growth in total person trips in the Brisbane Metropolitan Area from 6.5
million in 2007 to 8.8 million in 2026 (35 per cent increase).
33
Quoted in Tyler Hamilton, “Energy Giants Trim Spending Plans for 2009”, Toronto Star, 12
December 2008, at http://www.thestar.com/Business/article/552534.
34
Op. cit., p. 6.
22
• Continuation of historical trends in travel behaviour and mode share.
• Continuation of historical land use patterns as they relate to travel

behaviour.
• Continuation of historical trends in car ownership and car sales.
Recently published data indicates that these assumptions are invalid. Rising
fuel prices and other factors have seen a change in travel behaviour from
motor vehicles to public and active transport modes and car sales are
declining.
Total vehicle kilometres travelled (VKT) in Queensland has been declining

since 2003-04. Total Queensland passenger vehicle VKT declined by 3.62 per
cent from 2003-04 to 2005-06 (Figure 19) and Queensland capital city
(Brisbane) VKT declined by 8.82 per cent from 2003-04 to 2005-06 (Figure
20).35
South East Queensland public transport patronage grew by 32 per cent from
2003-04 to 2006-07, corresponding with the introduction of integrated ticketing
and declines in motor vehicle use (Figure 21). Patronage growth has
exceeded the rate of population growth since 2002-03, peaking at 11.4 per
cent per annum in 2005-06 (Figure 22). Patronage continues to grow at more
than six per cent per annum, limited only by capacity constraints. CityRail
trains are routinely overloaded by up to 20 per cent and many potential bus
patrons are denied entry to full buses.
New vehicle sales in Queensland declined by 14.8 per cent from October
2007 to October 2008. The 12-month moving average annual growth in new
vehicle sales is -2.16 per cent (Figures 23, 24). Further declines are likely as
the economy continues to slow. Many of the major car manufacturers are
currently on the verge of financial collapse.
Brisbane transport preferences have already changed, away from private

motor vehicles towards public and active transport. Demand for the former is
declining while demand for the latter is increasing.
The second flaw is the dependence on untested, exogenous assumptions

about perpetual growth in population, economic activity and employment,
including:
• Population growth in the Brisbane Metropolitan Area from 1,879,800 in

2007 to 2,533,400 in 2026 (35 per cent increase).
• Employment growth in the Brisbane Metropolitan Area from 963,800 in

35
Apelbaum Consulting Group, Queensland Transport Facts 2008, May 2008, available at
http://www.apelbaumconsulting.com.au/publi.html.
23
Total Distance Travelled by Vehicle Type, Queensland,

2000-01 to 2005-06
(Source: Queensland Transport Facts 2008 )
50,000
Vehicle Kilometres Travelled (million)
45,000
40,000
35,000 Buses
Other Truck Types
Articulated Trucks
Rigid Trucks
30,000 Light Commercial Vehicles
Motorcycles
Passenger Vehicles
25,000
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06
Figure 19. Total Distance Travelled by Vehicle Type, Queensland, 2000-01 to

2005-06.
Total Distance Travelled by Area of Operation, Queensland,

2000-01 to 2005-06
(Source: Queensland Transport Facts 2008 )
50,000
Vehicle Kilometres Travelled (million)
45,000
40,000
35,000
30,000
25,000
20,000
15,000
Non-Urban
10,000 Provincial Urban
5,000 Capital City
0
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06
Figure 20. Total Distance Travelled by Area of Operation, Queensland, 2000-

01 to 2005-06.
24
Public Transport Patronage in South East Queensland,

by Mode, 1998-99 to 2006-07
(Source: Queensland Transport, Translink Network Plan )
180
QR Citytrain
160
Brisbane Transport Bus
Annual Patronage (million)
Private Bus Operators

140
BCC Ferries
120
100
80
60
40
20
0
1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07
Figure 21. Public Transport Patronage in South East Queensland, by Mode,

1998-99 to 2006-07.
Public Transport Patronage in South East Queensland,

Growth All Modes, 1998-99 to 2006-07
(Source: Queensland Transport, Translink Network Plan )
180 12%
Annual Patronage Growth (per cent)
160 Total Patronage

Total Annual Patronage (million)
Annual Grow th 10%

140
120 8%
100
6%
80
60 4%
40
2%
20
0 0%
1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07
Figure 22. Public Transport Patronage in South East Queensland, Growth All
Modes, 1998-99 to 2006-07.
25
New Motor Vehicle Sales, Queensland, Nov 2003 - Oct 2008

(Source: ABS 9314.0, New Motor Vehicle Sales )
22,000 25%
Monthly Sales (Seasonally Adjusted)
21,000 20%
20,000 15%
Per cent Change

