As argued by Dr. Jane O’Sullivan, a research fellow at the University of Queensland, on the ABC – as good a summary as I’ve read:
When supply of oil and other fossil fuels no longer meets global demand, the price will rise steeply, as steeply as needed to get our demand back in line with supply. The fewer alternative options we have in place, the faster prices will rise and the deeper the economic recession they trigger. High fuel prices will translate into substantially higher prices for food, construction, transport and just about everything else.
That is, it will seem to us much the same as if we had an escalating carbon price. Except that the extra money we are spending won’t be collected by our government, to compensate households or to fund renewable energy or public transport so that we won’t need emissions-intensive options so much. We’ll have to pay the higher fuel price without compensation, and find the money ourselves to build the alternatives.
The world’s poor won’t take this lying down. We can expect food riots leading to much greater political instability. Oil supply will be a major target for disruption. The escalated military expenditure, and the diversion of scarce oil to military use, will further squeeze our cost of living, even if we can keep the violence at a distance.
It might be much better to do at least some of the weaning before global fuel prices climb. The more we can harness the inevitable price rises to provide non-fossil alternatives, the less impact we will suffer when the global oil price rises. A carbon price could do this neatly. If we got it right.
