It's not rocket science: we are nearing the point of peak oil production, the data suggests, and when that happens, oil will start running out. That's when oil prices will really soar...

Bruce Whitfield:
Well oil futures today above $85 a barrel it has been very high for the better part of the last month and there is no indication that it will get any reasonable relief any time soon. One Citigroup analyst today saying $90 a barrel is in sight and Simon Ratcliffe the chairperson of the Association for the Study of Peak Oil South Africa is with us on the line from Cape Town now and I was reading a little bit about you in the recent copy of Finweek Simon and the way I see it you are wanting our government to develop strategies to deal with the sustainably higher oil prices.

Simon Ratcliffe:
Yes absolutely Bruce. We put out a document recently which I think was referred to in the article you are looking at where we looked at two scenarios; one is the kind of business as usual scenario and the other one is in a sense put the country on a war footing and develop sustainable energy sources and I don't know if you want me to go into the reasons.

Bruce Whitfield:
Absolutely, I mean the business as usual scenario I guess is we anticipate that oil prices will gradually go up over time and we must deal with those consequences. Your other one, the other scenario, is the war footing scenario which I found interesting.

Simon Ratcliffe:
I think the important thing is to understand why it is that prices will continue to rise and it is really not rocket science it is really quite simple. We all know that oil is a finite resource and at some point is going to start declining in production. What is not well understood is that the production profile of oil follows a bell shaped curve and that obviously raises two immediate questions.

The first being at what point do we need to be concerned and the second where on that life cycle curve are we and obviously the point of concern is the point in the middle, it is the peak, which is why we are looking at this phenomenon, the peak production you know, because at that point global oil production starts to decline and this is not a complicated thing it is a geological phenomena.

Bruce Whitfield:
Is your standpoint that we are at peak oil production? The globe cannot actually produce more oil than it is producing at the moment.

Simon Ratcliffe:
Well it is difficult to be absolutely certain. There certainly are some strong indications that we may be nearing the peak and there is no one that can tell you with absolute certainty that we are at that peak but there is very strong evidence from independent researchers that we are pretty close to that point.

Bruce Whitfield:
But again that hypothesis being then if the oil price production then starts to lower prices naturally are going to shoot up.

Simon Ratcliffe:
Yes absolutely.

Bruce Whitfield:
That then takes you to your next point and that is that the South African government needs to be taking steps in order to ensure that we have some kind of manageable energy resource in reserve I guess.

Simon Ratcliffe:
Well absolutely and perhaps one of the ironies of the legacy of apartheid is that in a sense we have had an oil mitigation strategy for the last 50 years in that South Africa is probably one of the few countries that has developed an alternative method of producing liquid fuel unfortunately it is a very dirty method and it is a very energy inefficient method but as we all know we extract oil from coal and we produce oil from coal.

Bruce Whitfield:
As we do and we know that Sasol is a very attractive investment as a result but one of your hypotheses is that government should actually be preventing the export of coal which again raises the heckles of many people.

Simon Ratcliffe:
I'm not saying we should prevent it; what we are saying is that there is certain consequences and in a world where there is going to be declining oil supplies where does our energy future lie and at the moment the technologies that we have developed are to extract a resource that we don't have, oil, from a resource that we do have, coal, and the more of it we sell the less of it we have for our future.

Bruce Whitfield:
Absolutely but at the same time here you have got mining companies who are investing billions and extracting the stuff, we have got coal at record levels, a $100 a tonne I think it is. You know it is perfectly reasonable to expect them and the people who are running those companies who incentivised on current profits to be doing that.

Simon Ratcliffe:
To be selling it on to the international market and large quantities of it are going off to China.

Bruce Whitfield:
We shouldn't be shooting ourselves in the foot in the long term.

Simon Ratcliffe:
At some point and this is the point I made in the article, at some point, we have this clash of interests. Individual interests on the one hand, or private interests on the one hand, and collective interests on the other and you know how will that play itself out? Now I don't want to speculate about that but I'm just saying it is fairly easy to see that is coming.

Bruce Whitfield:
Again, we are headed for an energy crisis of unprecedented proportions if we don't put our heads together and come up with alternatives. Is uranium a feasible alternative in your view?

Simon Ratcliffe:
I have seen a very interesting study conducted by a German research group called The Energy Watch Group; it is a university-based research group, which is suggesting that global production in uranium will peak in the year 2013.

Now that is not far away and at that point it will also start to decline and they were suggesting that existing nuclear power stations would be forced to shut down because they wouldn't be able to secure their uranium supplies. Now I am not an expert in uranium production or uranium supply I'm just alluding to a report I read which is publicly available.

Bruce Whitfield:
Again, one can listen to this and say Simon you are overreacting a little bit, the world is okay, there are sustainable energy reserves. The boffins will work it out in the end. What do you say to people who might come back to you with that sort of argument?

Simon Ratcliffe:
Well let’s look at the data. You know the data suggests that we have finite resources and the quicker we use them and we have got the data to show how quickly we are using them the quicker they will run out. Not rocket science really; it is really quite simple.

Bruce Whitfield:
Simon Ratcliffe thanks very much for talking to us this evening from Cape Town. He is the chairperson of the Association for the Study of Peak Oil South Africa. Basically the argument is we are very close to global peak production in oil and what happens when we reach that peak and then oil reserves decline and oil prices go up. We have got to have alternative energy sources.