19,000 10%
18,000 5%
17,000 0%
16,000 -5%
15,000 Monthly Sales -10%

Annual Change
14,000 12 Mth Mov Avg -15%
13,000 -20%
04
05
06
07
08
3
7
-0
-0
-0
-0
-0
-
ov
ov
ov
ov
ov
ay
ay
ay
ay
ay
N
N
M
Figure 23. New Motor Vehicle Sales, Queensland, Nov 2003 – Oct 2008.
Queensland New Motor Vehicle Sales vs World Oil Price,

Nov 2003 - Oct 2008
30,000 $150
Monthly Sales (Seasonally Adjusted)
Monthly Sales
World Oil Price (US$/barrel)
25,000 Oil Price $125
20,000 $100
15,000 $75
10,000 $50
5,000 $25
0 $0
04
05
06
07
08
3
7
-0
-0
-0
-0
-0
-
-
ov
ov
ov
ov
ov
ay
ay
ay
ay
ay
N
Figure 24. Queensland New Motor Vehicle Sales vs World Oil Price, Nov
2003 – Oct 2008.
26
These assumptions are very unlikely to eventuate in light of the emerging

economic outlook. Queensland Gross State Product (GSP) growth has
already declined from 5.1 per cent per annum in 2007-08 and is forecast at 3
per cent per annum in 2008-09, while employment growth has declined from
2.8 to 2.25 per cent per annum over the same period.36 Mainstream
economists are currently forecasting that the national unemployment rate will
reach 10 per cent within the next two years, while key Queensland industries
including tourism and resources are beginning to experience a major
downturn. Population growth is also likely to be affected by the economic
outlook. The rate of Queensland housing approvals, a leading indicator of
population growth, is already declining at six per cent per annum (Figure 25).
Housing Approvals, Queensland, Oct 2005 - Sep 2008

(Source: ABS A418628F)
Dwellings Approved (Seasonally Adjusted)
3,000 25%
2,800 20%
2,600 15%
Per cent Change

2,400 10%
2,200 5%
2,000 0%
1,800 -5%
Monthly Approvals
Monthly Change
1,600 -10%
Grow th Trend
1,400 -15%
06
07
08
8
6
7
5
07
08
l-0
l-0
l-0
-0
-0
-0
-0
n-
n-
n-
r-
r-
ct
ct
ct
r
Ju
Ju
Ju
Ap
Ap
Ap
Ja
Ja
Ja
O
Figure 25. Housing Approvals, Queensland, Oct 2005 – Sep 2008.
Thirdly, recent projects in Australia that have used use similar traffic modelling
and forecasting methods have failed to achieve forecast traffic levels.
Sydney’s $1.1 billion Lane Cove Tunnel, for example, has struggled to
achieve 50 per cent of the forecast traffic levels since opening in March 2007.
Connector Motorways, the tunnel’s operator, is experiencing difficulty meeting
debt repayments, resulting in its credit rating being downgraded and several
institutional investors writing off their investments in the tunnel.37
36
Queensland Government, State Budget 2008-09: Mid Year Fiscal and Economic Review,
Queensland Treasury, 2008, Table 1.1, p. 8., at
http://www.treasury.qld.gov.au/office/knowledge/docs/mid-year-review/mid-year-review-2008-
09.pdf.
37
Linton Besser, “Lights are Flickering for the Lane Cove Tunnel”, Sydney Morning Herald, 30
November 2007, at http://www.smh.com.au/news/national/lights-are-flickering-for-the-lane-
cove-tunnel/2007/11/29/1196037074486.html.
27
The Four Step Transport Model (FSM) used by the proponent does not
adequately address Brisbane’s changing transport needs, particularly so in
light of the above factors.38 The Impact of peak oil on the project will be to
exacerbate these existing flaws. Evans et.al. make specific criticisms of the
planning methodology used by the proponent in light of peak oil and the
changes in travel behaviour noted above, including the “linear projection of
transport demand over the long term”:
Dependence on private automobiles for urban transport implies

increasing dependence on petroleum. … Rising fuel costs have
impacted on travel behaviour and have stimulated greater demand for
public transport and changing composition of motor vehicle fleets
toward smaller vehicles. Assessments of future petroleum prices
suggest rising fuel costs over the long term as global petroleum
demand exceeds global supplies.
Most technical assessments of transport systems are naïve to the

issue of petroleum risk. Indeed, conventional transport modelling
exercises typically involve linear projection of transport demand over
the long term, assuming growth in travel will continue without
interruption. Nor has there been much investigation in Australia to
assess the likely travel demand patterns under higher fuel prices. Such
petroleum risk evaluations should extend to comprehending the way in
which rising fuel costs will impact not only on transport, but on housing
and employment preferences, and on the communities at most risk.
Assessment frameworks are needed to deal with travel demand
volatility.39
Given recently observed changes in travel behaviour and the combined socio-
economic impact of peak oil and the global economic crisis in South East
Queensland, it is extremely unlikely that traffic levels will reach those forecast
in the EIS. Three more realistic scenarios, illustrated at Figure 26, highlight
the likely impact of declining demand for the Northern Link as traffic levels
decrease during the forecast period:
• In the High scenario, opening volume is 70 per cent of the modelled

