IDEAS21

Every year the National Treasury increases so-called ‘sin taxes’ on cigarettes and alcohol, both addictive substances whose use results in large health and social costs. So why not impose a similar tax on another substance that is a national addiction, deleterious to our long-term health and depleting globally – namely, oil?

Consumers already pay taxes and levies on petroleum fuels – amounting to about a third of their retail prices, which are now near their all-time nominal highs over R10 per litre. Further fuel price increases would hurt poor people who generally spend a large proportion of their meagre incomes on transport. Rather, the Treasury should impose a ‘syn’ tax – a windfall tax on the profits of synthetic fuel producers Sasol and PetroSA, which together contribute about a third of our fuel supplies. At the same time, consumers should begin a ‘rehab’ programme to address their oil addiction.

A windfall tax on synfuel profits will not make any difference to the price of fuel paid by consumers. This is because national fuel prices are determined by the Department of Energy on an ‘import parity price’ (IPP) basis. That is, local ‘basic fuel prices’ are benchmarked on international refined petroleum product prices, to which are added transport costs, wholesale and retail margins, and levies and taxes. Thus Sasol and PetroSA sell their synthetic petrol and diesel at the same prices as the companies – Engen, BP, Shell, Chevron and Sasol again – that refine imported crude oil.

Any increase in international crude oil prices or a weakening of the rand exchange rate pushes up local fuel prices, raising the rate of inflation and hurting SA’s consumers but boosting the profitability of synfuel producers. PetroSA recorded a R871 million net profit in fiscal year 2011, while Sasol Group operating profit increased by 25% to R30 billion.

Sasol is SA’s largest company by sales and market value and contributed R25 billion in direct and indirect taxes in the past financial year, ranking it amongst the country’s largest corporate tax payers. PetroSA by contrast is wholly owned by the state.

So should an extra windfall tax be imposed on the synfuel producers? This question was addressed comprehensively by a special Task Team appointed by then-Finance Minister Trevor Manuel in 2006. The Task Team found that both Sasol and PetroSA have benefitted extensively from state support over several decades.

Sasol was created and funded by the Apartheid state in the 1950s, but was privatised in 1979 and is now listed jointly on the JSE and the New York Stock Exchange. Sasol’s first synfuel unit was financed by the state-owned Industrial Development Corporation. The company has always been guaranteed full uptake of its products at import parity prices, enjoyed low tariffs on the pipeline network constructed by Transnet over the years – which gave Sasol market access for synfuels and gas and amounted to a subsidy of approximately R860 million per year – and benefited from tariff protection between 1979 and 2000 to the tune of at least R6 billion.

Moreover, Sasol was privatised “on terms very favourable to investors”, thereby benefitting a small group of shareholders, 40 percent of whom are foreigners.

Mossgas, which later became part of PetroSA, benefitted from tariff protection on the same basis as Sasol, ultimately enjoying subsidies from motorists amounting to R1.5 billion up to November 2004. Soeker, which discovered the gas feedstock, was funded by government but later absorbed into PetroSA. The state invested R13 billion in Mossgas and R8 billion in Soekor, and wrote off loans to these entities amounting to R8 billion and R1.5 billion, respectively.

The Task Team cited several independent estimates of the costs of production for existing CTL and GTL; these ranged between $22-45 per barrel and $18-30 per barrel, respectively. Even though these costs have surely risen over the past five years, the profitability of the synfuels producers indicates that they are considerably lower than recent crude oil prices.

In short, the Task Team commented that “very large amounts of the tax payers’ money have been used to support and maintain the synthetic fuels industry”. Thus they recommended the imposition of a windfall tax of R1.25 per litre of synfuel at an oil price of $110 per barrel, which would garner over R10 billion in annual tax revenue.

However, then-Finance Minister Trevor Manuel shunned this advice, saying the tax might undermine further investment in the synfuel industry, which he argued was necessary for bolstering energy security. An additional reason cited by the Treasury was that it could not be sure whether the windfall profits were of a cyclical or structural nature. With hindsight, it is clear that oil prices have been trending upwards for at least eight years now. And they are expected to shoot much higher after the world passes ‘peak oil’ production.

