Julie Bishop,

You make some very important points.

I'd add these related points.

Distorting energy markets is bad policy in the long term. The Australian Government has committed taxpayers and consumers to $30 billion in subsidies for renewable energy. That is very bad policy.

Solar power generates just 0.2% of Australia's electricity and wind generates 3%. They avoid about half as mush CO2 emissions as claimed by their advocates. that is next to nothing. And there is no realistic prospect that they will ever be economically viable.

These sorts of picking winner policies are seriously damaging Australia's economy.

Meanwhile we ban nuclear power and put so many constraints on it that we cannot have the benefits of it. Our interference in the energy market is irrational and seriously damaging our economy. It will get much worse if the CO2 tax and ETS are not repealed as they escalate in cost over time.

Here are some benefits the world could have by electrification with low cost nuclear power:

• Avoid increasing the cost of energy - avoid taxes and regulations (e.g. ETS)
• Avoid the compliance cost of carbon tax and ETS schemes (http://www.onlineopinion.com.au/view.asp?article=13578 )
• Avoid cost premium caused by partial participation in such schemes (http://skepticalscience.com//news.php?f=nordhaus-sets-the-record-straight-climate-mitigation-saves-money#82373 )
• Avoid the inevitable and ongoing domestic political interference, international cheating and dragging the chain.

• Faster GDP growth due to lower energy prices
• People rise out of poverty faster
• Reduce population growth rate and lower the peak population
• Reduce toxic pollution and black carbon (avoiding millions of fatalities per year)
• Reduce the transporting of coal and gas – less ships, trains and gas pipelines.
• Greater energy security.

What is the natural cost of energy, and what should you charge yourself for what you own?
When oil costs just a dollar a barrel to recover from very large, very shallow wells, and about that much again to turn into diesel or petrol, utilising fractional distillation; and when the remaining sulphur laden sludge can be sold on international markets, for a $100.00 a barrel; what should you charge yourself for what you own?
What price gouging multinationals charge us, with govt connivance or submission?
Or the actual out of pocket expenses related to getting out of the ground, refined and transported to the bowers, or the family home, in the case of gas?
And if international markets choose to subsidise that local distribution, the affected Arab populations are hardly likely to complain?
That said Julie, the rest of the world could, as you infer, come to a virtual stand still, if ever these supplies were to be cut of from dependant economies! Therefore, we ought to be taking steps now, while we still can, to give ourselves complete energy independence!
Always providing, our, or should that read, your political masters will allow it?
I mean, why are we importing around 80% of our oil needs, while we lock away potentially massive reserves to our immediate north; and, why are the opposition so strangely silent on this issue, all while complaining about oil rich Arabs not paying enough for their own oil?
With the greatest respect, your priorities seem all wrong Julie!?
Rhrosty.

Rhosty you are right.There are 4 big oil cartels that just do as they please.There is no oil shortage just shortage of competition.

I'd say we have lots of oil left untouched here to keep prices high and money flowing out of the country.

China will soon be the biggest oil user.African Countries love China because they are providing them with both infrastructure and employment.I think China will use the cheap Africian labour to keep its manufactured goods low while letting a middle class expand at home.This will enable China to expand domestic consumption.

Obama is sending troops to 35 African countries this year under the pretense of containing Al Qaeda.In reality they are trying to contain China.Obama has delayed his attack on Iran because the rise of China particularly in Africa.

Some say the US will do their usual dirty tricks of puting in corrupt dictators in Africa so they will default in loans made to them by China.

It will be interesting year if we can all stop this insane march by the West to war with China/Russia.

http://www.globalresearch.ca/

Dear Julie,

Good article, thanks.

I think the most significant part of your summation is the observation that “Energy markets have diversified, particularly on the back of the shale gas and oil revolution in the US,”

The energy markets are diversifying but the growth area is in fossil fuels. The great green renewables dream has failed to deliver against industrial needs; it shrank them which was what it was always intended to do.

It has also failed to deliver any upside such as energy security, any vibrant or sustainable renewables industries, no green jobs and the emissions trading markets have collapsed.

Many nations now have no choice but to recognize that new and diversified fossil fuels are a direct threat to any nations that ignore this, if your competitor has access to more and cheaper fuel options, you are at a competitive disadvantage. Moreover, if you are slow off the mark there is no possibility of catching up on a non- linear growth curve.

The industrial impact that Germany, the UK and the USA will have as they shift to Shale, Gas and in the case of Germany Coal, will be profound as they compete based upon cheaper energy rather than greener energy.

Your second summation point, “but any disruption to oil supplies from the GCC would send shockwaves through the world economy”. Yes I agree if you are looking at the next two years. This realignment of energy markets will be rapid because of the desperation of industrialized nations to drive themselves out of austerity, debt and low industrial productivity and to compete with Asia.

It is now time for the Gulf States to spin their heads. They were not comfortable with green energy, naturally. They thought it would end with a return to fossil fuels, theirs. Sadly, within the next five years the market will shift to someone else’s fossil fuels and not theirs.

Their “benign dictatorships” will suffer the same pressures as the “military” and “clerical” dictatorships in the region; they might need to rethink their foreign policy.

The market is speaking very loud

What a pleasant surprise, to find a politician prepared to talk about
energy, oil and its costs.
The Egyptian revolution was directly connected to the government
reducing the subsidy on petrol & food using the money from oil exports.
However when their production peaked in 2000 and they became an
importer of oil they just did not have the money to subsidise.
The first demonstrations were about the price of food.

What has to be realised is that the cheap oil has almost all gone.
It used to be that oil was about $10 to $20 a barrel to get it out of
the ground, now however new oil is around $90 a barrel which is why
we are paying $117 (yesterday) a barrel.
As decline of old oil continues, the mix of old and new will become
more expensive.

The situation in the Middle East is that the rising wealth and the
increased number of men in their 20s has caused a large increase in
their useage of oil so subsequently there is less available for export.
This know as the "Export Land Model".
It shows that available oil for export declines much more rapidly than
the production decline.

Spindoc said;
The industrial impact that Germany, the UK and the USA will have as they shift to Shale,

Won't happen. Shale oil is a giant Ponzi scheme.
The problem with shale is the decline rate.
40% to 60% per year. That tied to outputs like 500 to 1000 barrels a
day means that drilling has to be continuous, and financiers are now
baulking at putting up more money.
This is why the rig count has fallen from about 2400 two years ago to
about 1400, last I read.
Last report I read was that the Bakken output has started to decline.

Some shale gas wells have decline rates of 80% a year.
That is what put Chesapeak into trouble and BHP got out quick

Arjay said;
I'd say we have lots of oil left untouched here to keep prices high
and money flowing out of the country.

You are right there is plenty of oil, it is just that you cannot
afford to buy it. You saw what happened in 2008 when oil reached
$147 a barrel for WTI, the cheapest oil anywhere.
How much of that plenty oil will come from very deep offshore wells ?
How much from the Arctic and will you be able to afford it ?

The opposition needs to take up the cudgels on oil supply.
We know the Gillard government is not interested as they tried to hide
the BITRE report, and since it escaped have tried to poo hoo it.

So here is a great election issue;
The governments disregard of of our energy supply problem.