2014 volume, remains static for the first year, then declines at 2 per cent per
annum. Volume reaches 32,275 vehicles per day in 2026, only 43 per cent of
the EIS forecast.
• In the Mid scenario, opening volume is 60 per cent of the modelled

2014 volume, declines initially at 2 per cent per annum, then at 5 per cent per
annum. Volume reaches 20,291 vehicles per day in 2026, only 27 per cent of
the EIS forecast.
38
Rick Evans, Matthew Burke and Jago Dodson, “Clothing the Emperor?: Transport Modelling
and Decision-making in Australian Cities”, in Steve Hamnett (ed.), Proceedings of State of
Australian Cities National Conference 2007, University of South Australia, 2007, at
http://www98.griffith.edu.au/dspace/handle/10072/17993.
39
Ibid.
28
Draft Northern Link EIS Traffic Forecast

vs Realistic Scenarios, 2014 - 2026
80,000
70,000
Average Weekday Traffic Volume
60,000
50,000
40,000
30,000
20,000 Draft EIS Forecast

High Scenario
10,000 Mid Scenario
Low Scenario
0
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Figure 26. Draft Northern Link EIS Traffic Forecast vs Realistic Scenarios,
2014-2026.
Cumulative Toll Revenue, Draft EIS Traffic Forecast

vs Realistic Scenarios, 2014 - 2026
$1,400
Cumulative Toll Revenue ($ million, $2008)
Draft EIS Forecast

$1,200 High Scenario
Mid Scenario
Low Scenario
$1,000
$800
$600
$400
$200
$-
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Figure 27. Cumulative Toll Revenue, Draft EIS Traffic Forecast vs Realistic
Scenarios, 2014-2026.
29
• In the Low scenario, opening volume is 50 per cent of the modelled

2014 volume, declines initially at 5 per cent per annum, then at 10 per cent
per annum. Volume reaches 9,218 vehicles per day in 2026, only 12 per cent
of the EIS forecast.
Based on these scenarios and the indicative tolls provided in the EIS the
venture is unlikely to be profitable. The reference case would see cumulative
toll revenue reach $1.2 billion in 2026, however actual revenues will most
likely be substantially lower. Cumulative toll revenues based on the above
scenarios, illustrated at Figure 27, would be:
• $657 million in the High scenario (55 per cent of the EIS forecast).
• $498 million in the Mid scenario (42 per cent of the EIS forecast).
• $328 million in the Low scenario (27 per cent of the EIS forecast).
Peak Oil in the Draft Northern Link EIS
The section of Clause 2.2 of the ToR relating to peak oil reads:
In particular, the sensitivity of modelling assumptions to large changes

in global oil availability and oil price vulnerability over the life of the
project are to be assessed for the construction and operational phases.
This assessment should document assumptions and provide estimates
for the impact of fuel price changes on:
• travel behaviour in the study area, including possible modal shift

changes to public transport and non-motorised transport.
• traffic volumes using the project; and
• the commercial viability of the project over its life.
The modelling assumptions provided in Chapters 2 (Project Rationale) and 5

(Traffic and Transport) of the EIS include:
• Population growth in the Brisbane Metropolitan Area from 1,879,800 in

• Employment growth in the Brisbane Metropolitan Area from 963,800 in

• Growth in total person trips in the Brisbane Metropolitan Area from 6.5
million in 2007 to 8.8 million in 2026 (35 per cent increase).
• Continuation of historical trends in travel behaviour and mode share.
30
• Continuation of historical land use patterns as they relate to travel

behaviour.
• Continuation of historical trends in car ownership and car sales.
The proponent’s response to Clause 2.2 of the ToR is found at Section 2.6 of
the EIS. Rather than investigating changes in global oil availability and oil
price vulnerability the proponent has made an amateurish attempt to debunk
the reality of peak oil and its implications. Further, it has ignored and/or
misrepresented an extensive body of official data, official reports and
independent research into the peak oil phenomenon and its implications for
both the transport sector and the broader economy, much of it cited above,
which have a direct bearing on the feasibility of the project. Most importantly,
the proponent has not assessed the sensitivity of the above modelling
assumptions to changes in global oil availability.
Comments on specific sections of the response in the EIS are provided below.
Draft EIS, p. 2-37: “Analyses of crude oil production data of the last 100+
years generally conclude that the rate of discovery of crude oil has generally
increased throughout the 20th century during which various peaks in
production reflected geopolitical events such as World War II, major advances
in technology such as offshore drilling techniques and major oil field
discoveries such as the North Sea fields. Estimates of future global crude oil
production indicate that production will plateau and decline based on
assumptions that there are no known major fields left to be found on the
globe, and no obvious technological improvements to extract significant
volumes from resources not accessible at present.”
There are numerous factual errors and misrepresentations in this paragraph.