As it happens, at the same time that the Task Team released its report, Sasol announced that it was considering building a new coal-to-liquid plant, dubbed Mafutha. But the company later said it needed partial government funding for an investment set to cost in excess of R50 billion.

Last year Sasol put project Mafutha on ice because of concerns about the costs of greenhouse gas mitigation and the quality of coal in the Waterberg field. Thus the main justification for withholding the windfall tax has not materialised – and given climate change and other pollution concerns, that might be for the best.

The proceeds of a syn tax should not be used to subsidise domestic fuels, as this would encourage our oil addiction. The revenues should instead be utilised to reduce SA’s dependency on oil imports. Global oil production has been essentially stagnant for six years and an increasing number of analysts warn that we are at or near ‘peak oil’ production, and that annual output will begin an inexorable decline within the next few years. As the International Energy Agency’s chief economist Fatih Birol is fond of saying, “we must leave oil before oil leaves us”.

Thus syn tax revenues should be invested in renewable electricity capacity and more efficient and sustainable transport systems, like electrified rail for both freight and passengers. Subsidised public transport would be a much more sustainable form of support to poorer commuters than fuel subsidies.

In a country with amongst the highest levels of inequality in the world, it is iniquitous that a few private shareholders – many of whom are foreigners – should profit at the expense of our citizens. Our government should follow the example set by their Australian counterparts – in respect of their mining ‘super-tax’ – and divert resource rents to sustainable investments for the benefit of all South Africans.

Published in the Mail & Guardian, 10 February 2012

http://www.mg.co.za/article/2012-01-20-barrelling-towards-fuel-shortages/

Everything about the People’s Republic of China is big. It is the world’s second-largest country by land area, has the biggest population at over 1.3 billion people, and in 2010 its economy surpassed that of Japan to become the second largest in the world. China’s rampant industrialisation has profound implications for the global economy, energy security, environment and geopolitics.

For the past three decades the economy has grown at an average compounded rate of almost 10% per annum, which means the economy has been doubling in size roughly every seven years. Industrial growth, of course, requires energy – and China’s demand for energy has been growing prodigiously, so much so that the nation is now the world’s top energy consumer.

Coal is the mainstay of China’s economy, providing two-thirds of primary energy supply and fuelling over 80% of the country’s electricity. China is far and away the world’s top coal consumer and producer, accounting for 48% of global coal consumption in 2010. In each successive doubling cycle – about every decade – China consumes as much coal as it did in all of its previous history. According to a report by the German-based Energy Watch Group, China’s coal production could peak as early as 2015, although two Chinese researchers estimated the peak will likely occur between 2025 and 2032.

Oil is also increasingly important for the Chinese economy, accounting for 17% of primary energy supply in 2009. Oil consumption grew on average by 7.2% a year from 2003 to reach 9 million barrels per day (mbpd) in 2010. Chinese total vehicle sales were 18.5 million units in 2011, having overtaken the US in 2009. China’s expressways network is expected to exceed the total length of the US Interstate Highway system within the next couple of years.

The country is currently the world’s second-largest consumer and net importer of oil behind the US. Production in 2010 was 4.1 mbpd, but is expected by researchers at the China University of Petroleum to peak within the next few years. China already relies heavily on Middle Eastern oil producers – chiefly Iran and Saudi Arabia – for close to 50% of its oil imports.

China’s voracious appetite for energy has three major consequences for the world at large.

The first is pressure on world energy prices. While oil consumption has been declining in the rich Western nations since 2006, China has accounted for around half of world demand growth and thus much of the rise in oil prices. In 2009 China became a net coal importer, which has already had a noticeable impact on international coal markets.

The second implication of China’s hunger for energy concerns the country’s greenhouse gas (GHG) emissions and contribution to global climate change. In 2006 China overtook the U.S. as the largest absolute emitter of GHGs. China plans to reduce its energy intensity – energy consumed per unit of GDP – by 31 percent between 2010 and 2020. Beijing also recently announced a plan to introduce a moderate carbon tax. The world desperately needs China to accelerate its transition to low-carbon fuels to help avoid a climate catastrophe.

