Don’t be fooled by low gas prices — the crunch is nearly here
By Dan Gardner
In Greek mythology, the enchanting songs of the Sirens lured unwary sailors to shipwreck and death. Today's Sirens are the roadside signs singing sweetly, "Cheap gas! Cheap gas! Drink deeply and be at ease, weary traveller!"
After suffering record-high oil and gas prices earlier this year, it's understandable that we see cheap gas as anything but a danger. We're in a recession. Times are tough. It's a relief that the cost of getting around and heating our homes has plummeted. It's also an economic stimulus at a time when we need all the stimulus we can get.
But before we drink deeply and relax, let's have a good look through the telescope at what lies ahead.
In November, the International Energy Agency - an intergovernmental organization which advises 28 member countries - released its latest forecast. The current global economic downturn changes the numbers, the IEA concluded, but not in a way that will make a difference in the long term. Between 2006 and 2030, the IEA predicts, worldwide energy consumption will grow 45 per cent.
"Current trends in energy supply and consumption are patently unsustainable," declared Nobuo Tanaka, executive director of the IEA. "Rising imports of oil and gas into OECD regions and developing Asia, together with the growing concentration of production in a small number of countries, would increase our susceptibility to supply disruptions and sharp price hikes. At the same time, greenhouse-gas emissions would be driven up inexorably, putting the world on track for an eventual global temperature increase of up to 6° C."
Now, some people continue to deny the reality of man-made climate change. I'm not one of them, but I'd like us all to stay on the same page so I won't even mention climate change for the remainder of this column.
What does Tanaka's statement mean? Think 1973. That year, an oil embargo imposed by the OPEC countries hammered the developed world. Gas stations ran dry, prices soared, economies plunged into recession.
Oil shocks will become more common and more severe. The triggers could be anything. A terrorist attack in the Strait of Hormuz, maybe. A coup in Saudi Arabia. The collapse of Nigeria. Whatever it is, wherever it occurs, it will cause oil prices to explode and economies to fall to their knees.
Canada and every other developed nation runs on oil. It moves our cars and trucks. It heats our homes. It is essential in the manufacture of plastics and countless other products. It is the very foundation of our economy.
But with most of the world's oil production coming from unstable regions far away - and the proportion that comes from places such as the Middle East is growing rapidly - that foundation is not reliable. Tomorrow's headlines could cause it to shake, crack or crumble.
Bad as that sounds, it's likely to turn out even worse.
In preparation for its 2008 report, the IEA conducted a detailed study of depletion rates in 800 of the world's largest oil fields. Nobody had ever done such work before and what the IEA found caused the agency to revise its understanding of the world's energy future in a profound way.
The change has to do with worldwide "peak oil" - which is the point at which global oil production can no longer keep up with global oil demand. That sounds bland and technical, but it's actually a nightmare scenario: If oil demand outpaces oil supply, the price of oil will go up and up and up and never go back down. Imagine the oil shock of 1973 as a permanent reality.
It has always been accepted that the world would get to peak oil one day. The only question is when.
Some over-excited proponents of peak oil have been saying for decades that it would come any day now. More restrained voices say we're at peak now. Or we will be in a few years.
The IEA always insisted peak oil was decades off. Nothing to worry about. And so governments didn't.
But then the IEA conducted its survey of oil fields and got spooked. "Although global oil production in total is not expected to peak before 2030," the IEA's 2008 report states, "production of conventional oil ... is projected to level off towards the end of the projection period."
That's alarming, but vague. So British journalist George Monbiot asked the IEA's chief economist, Fatih Birol, to elaborate.
The really bad news lies in oil-producing countries that are not members of the OPEC cartel, Birol said. "We are expecting that in three, four years' time the production of conventional oil will come to a plateau, and start to decline."
And worldwide? "In terms of the global picture, assuming that OPEC will invest in a timely manner, global conventional oil can still continue, but we still expect that it will come around 2020 to a plateau as well, which is of course not good news from a global oil supply point of view."
Not good news, indeed. If oil production comes to "a plateau," it's not rising - but demand will be.
That's the nightmare scenario of peak oil. And it starts in 2020.
That's 11 years from now.
Now, for some problems, 11 years is plenty of time to get ready. But not for this problem.
As George Monbiot notes, the U.S. Department of Energy commissioned a report by oil analyst Robert L. Hirsch on how long it would take for developed economies to mitigate the effects of peak oil. Hirsch concluded that even a worldwide emergency response launched 10 years before the crisis hit would still result in "a liquid fuels shortfall roughly a decade after the time that oil would have peaked." That would be a disaster.
In order to avoid this scenario, Hirsch advised, a massive mitigation program must begin at least 20 years before peak.
If a chill didn't run up your spine, you need to read that again.
Fortunately for every man, woman and child on the planet, one of the few politicians who seems to understand the urgency of the situation is the president-elect of the United States.
On Monday, in announcing his energy policy team, Barack Obama noted that presidents since Richard Nixon have recognized that oil addiction is a dangerous vulnerability but all have failed to make real change. "This time has to be different," he said. "This time we cannot fail. Nor can we be lulled into complacency just because, for now, the price of gas has fallen below $4 a gallon."
Obama backed his rhetoric with a daring choice for energy secretary. Rather than appoint a politician who could be counted on to say and do what is politically expedient, Obama picked Steven Chu, a physicist and Nobel laureate who has been leading research into cutting-edge energy technology.
We must have a "global energy revolution," the IEA's Fatih Birol told Monbiot. And it has to start now. "I think time is not on our side here."
Don't listen to the Sirens, weary travellers. Be not at ease.
Dan Gardner writes Wednesday, Friday and Saturday and blogs at ottawacitizen.com/katzenjammer. E-mail: email@example.com.