The rate of discovery of crude oil has not “generally increased throughout the
20th century.” On the contrary, the rate of discovery reached a maximum and
started declining more than four decades ago, since which time the inexorable
downwards trend has continued, with the rate of discovery now one quarter of
the rate of production. The last single year in which crude oil discoveries
exceeded current annual production was a quarter of a century ago.
Oil production has already peaked and begun to decline in the majority of oil
producing countries and most regions, including the North Sea, which is
rapidly declining. The EIS does not cite a single study of historical or forecast
world oil production, but does cite the McNamara Report, which found that
“the overwhelming evidence is that world oil production will peak within the
next 10 years.”
Estimates of future declines in oil production are not based merely on

assumptions about discoveries and technology, but 75 years of observed data
and well established trends on historical production, actual decline rates and
production capacities for new projects. Far from being “pessimistic”, future
discoveries at Figure 1 include a further 143 billion barrels of recoverable oil
to reach this URR, roughly equivalent to Saudi Arabia’s current recoverable
31
reserves. These will likely include a number of “giant” oil fields, i.e. those with
at least 500 million barrels of recoverable oil.
The proponent’s comment about improvements in oil production technology is

misleading. Technological advances continue to be made in the oil industry,
however given that oil reserves are finite, technologies that increase
extraction rates have the effect of precipitating peak production and
steepening subsequent decline rates. For example in the Cantarell oil field,
which at its peak was the third largest in the world, the introduction of nitrogen
injection saw production rates double over a five year period (see Figure 28),
but then resulted in a very sharp production peak and rapid subsequent
decline. Production declined by 25 per cent in the first year after the peak and
by more than 50 per cent in the three years after the peak.40
Figure 28. Oil Production, Cantarell Oil Field, Gulf of Mexico, 1979-2004.
In the case of oilfields already in decline, even the most advanced and
expensive technologies are resulting in only marginal offsets in depletion or
increases in cumulative recovery. The redevelopment of the North Sea Forties
oil field by Apache Corporation since its purchase from BP in 2003 provides a
good example. Oil production at Forties peaked at more than 500,000 barrels
per day in 1979 and by 2003 had declined to 45,100 barrels per day. The
$800 million redevelopment increased production to over 70,000 barrels per
40
Mikael Höök, The Cantarell Complex: The Dying Mexican Giant Oil Field, Uppsala
Hydrocarbon Depletion Study Group, 1 November 2007, at
http://www.tsl.uu.se/uhdsg/Popular/Cantarell.pdf.
32
day by 2006, which is double the previous production rate but only 14 per cent
of peak production (see Figure 29).41 The UK Government’s objective for
North Sea production is to keep the overall decline rate at 7.5 per cent per
annum.
Production Peak
Apache Redevelopment
Figure 29. Oil Production, ‘Forties’ Oil Field, North Sea, 1975-2008.42
Draft EIS, p. 2-38: “Regardless of the debate about whether the future outlook
is optimistic or pessimistic, there is consensus that the world’s crude oil
resource is finite. There is a market expectation that technological advances
would respond to the need for alternative energies for transportation and
industry, just as steam-driven land transportation was largely and
progressively replaced.”
The two major historical transport fuel transitions, i.e. from wood to coal and
from coal to oil, were driven by the availability of better quality fuels, with the
alternative being more abundant, cheaper, more concentrated, more energy
dense, higher energy return on energy invested (EROEI) and/or easier to
transport and store. In the case of peak oil the transition will be relatively
sudden and driven by scarcity rather than choice, with alternative fuels being
of poorer quality, i.e. less abundant, more expensive, more diffuse, less
energy dense, with lower EROEI and/or poorer transport and storage
characteristics. Notably, this issue was addressed in Hirsch Report, which is
cited elsewhere in the EIS:
The world has never faced a problem like this. Without massive
mitigation more than a decade before the fact, the problem will be
pervasive and will not be temporary. Previous energy transitions (wood
to coal and coal to oil) were gradual and evolutionary; oil peaking will
be abrupt and revolutionary. 43
41
Jeremy Beckman, “Forties Set for Long Haul Following Comprehensive Renovation
Program”, Offshore, August 2006, at http://www.offshore-
mag.com/display_article/262119/ARTCL/none/Forties_set_for_long_haul_following_compreh
ensive_renovation_program.
42
UK Department for Business Enterprise & Regulatory Reform, UK Monthly Oil Production, 4
November 2008, at https://www.og.berr.gov.uk/pprs/full_production.htm.
43
Op. cit., p. 64.
33
There is no evidence for a “market expectation” of a timely, affordable or large

