Bad News For Oil Consumers  

Alan Kohler's "Inside Business" show on ABC has been keeping a close eye on the oil price in recent months. This week's show took a look at recent price rises and growing demand for energy from China. Matthew Simmons gets a brief quote in but peak oil is fairly quickly dismissed as doomsaying.

ALAN KOHLER: Well, is $60 a barrel just a spike or are high oil prices here to stay? So far, efforts to rein in praises seem to amount to little more than jaw boning in the face of the insatiable appetite both in China and the west. And for consumers of oil there's little good news on the horizon. Stephen Long reports.

SPEAKER: The days of cheap oil are behind us now. You just can't rule out $75 a barrel. Taking a five-year view, it's quite conceivable we'll see the oil price above $100 a barrel.

STEPHEN LONG: When the price of crude oil spiked above $US60 a barrel this week, investors got nervous. But it might not be too long before prices of this order are just a fond memory because the world is in the grip of a new China syndrome. Factories like this plant in Wung Chan are driving China's economic boom. But energy output can't keep pace with demand and blackouts and rationing are a fact of life. Since 2002 the energy problems in southeastern China became more obvious. A serious shortage.

This enterprise has responded to the power crisis like thousands of others by installing a generator that chokes through diesel. It's just one of the factors pushing up the oil price as China's workforce transforms from peasantry to proletariat.

SIMON WARDELL: It's basically been a case of an industrial revolution on an almost unimaginable scale in China. We've seen power plants being constructed at the rate of one every two weeks. We have seen oil demand nearly double in the past five to ten years. These are really unprecedented numbers. China really is now the second largest consumer of oil in the world. It's been an absolutely rapid growth.

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MATHEW SIMMONS: What it really basically means is that the continued growth in energy demand era is coming to an end unless we can quickly invent some other form of energy to take its place and we haven't started.

STEPHEN LONG: Even if the doomsayers are wrong, it will be years before new production and refining comes online and it may not be enough to meet China's growing demands.

SHANE OLIVER: If China moved to a similar level of car ownership to Australia and a similar sort of oil usage as Australia has and many other western countries have, then global oil production would have to go up by 50 per cent.