The third big ramification of China’s growing energy use is geopolitical. Depletion of finite fossil fuels implies increasing competition with other countries – notably the U.S. – over access to energy resources. In December 2011 President Obama announced that the U.S. military would be shifting its main focus from the Middle East to the Asia-Pacific area, obviously to counter China’s growing influence in the area. Nonetheless, the military actions by the US and its allies in Africa and the Middle East could be partly aimed at restricting China’s access to oil.

For its part, China is rapidly modernising its military, reportedly spending around $100 billion on defence in 2010. But Beijing’s main strategy has so far been to lock up energy resources in bilateral contracts with producer countries. And Chinese oil companies – mostly state-owned – have been investing aggressively in many resource-rich nations.

Looking ahead, three scenarios present themselves.

One is a derailment of the Chinese growth juggernaut. Concerns are mounting that the real estate bubble could soon burst, landing China with the same fate as Japan, whose economy stagnated for more than a decade after its property and equity bubbles burst in the early 1990s.

A second scenario is that China continues its relentless growth, powered principally by fossil fuels. This would be a world of rising carbon emissions and escalating geopolitical tensions. But in the face of oil and coal depletion, this path will also come to an end sooner or later.

Thirdly, if the Chinese government is really serious about transforming their energy-economy system to one that is sustainable and provides greater energy security, it could conceivably lead the world in a transition to renewable energy sources.

One thing is sure: when the Chinese jump, the world shakes.

Published in Engineering News, 3 February 2012.

http://www.engineeringnews.co.za/article/when-china-jumps-the-world-shakes-2012-02-03

Tension between Western powers and Iran, which has been simmering for decades, has heated up considerably in recent weeks and is in danger of boiling over into full-scale military conflict.

Because South Africa sources about a quarter of its crude oil imports — about 100 000 barrels a day — from Iran and another quarter from neighbouring Saudi Arabia, geopolitical events involving these countries could seriously knock the local economy.

The South African government should be crafting contingency plans to deal with possible fuel supply disruptions and price surges.

The ostensible reason for the tension is Iran’s nuclear programme, which Tehran insists is for civilian energy production only, but Western countries allege it is a cover for the production of nuclear weapons.

But it is no secret that energy security is a major driver of United States and Nato foreign policy and that Iran possesses the world’s second-largest reserves of both natural gas and oil. Moreover, the Islamic state has close ties with Russia and China, both of which have invested heavily in Iran and supplied it with conventional weaponry and, in the case of Russia, nuclear energy technology.

The hawkish Israeli leadership continues to threaten a “pre-emptive” military strike on Iran’s nuclear facilities. Defence Minister Ehud Barak recently stated that after September it would be too late to disable Iran’s nuclear-enrichment capabilities because some of the installations were being moved underground.

For now, however, the US and European Union (EU) are opting to use economic pressure on Tehran. On New Year’s Eve President Barack Obama signed into law the controversial National Defence Authorisation Act that, among other provisions, imposes harsh economic sanctions on corporations or central banks that transact with the Central Bank of Iran. The legislation, due to come into effect within six months, aims to obstruct the sale of Iranian oil exports and thereby deprive Tehran of critical oil revenues.

Although the Act authorises Obama to grant waivers in cases in which oil purchasers experience difficulty in reducing their consumption of Iranian crude, the sanctions may force South Africa to find alternative suppliers and pay higher prices for one-quarter of its oil imports. So far, the government has not decided how it will respond.

On January 4 the EU agreed in principle to establish an embargo on oil imports from Iran, which sells 600 000 barrels a day to the bloc. Analysts from French bank Société Générale warned that an embargo could send Brent crude prices into the $125 to $150 a barrel range.