scale response sufficient to offset the impact of a permanent decline in oil
production that will likely be steeper than the temporary decline experienced
in the 1979-80 oil shock. On the contrary, the best indications of actual
“market expectations” as they relate to this project are the collapsing prices of
RiverCity Motorway Group (North South Bypass Tunnel) and Brisconnections
(Airport Link) securities shown at figures 30 and 31. The feasibility studies for
these projects were based on assumptions, forecasts and business models
similar to those in the Northern Link EIS.
Draft EIS, p. 2-38: “Transport systems that rely on petroleum-derived fuels at

present are expected to move progressively to development of alternative fuel
sources. This transition has been foreshadowed in the McNamara report to
the Queensland Government and the Hirsch Report to the US Government
(Hirsch et al., 2005).”
This is a gross misrepresentation of both the McNamara Report and the

Hirsch Report, neither of which foreshadow a progressive transition to
alternative fuel sources in such a manner that would support the traffic
forecasts in the EIS. Some of the key conclusions of the McNamara Report
were that:
... the world oil market is becoming increasingly supplied from

politically and/or socially unstable areas, such as from many OPEC
and Middle East nations. This means that, regardless of the global
peak oil issue, the risks of supply disruptions are rising.
… Queensland’s vulnerability to peaking of world oil supplies, and to

world supply disruptions, is particularly acute given our oil supply and
demand trends, as well as our regionally distributed population and
industrial base.
… the alternative energy sources currently available have a

combination of problems including volume constraints, substitution
impacts, infrastructure costs and substantially higher costs than
existing oil-based liquid fuel supplies.
… the Taskforce recommends that a prudent risk mitigation approach

requires a mix of initiatives such as reduction in consumption of liquid
fossil fuels, encouraging the development and use of alternative fuels,
technologies and strategies, and preparation for demographic and
regional changes, as Queenslanders change travel, work and living
habits in response to rising fuel prices.44
44
McNamara et. al., Queensland’s Vulnerability to Rising Oil Prices: Taskforce Report,
Queensland Government, 5 April 2007, pp. 4-5, at
http://www.epa.qld.gov.au/environmental_management/sustainability/mcnamara_report/.
34
Figure 30. RiverCity Motorway Group Stapled Unit Price, December 2007-
November 2008 (ASX).
Figure 31. Brisconnections Stapled Unit Price, July-November 2008 (ASX).
35
Hirsch’s conclusion on the “abrupt and revolutionary” nature of peak oil

quoted above directly contradicts the notion of a progressive transition to
alternatives. Rather than focusing narrowly on purported “inelasticity” of
demand in response to fuel prices as is the case in the EIS, the Hirsch Report
provides a rigorous analysis of the broader economic impact of peak oil. This
analysis invalidates the assumptions in the EIS regarding the continuation of
historical trends in employment growth, growth in total person trips and the
affordability of private car travel:
How Oil Supply Shortfalls Affect the Global Economy
Oil prices play a key role in the global economy, since the major impact
of an oil supply disruption is higher oil prices. Oil price increases
transfer income from oil importing to oil exporting countries, and the net
impact on world economic growth is negative. For oil importing
countries, increased oil prices reduce national income because
spending on oil rises, and there is less available to spend on other
goods and services. Not surprisingly, the larger the oil price increase
and the longer higher prices are sustained, the more severe is the
macroeconomic impact.
Higher oil prices result in increased costs for the production of goods
and services, as well as inflation, unemployment, reduced demand for
products other than oil, and lower capital investment. Tax revenues
decline and budget deficits increase, driving up interest rates. These
effects will be greater the more abrupt and severe the oil price increase
and will be exacerbated by the impact on consumer and business
confidence.45
Implications [for] the World Economy
A shortfall of oil supplies caused by world conventional oil production

peaking will sharply increase oil prices and oil price volatility. As oil
peaking is approached, relatively minor events will likely have more
pronounced impacts on oil prices and futures markets.
Oil prices remain a key determinant of global economic performance,

and world economic growth over the past 50 years has been negatively
impacted in the wake of increased oil prices. The greater the supply
shortfall, the higher the price increases; the longer the shortfall, the
greater will be the adverse economic affects.
The long-run impact of sustained, significantly increased oil prices

