The peak oil debate has many linkages to the climate change debate, and it is useful to consider the correlation of implications from these debates.

There is a new report by the UK Industry Taskforce on Peak Oil and Energy Security on peak oil. It says that the effects of peak oil will be felt in the next five years. The Taskforce anticipate oil prices much higher than the existing record of $147 by 2013.

The report outlines three major areas of impact:

• Increased oil-based input costs for manufacturing and agriculture
• Increased transport costs throughout the supply chain
• Wider macro-economic shocks via higher inflation, balance of payments deficit and reduction of consumer demand.

The report itself is not unique, and there have been many other reports on peak oil during the last few years. However, the substance of these reports is much less disputed. Oil is a finite resource and its exploration will inevitably end. The difference this report (and other such reports) makes is that it puts the “peak oil” phenomenon in a temporal perspective, saying more or less “we’re already there”.

The implications of the peak of world oil supply and its inevitable decline are huge. The world economy is largely based on fossil fuels and oil in particular. Initially, high oil prices will deter consumption, will push for more energy-efficient technologies, and will curb CO2 emissions. At the same time some of the alternatives of conventional oil are even more carbon intensive. The disruption of oil supply will in general disrupt the energy balance, long before we have sufficient replacing options.

This leaves many questions open. How will oil be replaced as an energy resource? Will the replacement exacerbate or improve current climate trends?

Oil can be replaced on large scale by a new energy mix, including coal, unconventional fossil fuels, and renewable energy sources. The experts say that the oil transition will bring more long-term environmental concerns than long-term economic or security threats because tradeoffs can be resolved by accepting increased environmental damage.

In the end, it will depend much on policy choices made now. It will be difficult to both replace oil and maintain current lifestyles. If we put climate change considerations in the picture, it gets even murkier.

What is the way forward, then?

One of the less obvious issues is creating sustainable infrastructure and communities. Should peak oil and climate change bring forward the challenges we currently expect, the sustainable communities will be much more able to adapt.

To do that we may also use a scenario approach, taking into consideration the impacts of both phenomena into all kinds of local planning and policymaking exercises.