Last Updated:Friday - 09/24/2010
August 30, 2004
We're slouching towards a post-oil economy
On the Other Hand
SPECIAL TO THE WCR
Current record or near-record oil prices certainly have a "terrorist premium" built into them. But even if the political situation in Iraq and other oil-strategic places quiets down, it is futile to hope for return to the relatively cheap oil prices of quite recent memory.
Even with political stability, it's unlikely we will see crude drop below $35 a barrel, or even return to that level for any length of time is likely an optimistic scenario. World oil production is expected to hit its all-time historical peak in 2006, and will begin declining, while demand for petroleum in rapidly-developing non-traditional markets will continue to escalate.
Global demand is projected to increase 3.2 per cent to an average of 81.4 million barrels a day in 2004, and of 83.2 million barrels a day in 2005.
According to the Paris-based International Energy Agency , Saudi Arabia and its OPEC partners have been pumping 1.4 million barrels above their July production target of 25.5 million barrels, and the world has only approximately one million barrels in reserve capacity, almost all of it in Saudi Arabia. If world demand rises by 2.5 million barrels between the second and fourth quarters of 2004 - as the IEA predicts - even that razor-thin capacity cushion will diminish to nothing. Elementary economics dictates that there's nothing here that would cause prices to go down.
The harsh reality is that oil production from conventional sources has been plateaued at about 65 million barrels per day globally for the past half-decade, with another 10 to 15 million barrels a day coming from unconventional sources like the Alberta tar sands. We can safely assume that with no new major oil field discoveries in the past 40 years, all of the easy oil has been found.
The ability to harness and consume energy other than that produced by human or animal labour is what makes our comfortable, affluent lifestyles possible.
That's a truism of course, but the point that we are utterly dependent on massive energy consumption, and how precariously tenuous the energy supply from traditional resources has become, appears to be seldom contemplated.
Because oil has been abundant, and is (even at $40 a barrel) relatively cheap compared with most practical alternatives, has created a path-of-least-resistance inertia with regard to pursuit and development of alternative energy technologies. Consequently, when the crunch comes we are a lot less well prepared to address the challenge than we could have been.
Here in Canada, we have one of the world's leading fuel cell energy technology development projects - B.C.-based Ballard Power Systems.
Some multinational automakers have ponied up with R&D funding cash, but both Canadian private investors and the federal and provincial governments should be backing the Ballard project much more enthusiastically than they have been.
Then there are wind power and tidal power - two massively underdeveloped and underutilized non-polluting energy resources.
Some Canadian governments and power utilities have been very gradually establishing the fundaments of a wind power infrastructure, but because oil (and coal) remain cheaper sources of bulk energy, wind power remains a niche sector.
There could also be potential in old technologies. In the early days of automotive transport, steam power was a more refined and powerful competitor to the gasoline engine, offering both better on-the-road performance and much quieter running.
However, as the gasoline engine's crudities were polished and with the advent of the electric self-starter, the convenience and cheapness of gasoline power eclipsed and soon ended development of automotive steam technology, despite the fact that steam power is a much more efficient user of energy than the internal combustion engine.
Following the first oil crisis in the early '70s, several visionaries, including Learjet pioneer William Lear, took a shot at reviving automotive steam power technology, but then oil prices stabilized and dropped, and interest in steam petered out.
A pity. We could have used that 30-year head start on facing the challenges that will soon confront us.