associated with oil peaking will be severe. Virtually certain are
increases in inflation and unemployment, declines in the output of
goods and services, and a degradation of living standards. Without
timely mitigation, the long-run impact on the developed economies will
45
Op. cit., pp. 27-28.
36
almost certainly be extremely damaging, while many developing

nations will likely be even worse off.46
The Hirsch Report also examined the specific problem of developing

alternative liquid fuels to mitigate a liquid fuel shortfall following peak oil.
Three mitigation scenarios were developed, based on different timings for the
implementation of comprehensive supply-side and demand-side “crash
programs” including enhanced oil recovery (EOR), heavy oil production (such
as tar sands), gas-to-liquids (GTL), coal-to-liquids (CTL) and fuel efficiency
gains. The conclusions were:
• Waiting until world oil production peaks before taking crash program
action leaves the world with a significant liquid fuel deficit for more than
two decades.
• Initiating a mitigation crash program 10 years before world oil

peaking helps considerably but still leaves a liquid fuels shortfall
roughly a decade after the time that oil would have peaked.
• Initiating a mitigation crash program 20 years before peaking

appears to offer the possibility of avoiding a world liquid fuels shortfall
for the forecast period.
The obvious conclusion from this analysis is that with adequate, timely
mitigation, the costs of peaking can be minimized. If mitigation were to
be too little, too late, world supply/demand balance will be achieved
through massive demand destruction (shortages), which would
translate to significant economic hardship.47
With peak oil in the here-and-now timeframe, the proponent does not cite any
evidence of such crash mitigation programs being implemented. On the
contrary, the world economic crisis is resulting in a serious decline in
investment in projects to increase the production of oil, alternative liquid fuels
and alternative energy.
In terms of prospects for a progressive transition to alternative fuels and

propulsion systems across the motor vehicle fleet, Hirsch concludes:
The economic and physical lifetimes of existing transportation

equipment are measured on decade time-scales. Since turnover rates
are low, rapid changeover in transportation end-use equipment is
inherently impossible.
… Motor vehicles, aircraft, trains, and ships simply have no ready

alternative to liquid fuels. Non-hydrocarbon-based energy sources,
such as solar, wind, photovoltaics, nuclear power, geothermal, fusion,
etc. produce electricity, not liquid fuels, so their widespread use in
transportation is at best decades away.
46
Ibid., p 30.
47
Ibid., p. 59.
37
… Mitigation will require an intense effort over decades. This

inescapable conclusion is based on the time required to replace vast
numbers of liquid fuel consuming vehicles and the time required to
build a substantial number of substitute fuel production facilities.48
This hardly foreshadows a progressive transition to alternative fuel sources.

Clearly the proponent has made a very selective interpretation of the reports.
Draft EIS, p. 2-39: “The convenience and flexibility provided by private motor
vehicle travel appears to override other considerations, such as personal
finances, for the majority of suburban residents in Australian capital cities.
The demand for this mode of travel can be expected to continue in the future.”
Evidence cited above, including declining vehicle distance travelled, declining

motor vehicle sales and increasing public transport patronage, indicates that
demand for car travel is already declining in both absolute and relative terms.
Draft EIS, p. 2-39: “Whether there is a threshold price level at which a radical
change in travel behaviour would occur and what that level might be cannot
be determined with any rigour, having regard to the historic increases in fuel
prices to date.”
The proponent has failed to investigate observed data indicating that rising
fuel prices and other factors have already resulted in changing travel
behaviour. The 8.82 per cent decline in capital city VKT from 2003-04 to
2005-06 corresponds with the doubling of average annual oil prices over the
same period (Figure 32). Oil prices doubled again during the subsequent two
years. Given that Brisbane roads remain heavily congested in peak hour,
much of the VKT decline is likely to have been in discretionary travel.
However, declining economic and employment growth as the impact of the
global financial crisis flows into the real economy will likely result in declining
peak hour traffic from 2009.
Contemporary evidence from the United States, the United Kingdom, New
Zealand and other developed economies indicates that a major change in
travel behaviour is underway due to the combined impact of rising fuel prices
and the broader socio-economic impact of peak oil. In the US, which collects
detailed monthly data, a reversal of a 25-year long trend of increasing vehicle-
miles travelled (VMT) has occurred since 2005, with a 3.5 per cent decline in
travel on all roads and streets occurring from September 2007 to September
2008. Moving 12-month total VMT declined by 3.3 per cent over the same
period (see Figure 15).49 The decline has continued even as fuel prices have
eased in the second half of 2008. US Transportation Secretary Mary Peters
recently observed: “The fact that the trend persists even as gas prices are
dropping confirms that America's travel habits are fundamentally changing.”50
48
Ibid., p. 65.
49
Federal Highway Administration, Traffic Volume and Trends: October 2008, US Department
of Transportation, December 2008, at http://www.fhwa.dot.gov/ohim/tvtw/tvtpage.cfm.
38
Brisbane Vehicle Distance Travelled vs World Oil Price,