As a result of the existing and threatened sanctions, Iran’s currency has depreciated a precipitous 40% in the past month, rendering many imports increasingly unaffordable. In response to the sanctions Iran has threatened to close the Straits of Hormuz, the narrow “choke point” in the Persian Gulf through which one-third of the world’s seaborne oil is shipped. At the end of December the Iranian military conducted 10 days of war games in the straits — and now the US and Israel are preparing to hold their largest joint naval exercises in the Gulf.

Both sides have a lot to lose from an all-out war: much of Iran’s infrastructure would be destroyed, whereas spiking oil prices would deal another crippling blow to fragile, debt-ridden Western economies. Nonetheless, there is a danger that the current brinkmanship could result in a miscalculation that triggers a “shooting incident”. Société Générale reckons a temporary closure of the Straits of Hormuz could result in oil spiking to between $150 and $200 a barrel.

South Africa would suffer economic consequences with the rest of the world, much as we did after the last oil spike in 2008 that helped to spur the great recession.

In the past few years South Africa has experienced several episodes of localised petroleum product shortages, including road construction companies being unable to source bitumen, households facing shortages of liquefied petroleum gas, aeroplanes being grounded because of insufficient jet fuel stocks and petrol and diesel pumps running dry at hundreds of service stations.

Although caused by temporary problems at local refineries, these events revealed both inadequate strategic reserves of refined petroleum products and the fragile nature of our logistics chains. Fuel shortages can cause great inconvenience to commuters and substantial financial losses to businesses. They can also be devastating to farmers if they occur at critical harvesting or planting times.

The threat of military conflict involving Iran should be taken seriously by the South African government. Authorities should formulate emergency response plans to deal with sudden and severe limitations on petroleum imports. They must be ready to implement measures for rapid demand restraint — such as carpooling and eco-driving — in combination with a fuel rationing system that includes a prioritisation plan to ensure the continued functioning of emergency services, the transporting of medical supplies, food production and distribution, and deliveries of coal to power stations.

In addition, the state must have plans to respond to the possible social panic, hoarding behaviour or civil unrest that could accompany dislocations in fuel and food supplies and sharply rising prices.

Let us not repeat the folly of denial and complacency that precipitated the electricity crisis in 2008, but rather take positive steps to build our resilience against external shocks.

Published in the Mail & Guardian, 20 January 2012.

http://mg.co.za/article/2012-01-20-barrelling-towards-fuel-shortages/

According to a report by the African Development Bank:

“In 2010, 34.3% of the African population, or 313 million people, were classified as middle class, compared with 26.2% or 111 million people in 1980… The class is defined as those who spend between $2 and $20 a day, a range the bank says is appropriate given the cost of living in the world’s poorest continent.”

Meanwhile, in the United States “the poverty level for 2011 was set at $22,350 (total yearly income) for a family of four”, which translates to $15.3 per person per day.

So is the way to solve US poverty is to let them live in mud huts and eat maize, so their ‘overheads’ are lower? Then by African standards they’ll be back in the middle class.

By comparison, the poverty line in SA is about R500 per person per month ($2 a day). Almost half of our population of 50 million live below the poverty line, despite SA being categorised as an “upper-middle income country”. We are one of the most unequal societies in the world, and income inequality has deteriorated since 1994.

Where would you rather be poor?

These days the news is full of dire warnings about another financial meltdown emanating from the sovereign debt crisis in Europe. Professor Nouriel Roubini, who was catapulted to international fame after correctly predicting the 2008 financial crash, says Europe is sliding into a ‘double-dip’ recession – if not depression – and a break-up of the eurozone is increasingly likely.

So in the face of this downside economic risk, why does the price of oil remain stuck above $100 per barrel? What are the short, medium and long-term prospects for oil prices? And most importantly, what do the underlying currents imply for future economic prosperity?

To answer these questions, we need to interrogate the ‘usual suspects’: the insatiable Chinese dragon; supply fundamentals; the OPEC (Organisation of Petroleum Exporting Countries) cartel; the geopolitical risk factor; and assorted speculators.

