THERE'S been a lot of bull talked about a temporary little problem with oil. That's why the OPEC president's prediction last week that oil prices will rise to $200 a barrel especially if the dollar stays weak, will stun the Department of Finance. The piston in the National Development Plan is the assumption that oil would be $100 per barrel (42 gallons) by 2020. The Government's big strategy, so clearly priced on pre-peak oil economics is already bog-roll, but, officially, the Government is sticking to the daft idea that our energy input costs will remain a constant for the next 12 years and plans to build an infrastructure for the oil age.

Think of home heating and petrol prices doubling and consider the effects on your own net take-home pay when energy and motoring costs rise to absorb a chunk somewhere between 15 per cent and 20 per cent of average wages. Now consider the effects on the world's fourth most dependent economy on imported oil and gas which already has a lousy record in integrated planning on everything from its health service, to decentralisation, to transport and tell me that the risk of the mother of all cock-ups isn't on the cards.

Despite the presence of two Green ministers who understand the maths, there's no sign of collective urgency or understanding from the Cabinet. In an article lovingly headed "Cowen Secures Economic Strength", penned by the Cabinet's unofficial minister for propaganda Willie O'Dea in this newspaper, we were told not to worry, that oil would be driven down. Since Willie's intervention a few weeks back, prices have risen another 20 per cent.

The evidence that we are at the foot of a prolonged period of undulating high inflation and which will last until dense and scalable alternatives to oil and gas become widespread, is staring us in the face. At the time of Julius Caesar 400 million people lived on the planet. It took the next 17 centuries for the population to double. The injection of cheap energy 150 years ago from the exploitation of coal, oil and gas resources, fuelled industry, trade, transport and agriculture but also drove the population to over six billion. In more recent years the advent of globalisation, the internet, free trade and the collapse of communism, have created vast new markets and demand for natural resources from three billion new consumers who've emerged from fast-growing middle income economies, to claim their share of the pie.

The most basic ingredient in economic growth is energy -- without it nothing happens. Global demand for energy is set to double over the next 20 years but already in the oil market, where 86 million barrels of oil a day are produced there is a growing problem in matching burgeoning demand with limited supply. Demand from non-members of the Organisation for Economic Co-operation and Development is growing at 4 per cent yearly, dwarfing OECD demand growth some eightfold. In a few years the biggest users will be the oil-producing nations themselves who, as a block, will replace the USA as the world's largest oil consumer.

Rising prices over the next few years will push a gallon of gas in the USA from $3.60 to nearly $7 so demand will drop but, for example, at a cost of 25 cents in Venezuela and 50 to 60 cent in Saudi Arabia, Kuwait and Iran, conservation in OECD countries will be outpaced by demand elsewhere. It's easy to see why. Car sales in Russia, which is now selling more oil to its own citizens than it's exporting, grew nearly 60 per cent last year. In China and Brazil new car sales grew between 20 per cent and 30 per cent. The Tanto Nano, an economy car for the developing world, launched in India which has a population of one billion, is priced at $2,500.

Demand from within oil-producing nations is on track to cut into their oil exports by 2010 pulling 2.5 million barrels of oil a day off international markets and pushing prices up further. But oil prices have already rocketed over the past two and half years. Correspondingly over this period there's been no growth in crude oil production. Natural gas liquids which make up 10 per cent of the 86 million barrels of production per day estimated by the International Energy Agency, account for nearly all the increase in production since 2005. Gases like butane and propane, which increase as oil fields mature and reservoir pressure declines, are not transport fuels.

Unquestionably oil prices have been magnified by speculators but there's no getting away from the fact that sharply rising oil prices are here to stay even if OPEC plants the blame for the current spike at the door of the dollar and speculators. Alternatives to oil and gas, energy conversation technologies and political action are not arriving fast enough to avoid a long period of high inflation that fluctuates with worldwide energy demands. What's likely is a repeat of the Seventies except this time on steroids since oil scarcity will be based on depletion and not politics.

The result will be wage/price spirals, sharply rising unemployment as jobs are lost to countries that have better managed to control energy input costs, and governments adopting big spending policies that exacerbate inflation to avoid choking growth and risking depression.

Although burdened with a legacy of incompetent planning, Ireland, with its temperate climate, lack of heavy industry and green energy potential is well positioned. The problem, as ever, is short-sighted leadership that fails to make energy its top priority and merely green-washes its agenda to comply with EU directives and satisfy its junior partner. Setting renewable energy targets or farting around with motor tax isn't enough -- it's just a beginning. A new and positive shared vision of a different Ireland is needed, one wholly, not partially, energy independent. Tax incentives are needed to tap into the vast pool of private wealth in property to redirect it towards green energy and energy efficiency projects and businesses.

Meanwhile, a new industry in retrofitting all Irish homes with insulation and solar and wind technologies (where efficient), can be stimulated by much bigger grants and tax reliefs.

It's not going to happen overnight and in the meantime our lack of hydro power, ban on nuclear energy and zero market competition will contribute to savage Irish electricity prices. Plans to import UK prices, plus a premium to interconnectors, will not immunise us from sharply rising electricity prices. Nearly 80 per cent of UK electricity is fossil-fuel based and prices are set to rise as CO2 emission costs bite. In France where 80 per cent of electricity is nuclear, which has a low carbon footprint, prices are already 17 per cent cheaper than the UK. The gap is likely to widen. Irish interconnectors need to go to Brittany not Wales.

Much can be achieved by individuals investing in energy efficiency at home and switching to low-cost cars. Meanwhile, a prolonged bull market in commodities, set to dwarf the three we had in the last century, is the opportunity of a lifetime to invest in a range of businesses and assets that stand to make fortunes while dumping those that lose heavily in a high energy-led inflation cycle. Terrified of taking maverick positions that might queer short-term performance data against peer groups, don't expect your pension fund manager, life insurance adviser or stockbroker to tell you that they've put you in the wrong assets.

Meanwhile, Willie O'Dea as Minister for Defence, should snuggle up some night with a warm milk and a copy of the US Army Corps of Engineers' report on energy -- he's had plenty of time to bone up -- it was written in 2005.

- Eddie Hobbs