2000-01 to 2005-06
(Source: Queensland Transport Facts 2008 and US EIA)
24,000 $60.00
Average Annual Oil Price (US$/barrel)

Brisbane VKT
Brisbane Annual VKT (million)
Oil Price
20,000 $50.00
16,000 $40.00
12,000 $30.00
8,000 $20.00
4,000 $10.00
0 $0.00
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06
Figure 32. Brisbane Vehicle Distance Travelled vs World Oil Price, 200-01 to
2005-06.
This illustrates the impact of a decline in the affordability of motor vehicle on

travel behaviour resulting from the combined impact of higher fuel prices,
declining discretionary income and related socio-economic factors. The
proponent has not investigated the evidence of changing travel behaviours.
Draft EIS, p. 40: “There is no realistic basis upon which forecasts about
technological advancements in motor vehicle design and construction can be
made, other than to anticipate that such advancements would continue and
would certainly address alternative forms of propulsion.”
This claim is incorrect. At least two realistic, authoritative forecasts for the
introduction of alternative fuels and propulsion systems into the Australian
motor vehicle fleet have been published this year.
The CSIRO Future Fuels Forum undertook a comprehensive study of

prospects for the introduction of alternative fuel and propulsion technologies
into the Australian automotive fleet. The forum included scientists,
economists, engineers and representatives from state governments, motoring
groups, the petroleum industry, the biofuels industry and the automotive
industry. All of the alternative fuels and technologies mentioned by the
proponent in the EIS were examined and the CSIRO modeled a number of
different scenarios. The scenario of a near-term peak in world oil production
50
Federal Highway Administration News Release, Decline in American Driving Reaches Year
Mark, US Department of Transportation, 12 December 2008, at
http://www.fhwa.dot.gov/pressroom/fhwa0826.htm.
39
indicated fuel prices as high as $8 per litre by 2018, a reduction in passenger

and freight travel of up to 40 per cent and a decline in GDP of at least three
per cent.51
Similar modelling was also undertaken by the Garnaut Climate Change

Review. The “standard” scenario envisaged the transport fleet
remaining approximately 90 per cent dependent on petroleum fuel
by 2050, while the “enhanced technology” scenario saw electric
vehicles become cost-competitive 20 years sooner but undergo a
slower take-up, becoming a major component of the fleet by about
2040.52 The Garnaut Review did not include consideration of peak oil,
although a “high” fossil fuel price scenario incorporating oil prices lower than
$150 per barrel by 2050 and modest climate change mitigation policies was
modelled. The outcomes included:
Higher fossil fuel prices result in an immediate shift to non-

road modes of transport and distribution (including rail and
pipelines) compared to the standard scenario, and electric
and hydrogen vehicles are developed and adopted around
five years earlier.53
These outcomes reflect the reality that changing over the

automotive fleet is a decades-long process, even before the broader
socio-economic impact of peak oil on the affordability of car travel is
considered. The question is not one of technological advancements
in isolation, but one of scale, time and affordability. Unfortunately
the proponent has ignored a wealth of published research on these
factors.
In summary, the proponent’s response to Clause 2.2 of the ToR is grossly

