A TV show co-panellist said that Peak Oil is irrelevant to T&T. Peak Oil is the phenomenon which links the inability of petroleum suppliers to meet demand for oil to the peaking of world oil production. This has come about not because there is no more oil to be found, but because it is becoming increasingly expensive to get to it.

This phenomenon, attributed to the famous geologist Dr M King-Hubbert, postulates that oil production - for a field, a country or the world - follows a bell curve, with reducing production costs on the upside and increasing economic and production energy requirement costs on the downside. Exploration will cease when costs to locate and produce oil become higher than expected returns. This according to King-Hubbert can happen when there is still a large amount of oil in the earth but it is too expensive to access, particularly in a global economy that is driven by cheap energy.

For example, Chevron made a find of between three and 15 billion barrels of oil six miles deep and 270 miles off the cost of Mexico. This was very expensive to explore and similarly to produce. Also, it requires more energy to operate the Great Oil Shale of the American West than is obtained from the oil retrieved, though the field has some 64 per cent of the world’s conventional resources.

In Kuala Lumpur, BP’s Tony Hayward said that the world is not short of oil but high operating costs, rising taxes and lack of access are hampering investment in new capacity. The inadequate supply of oil has led to record global prices. Despite record profits by Big Oil (Barack Obama is promising, if he becomes US president, to levy windfall taxes on American oil companies’ huge profits) Hayward claims that the increasing taxes governments take for oil and gas are unproductive since less will be available to invest in production.

However, one is concerned that while the US refineries are working near to capacity no new refineries have been built since 1976; outdated tankers are being decommissioned faster than new ones are being built. This all supports the view that possibly there is oil out there still but even with its rapid rise in price it is becoming uneconomical to pursue.

The global economic situation is unstable - almost all of its processes depend on cheap energy. But oil prices are rising because of shortages and increasing exploration costs. Inelastic demand is rising as emerging countries attempt to develop, even by subsidising domestic energy. This instability comes from the difficulty of finding cheap substitutes for oil (ethanol is not cheap) and from the inability of people to afford goods by equivalently increasing both their productivity and global production, the latter constrained by oil shortages. Thus, the high price and unavailability of oil threaten the core of the global financial-economic system.

Whether we subscribe to the view that oil is running out or not, geological, economic and fiscal circumstances have contributed to a global shortage of oil and as a result, its record prices (driving natural gas prices). This situation I describe as Peak Petroleum.

My concern is, what should a small energy-exporting economy do in the face of Peak Petroleum? We are already feeling the impact of high imported food prices (reduction in tourist arrivals will follow) which cannot be completely alleviated by planting our own food. We cannot be self-sufficient in food and the contributors to modern farming are also petroleum-based - fertilisers, equipment, pesticides, infrastructure, construction etc.

As we export and deplete our resources we may be able for a time to alleviate the impact of high-priced imports via subsidised prices (TT$6 billion in 2008 for gasolene according to the Minister of Finance). Our savings in the Heritage and Stabilisation Fund etc - the result of high oil prices - are to be invested in the global financial system that depends on cheap energy - quite a conundrum. What this scenario suggests is that rapidly depleting our resources to turn some of it into US dollar savings to be invested in a precarious global financial system, needs re-evaluating.

GDP growth, which depends directly on the increasing exploitation of our natural resources, is important to the government. But GDP growth is not being reflected in improved health or education services or crime alleviation. Further, this growth at the expense of our natural resources puts our national economic security at risk.

The world’s economy, one that we hope to export into, has changed fundamentally. Hence we need to take another look at our development objectives and strategies. Vision 2020 is no longer relevant. A wide-ranging discourse on Peak Oil is at www.lifeaftertheoilcrash.net.