Before starting the inquisition, some historical context is useful. Between 1986 and 2003 the oil price traded in a remarkably stable and narrow range, averaging about $20 per barrel. From 2003, it rose steadily for several years and then spiked dramatically to reach an all-time nominal peak of $147/barrel in July 2008. When the world sank into recession after the global financial crisis later that year, demand for oil fell rapidly and the oil price plunged to around $40/barrel. Since then, the price has ratcheted up again, and has traded in triple figures for the whole of 2011.

The resilience of the oil price reflects first and foremost the tightness between the global supply and demand for oil.

Despite oil consumption having apparently peaked a few years ago in the industrialised countries, demand for oil products continues to grow apace in emerging economies.

China leads the pack, expanding its oil consumption by nearly 10% a year. Last year 13 million new cars were sold in China, topping US vehicle sales for the first time ever. And it seems that whenever the oil price falls, China taps into its vast foreign exchange reserves – over $3 trillion and counting – to stockpile crude for its strategic petroleum reserve.

Meanwhile, oil producers can’t seem to meet demand like they used to. A number of independent oil analysts have been warning for years that oil production could reach its all-time peak early in the 21^st century. Now even the International Energy Agency agrees that conventional crude oil output likely peaked in 2006. The data show that world liquid fuel production has been essentially stagnant for the past six years, aside from an increase in biofuel output that has in turn boosted food prices.

Global spare oil capacity is now minimal, which means that the slightest market disturbance can trigger big price fluctuations.

Furthermore, most new oil sources outside a few Persian Gulf states – many of which are in deep water – have marginal production costs of around $80 per barrel. Canada’s tar sands have marginal costs of about $90-100.

Another perennial suspect is OPEC countries: most of them can no longer ‘afford’ for the price to drop below $100, as they are dependent on high oil revenues to maintain government spending and social stability.

Speculators no doubt played a part in amplifying the wild price gyrations in 2007-2009, but without fundamental price drivers they would have nothing to bet on.

Our final suspect is geopolitical risk. Certainly, the conflict in Libya this year played a significant role by taking about 1.2 million barrels per day of world oil exports offline. And tensions persist throughout the Middle East region, centred now on Syria and Iran.

So all in all, there are many forces keeping the oil price in three digits. Meanwhile, there seems to be a ceiling for oil prices at around $120; above this level, it destroys demand.

Forecasting oil prices with any great precision is notoriously difficult. Nonetheless, we can be reasonably confident about certain trends.

In next year or two the oil price kite will continue to be buffeted by the winds of financial turmoil and an increasingly tight demand/supply balance. If the world economy continues to grow, spare oil capacity will essentially disappear next year. But if Europe falls into a financial/economic abyss, the oil price could drop markedly, although probably not for very long.

For the remainder of this decade, the greatest likelihood is that oil prices will continue their volatile swings, but around a rising trend driven by falling supply.

Beyond that, the trajectory for oil prices will depend largely on how governments and societies respond to diminishing oil supplies. If they attempt to continue business-as-usual and compete for a shrinking pool of the black liquid, it will become increasingly unaffordable and engender economic chaos.

If, on the other hand, there is a concerted mobilisation to reduce oil dependency through conservation and efficiency, investing in alternative energy supplies, and electrifying transport systems, then eventually the oil price train could run out of steam.

Indeed, the economic fortunes of the world hinge on which of these scenarios comes to pass. The window of opportunity for launching a crash programme to mitigate the impending decline in oil production and accelerate a transition to a sustainable global economy is rapidly closing.

So fasten your seatbelt and tighten your economic belt: 2012 promises to be another wild ride on the oil roller-coaster.

Published in the Mail & Guardian, 25 November 2011.

The Association for the Study of Peak Oil (ASPO) South Africa in collaboration with EcoDoc Africa produced a three part video documentary on Peak Oil and South Africa - Impacts and Mitigation. Presented by Jeremy Wakeford of ASPO South Africa, the presentation outlines what the phenomenon called Peak Oil is all about, and what it means for us here in South Africa.

