Nick Minchin (SA, Liberal Party, Minister for Finance and Administration) Share this | Hansard source

I am aware of the concept of peak oil—the sense that you will reach a point at which the world starts to effectively run out of oil supplies. But I think since oil was discovered and first used in the internal combustion engine there have been regular forecasts that the world is about to run out of oil. That has been going on for at least 100 years as far as I can recall from studying economic history.

Of course, the extent to which there is exploration for and discovery of oil is a function of price. It is a fact that one of the reasons why currently demand is exceeding supply in relation to oil and high prices is that, remarkably, it was not that long ago that oil was $11 a barrel. That meant that there was a decline in exploration for oil and a significant decline in investment in refining of oil because the returns were not available. As a consequence of the increase in price, which is a result of the growth in demand for oil from China and India and the fact that there are the supply constraints caused by the consequences of previously unduly low oil prices, we are seeing increasing efforts to explore for oil and we certainly want to do all we can to encourage that in this country and of course around the world. There is much more investment in refining capacity occurring. If one allows the market to operate, as we advocate but the Greens never do, you will see supply respond to demand and price equilibrium restored.

The other important thing, and I have said this before in relation to the price of oil, is that having a high price of oil is of course painful for ordinary Australians—we understand that. Despite the fact that the price of petrol in this country is probably the fourth lowest in the OECD it is still painful for Australian families. The relatively high prices do of course make much more commercially feasible alternative sources of transport fuels so that you are seeing, in this country and in others, a significant expansion in the investment in biofuels and alternative fuels.

You are seeing significant growth in use of LPG. You are seeing significant investment by the car companies in hydrogen as a future fuel source and I suspect, personally, that the future of automotive transport does lie in hydrogen. That is the consequence of bringing on and having the sort of market that you have in oil at the moment. You are seeing those investments in those alternatives. We have seen an explosion in the production and purchase of hybrid vehicles like those of Toyota and Honda, so if you do allow the market to work you will get these responses.

Of course, oil is a finite resource. At some point—who knows when, and nobody does know when—the last drop of oil will presumably be extracted, although one must take account of the fact that there are enormous reserves of shale oil in this world. There are significant deposits of shale oil in this country, which at a certain price will be commercially feasible to extract. At some point the world will need to move to an alternative source of transport fuel. The market will dictate that, as it does in most things. It dictated that we moved from the horse and buggy to the internal combustion engine and, no doubt, at some point it will dictate a move from oil to some alternative source of fuel. The key thing we want to encourage is a proper operating market and the proper incentives for the exploration and development of our fuel reserves and alternatives. (Time expired)