inadequate, indeed the requirement to assess the sensitivity of the modelling
assumptions to large changes in global oil availability and oil price
vulnerability has apparently been ignored. The proponent has ignored official
data on declining Australian oil production and published research on world oil
production trends, while misrepresenting Queensland and US Government
reports on the socio-economic impacts of peak oil. Observed data on recent
declines in motor vehicle use in Brisbane and published research on the
vulnerability of Brisbane households to the socio-economic impact of rising oil
prices and mortgage debt have been ignored, as has historical US data that
exemplifies changes in travel behaviour likely to result from this vulnerability.
Techno-economic modelling on the introduction of alternative fuels and
propulsion systems and the impact of peak oil on the transport sector by the
CSIRO and the Garnaut Review, which invalidate the assumptions in the EIS,
has also been ignored. Perhaps most importantly, the proponent has ignored
its own previously commissioned report into the impact of peak oil in
Brisbane.
51
Op. cit.
52
Ross Garnaut, The Garnaut Climate Change Review: Final Report, Cambridge University
Press, Cambridge, 2008, pp. 515-16, at http://www.garnautreview.org.au/index.htm.
53
Ibid., p. 516.
40
Conclusion
The rationale for the proposed Northern Link tunnel is questionable at best.
World oil production is peaking and will most likely be in decline by the time
the tunnel is scheduled for completion. Given the socio-economic impacts of
peak oil, which are already being witnessed, the business case for the project
is seriously flawed. The premise of continuing growth in motor vehicle traffic
and its underlying assumptions are invalid. Motor vehicle use is already
declining due to the direct impact of rising fuel prices and the indirect
economic impact of world oil supply-demand imbalances. Travel preferences
are already beginning to shift towards alternative modes, a trend that is likely
to continue for the foreseeable future. The proponent has ignored both the
evidence of this fundamental socio-economic shift and the explicit
requirement in the ToR to assess the validity of the traffic modelling
assumptions. The Northern Link EIS is a seriously flawed document that
needs to be either substantially revised or withdrawn from further
consideration.
~~~
http://www.aspo-australia.org.au/

Stuart McCarthy, Peak Oil and Brisbanes Northern Link Tunnel Project, December 2008

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Stuart McCarthy, Peak Oil and Brisbanes Northern Link Tunnel Project, December 2008

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PEAK OIL AND BRISBANE’S NORTHERN LINK TUNNEL PROJECT

Stuart McCarthy, December 2008

Oil production has already peaked in as many as 60 countries and most

Figure 1. World Oil Production vs Discovery, Regular Conventional Oil, 1930-

OIL & GAS DEPLETION PROFILES

Figure 3. The Oil Drum/Wikipedia Oil Megaprojects Database, Moderate

Despite the evidence, sceptics of the proposition of a near-term oil production

Figure 4. World Oil Production, 1980-2008 (EIA monthly data).

• The bulk of the increase in conventional oil production comes from

• Future discovery and production of conventional oil reaches an ultimate

• Cumulative investment in the upstream oil and gas sector of US$8.4

• 64 million barrels per day of additional oil production capacity is

• 30 million barrels per day of additional oil production capacity is

Notwithstanding the implausibility of these assumptions, WEO 2008 does

For oil importing countries the prospect of overall production declines is

World Conventional Oil Production

Figure 5. Derivative of Cumulative World Conventional Oil Production.

Figure 6. World Oil Exports, 1965-2020 (Luis de Sousa).11

Socio-Economic Impacts of Peak Oil

The long-run impact of sustained, significantly increased oil prices

implementation of ‘crash programs’ in fuel efficiency and alternative fuel

Despite the notion of Australia as an emerging “energy superpower” which

Australian Coal Exports vs Petroleum Imports, 1999-2008

Figure 8. Australian Coal Exports vs Petroleum Imports, 1999-2008.

While there are contingency plans in place to address short-term supply

Australian Oil Production vs Demand, 1975-2020

0.7 net imports

Figure 9. Australian Oil Production vs Demand, 1975-2020.

Figure 11. Australia’s Debt to GDP Ratio, 1880-present (Steve Keen).

… no ‘magical’ solutions will arrive to permit a smooth transition to, for

With peak oil, there is a prospect of rapid change to higher density

Peak oil is likely to impact heavily on freight operations. These impacts

Air travel for people and goods may become unaffordable. … A

Peak oil is merely one of several systemic socio-economic shocks likely to

… energy is society’s critical master resource: when it’s scarce and

Major World Oil Supply Disruptions

Nov 1956 - Mar 1957 Suez Crisis

Jun-Aug 1967 Six Day War

Oct 1973 - Mar 1974 Arab-Israeli War and Oil Embargo

Nov 1978 - April 1979 Iranian Revolution

Oct 1980 - Jan 1981 Outbreak of Iran-Iraq War

Aug 1990 - Jan 1991 Iraqi Invasion of Kuwait

Jun-Jul 2001 Iraq Halts Oil Exports

Dec 2002 - Mar 2003 Venezuelan Oil Workers' Strike

Mar-Dec 2003 Iraq War

Sep 2005 Hur. Rita & Katrina

Figure 12. Major World Oil Supply Disruptions.

The ‘Bumpy Plateau’ and the 2008 Global Economic Crisis

Figure 13. Oil Price Behaviour on the ‘Bumpy Plateau’ (Campbell).

In relation to the impact on the world financial system, Campbell wrote in

It is becoming evident that the financial and investment community

The investment community however faces a dilemma. It desires to

In this situation, interest shifts to commodities and to short term trading

Speaking at the Brisbane Institute in March this year, Queensland

From early-2005 to mid-2008 oil prices quadrupled as strong economic

World Crude Oil Production vs Price, 2002-2008

World Oil Price (US$/barrel)

Figure 14. World Crude Oil Production vs Price, 2002-2008.

Vehicle Miles Travelled, Moving 12 Month Total, All Roads,

Figure 15. Vehicle Miles Travelled, United States, 1995-2008 (US

OECD Oil Demand, 2003-2008

Figure 16. OECD Oil Demand, 2003-2008.

Oil Price, US Dollar and Dow Jones Industrial Average,