In Part 1, Jeremy outlines our “addiction” to oil, and details three assumptions that we have about oil — namely business as usual will prevail, that there is plenty of oil left, and markets will solve the problem of depletion. For each assumption, Jeremy provides a reality check.

http://www.youtube.com/watch?v=ooXpYkLzLCQ

In Part 2, Jeremy continues to detail our erroneous assumptions about oil and its substitutes, and shows us how we are heading for a reality check mate. This is followed by an analysis of the global and South African implications of Peak Oil.

http://www.youtube.com/watch?v=d719QRRPC-A&feature=related

Part 3 focuses on how we can respond to the challenges of Peak Oil. Jeremy argues that our society must urgently embark on a ’sustainability mobilisation’ that revolutionises our energy, transport and industrial systems, underpinned by a shift in values to reflect environmental realities. He suggests practical responses that can be taken by government, businesses and individuals. He concludes with a reminder that Peak Oil is NOW, that the impacts will intensify, and that proactive mitigation can ease the inevitable transition to sustainability.

http://www.youtube.com/watch?v=CEqOK5FaTSU&feature=related

There are many similarities between 2008 and 2011, such as rising prices of oil, food and other commodities. The following graph shows how the monthly oil prices compare - it will be updated each month. The drivers of the oil price are similar, but this year are even stronger in many respects compared to 2008: protests and conflict in MENA countries; Japan’s tsunami; static supply in the face of rapidly growing demand for oil in Chindia. The scene is thus set for another superspike, probably exceeding the $147 peak of 2008. The consequences are likely to be similar too - more protests over fuel and food prices, another round of financial turmoil, etc.

South Africa has learned the hard way about the consequences of inadequate planning for energy security. Since the electricity crisis erupted in January 2008, supply constraints have hobbled our economy’s development. Our leadership urgently needs to take action to avoid a similar looming energy crisis – this time concerning liquid fuels.

Over the past couple of years the world has begun to wake up to the reality of ‘peak oil’: the empirical fact that global oil production will inevitably reach a maximum rate – a peak – and thereafter decline inexorably due to the depletion of this finite resource.

Most of the world’s governments have for decades taken their cues on security of oil supply from the International Energy Agency, which was set up after the 1970s oil shocks. Until recently, the IEA maintained that there was no prospect for oil supply constraints before 2030.

But the IEA’s Chief Economist, Fatih Birol, admitted in an interview with the UK’s Guardian newspaper last year that he expects conventional oil production to peak by 2020.

In November, a whistleblower from the IEA alleged that the agency knew very well about the threat posed by peak oil, but was under pressure from member governments – chiefly the United States – to keep the issue under wraps out of fear that open acknowledgement would lead to a stock market collapse.

A comprehensive survey of academic research and industry reports on peak oil published last October by the UK’s Energy Research Centre concluded that “there is a significant risk of a peak before 2020”.

A report for the US Department of Energy in 2005 warned that mitigating actions needed to be implemented at least 20 years before the oil peak to avoid serious economic and social dislocations.

The peak and decline will happen at a time when demand for oil is growing very rapidly in many developing economies. China’s oil consumption has leapt from six to nine million barrels per day in the past three years alone.

Because oil exporting countries like Iran and Saudi Arabia have been consuming an increasing share of their oil production, total world oil exports have in fact been declining since 2005 – a major factor underlying the steep rise in international oil prices observed since then.

Until now, most national governments have had their heads in the sand with respect to the threats posed by oil depletion. One exception is Sweden, whose government in 2006 outlined plans to halve the country’s oil consumption by 2020.

And just last week, the UK’s Energy Minister called a summit with industrialists to discuss his government’s response to a near-term oil peak.

This follows the publication in February of a report entitled “The Oil Crunch” by the UK Industry Taskforce on Peak Oil and Energy Security. The taskforce – whose membership includes Sir Richard Branson, founder of the Virgin Group – stated that “We must plan for a world in which oil prices are likely to be both higher and more volatile and where oil price shocks have the potential to destabilise economic, political and social activity.”

The dramatic price spike in 2008, when oil reached $147 per barrel, was a major contributor to the global economic crisis. The recession dented demand for oil in the industrialised countries and effectively postponed the oil supply crunch for a couple of years, buying the world some precious time to prepare.

Despite the synthetic fuels produced by Sasol and PetroSA from coal and gas, respectively, South Africa imports about 70 per cent of its liquid fuels and is therefore highly exposed to international oil shocks. More than 80 per cent of oil imports come from the volatile Middle East.

Our transport systems are overwhelmingly reliant on petroleum fuels, which make up 98% of the sector’s energy supply. Conversely, the transport sector accounts for over three quarters of national oil consumption and is thus our Achilles heel with respect to global oil depletion.

The National Department of Transport calls transport “the heartbeat of the economy”. Rising fuel prices lead to higher prices of food and many other goods and services, pushing up the overall rate of inflation and raising the costs of living.

Physical shortages of fuel would disrupt flows of commuters to work-places, learners to school and food from farms to supermarkets, and hamper economic activity in general. The Department of Energy estimated in 2005 that a total liquid fuel supply disruption would cost the economy nearly a billion rand a day.

What should our government be doing to prepare for the inevitable decline in global oil production?

For a start, preparing for peak oil should become a cornerstone of the National Planning Commission – and it should be integrated with plans for poverty alleviation, food and water security, job creation, climate change and other pressing development challenges.

More broadly, all aspects of government policy should be underpinned by an expectation of much more expensive and scarcer oil supplies in the future.

There is a wide range of policies and measures that can be implemented to mitigate the effects of peak oil.

The first step should be a comprehensive conservation programme that cuts unnecessary fuel use and raises energy efficiency.

One simple conservation measure is to reduce road speed limits – which will save lives as well as fuel and money. Another is to educate drivers on ways to improve their fuel economy, such as using the correct gears and tyre pressure.

Proper traffic management can also help reduce fuel consumption. Carpooling can be encouraged by having dedicated multiple-occupant lanes on city freeways. Various types of fuel rationing could also be considered.

Any government support that is given to the automotive sector should be tied to improved fuel efficiency standards. Even better, government should appropriately incentivise the development and production of electric cars – such as the home-grown Joule – which are much more energy efficient than internal combustion vehicles and not nearly as reliant on oil.

The second strategy concerns infrastructure spending.

Instead of wasting public money widening roads and building new or upgraded airports, the government should invest in more sustainable forms of public transport. The bus rapid transit systems under development in Cape Town and Johannesburg are steps in the right direction, as are safe cycle lanes and cheaper internet bandwidth to support telecommuting; all of these need to be expanded and accelerated.

Our long-neglected railways must be refurbished, extended and electrified. Priority should be given to major freight transport corridors such as between Johannesburg and Durban. Light rail systems could be an option for the big metros.

For rail and road transport systems to be progressively electrified, the country will need to expand its electricity production even more than Eskom is currently planning. This will require huge extra investments in renewable energy such as wind farms and concentrated solar power plants. Such investments will have the additional benefit of creating new ‘green’ jobs.

Agriculture is another sector of the economy that is particularly vulnerable to rising oil prices.

Farmers will need support to cope with rising input costs and to progressively switch over to organic production methods that are not dependent on fossil fuels. A training programme for small-scale and urban farmers is also imperative to promote food security and social stability.

By ignoring the reality of the imminent peak and decline in global oil production, and not planning accordingly, our leaders are imperilling our future.

There is much that can be done to mitigate the impacts, but the longer actions are delayed the more costly and difficult they will be. We need to seize the moment and accelerate the transition to a sustainable economy.

There are some signs that the world economy might be recovering from its worst recession since the 1930s.

 Japan, Germany and France officially exited recession in the second quarter of this year and the Chinese and Indian economies are still growing apace.

 Many economists and institutions such as the International Monetary Fund are predicting a return to global economic growth next year.

 Nevertheless some more bearish analysts - such as Professor Nouriel Roubini, who correctly predicted the financial crisis - warn of a possible ‘double dip’ recession.

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The global financial system and economy, many experts are saying, are experiencing their worst crisis at least since the Great Depression of the 1930s.

However, if we take longer-term sustainability concerns into account, then a more positive interpretation of the current situation can emerge.

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