As billions pour into projects aimed at making the Canadian prairies the world's largest exporter of crude oil, supposedly insulating Canada from an American economic downturn, two major Canadian news sources foreshadow a gloomy future for The Great White North. Canwest News (via Canada.com) quotes a study conducted by CIBC World Markets (the investment arm of the Canadian Imperial Bank of Commerce) that suggests oil prices could surge to $225 per barrel by 2012. That would push Canadian gasoline prices to about $2.25/L (or about $8 gallon at current exchange rates). According to Jeff Rubin, World Market's chief economist, oil supplies are static; demand isn't. "[For] every extra driver that gets a car and goes on the road in those (developing) countries in the next five to six years, somebody's having to get off the road in the OECD countries." Meanwhile, Montréal's La Presse ran the results of a study conducted by energy analyst and longtime doom-and-gloomer Patrick Déry. He predicted Peak Oil's (long-awaited?) arrival in 2018; Québec and other net importers of energy will run out of oil supply by 2030.
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Of course, by then $225 will be just about enough to buy you a pack of beef jerkey, or a solid-color T-shirt.
Nevertheless, we’re heading for some wild times. I’m betting on a major war + hunger + genocide, with billions dead, coming within the next 50 years.
Not to say it can’t/won’t happen, but a lot of what I hear today are the same claims we heard in the 70’s and early 80’s (peak oil already passed, run-away oil prices, etc).
Again, not saying it can’t. But I can’t help but also remember that after that, oil was the cheapest it has been EVER.
I can’t help but think that with the change in driving habits to smaller cars and fewer trips, the economy taking a big dump, the US economy’s dump will land on the face of China and India and most of the rest of the oil-consuming world, resulting in their economies taking dumps and the dramatic slowing or stopping of their move to consume more oil. Add to it that these huge profits mean more investment in extracting more oil could result in an over-supply. Add to it that how much of a premium in the price of oil is for supply disruption speculation? That can’t go on forever I don’t think. At some point the price is going to have to closer reflect the actual demand.
I’m just saying………..
I’m betting on a major war + hunger + genocide, with billions dead, coming within the next 50 years.
Bull manure! First off, the effect of the past two World Wars on population growth was barely noticeable, perhaps due to the corresponding (resulting?) baby boom. So, to get war to make dent on population, you are talking about WWII times 10. Can you even imagine that?
Most of the hunger and genocide in the last 500 years or so, have been caused by bad political decisions, not a lack of resources. Why would that change now? We are currently seeing the same thing, now that the real effects of converting food into fuel are becoming apparent.
Population growth is not the problem. You need population growth to have technological advancement. Population growth creates both the demand and the supply (of brains to make it work). Technological advancement makes it possible to sustain 6 billion people on the planet – there is no way the planet could sustain 6 billion hunter-gatherers.
The technological advancement will continue in future. $225/bbl may be what is needed to help us to conserve energy and develop sustainable sources of it.
This oil game is really starting to anger me. A barrel of oil now costs ten times what it did at the end of 1998, ten times. $12.50 to $120 in less than a decade. What originally started the hike was OPEC finally agreeing to cuts in production and sticking to it after fifteen years of member nations cheating. They got the taste of fat money and kept squeezing supply.
What’s supposed to happen is when oil gets pricey then big oil seaches for more deposits. When that finally hits the market prices fall again, but it’s obvious that the game has now changed. “Wait, what if we don’t rush to find more reserves this time? Oh yes, we’ll make more and more money as the commodity marches higher and people just keep getting used to it. Let’s keep it going!”
Naturally they argue that India and China now eat so much oil and hence the demand. But wait, didn’t their demand for oil jump drasticially as they industrialized from 1975 to 2000 too?
There’s no limit to how much they’ll tell you it’s worth if you don’t change your driving habits and cut your personal consumption.
@engineer
you need population growth up to a point. We passed that point probably a century ago.
And yes, tech advancement makes it possible to sustain 6 billion, but with more than half the world at less than $2/day. With the population pushing towards 9-10 billion, and development apace in India and China, things are probably going to get even less sustainable than they already are. We are burning capital in the form of fossil fuels. And we depend on fossil fuels in order to eat (for fertilizer, distribution, etc).
Many societies have collapsed in the past, such as Easter Island. The great thing about globalization is, in the words of Tom Lehrer, “We’ll all go together when we go.”
I hope I’m wrong about this stuff, and I’d love a technological deus ex machina, but I think it makes the most sense to plan for the worst and hope for the best.
I found a website (sorry, can’t find it now) which allowed you to put in your miles driven, type of house owned, car driven, and energy habits and found that as for my wife and I, we use about 1/2 of the average American household of two, or just slightly less than an average Japanese or British household.
Having a Prius (we’re on #2), carpooling 90-95% of the time, combining trips, intentionally buying 1150 square feet of home in 1999 instead of 2000 or 3000, buying a house which was new and well insulated, fluorescent bulb use (over the past decade or more – I’m an early adopter in a lot of ways) and not travelling by air a lot, all help.
It’s just good Stewardship, a Judeo-Christian concept which is likely to make a sudden return in popularity (if only because the alternative is to spend money like a drunken sailor on shore leave, for energy).
By the way, what’s the general consensus of our little group of avid TTACers, as to when the tipping point for the average Joe and Jane driver of America will be, causing them to say ENOUGH! and give up their SUV’s to go buy something a little more sensible?
$4 a gallon?
$5 a gallon?
$6 a gallon?
$7 a gallon?
or $8 a gallon?
People have been predicting worldwide doom since the beginning of time. None of them have been right so far.
It’s possible.
Look at consumption:
Despite high prices the worldwide oil consumption is still rising.
Despite high prices we still don’t have a global economic recession.
High oil prices lead to higher oil consumption in oil producing countries, supporting high oil prices.
Consumption cannot be switched easily to something else. Unlike the 1980’s when a lot of electricity production could switch away from fuel oil.
Some chemical production can still be switched to natural gas.
Look at production:
Non-OPEC oil production is stagnant or increasing slowly. Unlike the 1980’s when Alaska and North Sea production came online.
Increasing production requires enormous investment. Most producing countries (such as Mexico, Venezuela and even Russia) simply can’t or won’t do that.
What to do? Cut back! Use less! Invest in alternatives (hybrids, biofuels, yada, yada, yada)!
guyincognito:
The end is near! This time I mean it!
Menno,
Welcome back; I was wondering where you had gone! You’ve changed your handle, but the Priora, Traverse City, utter disdain for your fellow Michiganders’ driving habits, UK living, etc. give you away.
BTW, I even considered a Camry 4-cyl. vs. Prius swap — the math doesn’t work because of the former’s depreciation, relatively low annual miles, and the Prius’s relatively high initial cost, even for a used one (2004 and later). You can buy a lot of gas with the money NOT spent in trading.
This could change of course with $225 oil, but our 2 Camrys aren’t getting any younger, either!
Of course it’s headed for $225 eventually. That’s how we’ll get more and also wring more efficiency out of the US energy inputs to generate a unit of growth. The Elektra mark also passes the threshold where American shale oil becomes an economically viable proposition, and if fully developed these reserves dwarf Canada’s oil sands.
Phil
There is all manner of stuff that becomes commercially feasible when oil goes north of $150/bbl.
You can turn coal into oil using Fischer-Tropsch.
Natural Gas can become high quality diesel via Gas-to-Liquids.
Internal combustion of hydrogen electrolyzed from wind power starts to look good.
High traffic rail corridors can be electrified.
People have been predicting worldwide doom since the beginning of time. None of them have been right so far.
That may be – however man’s ability to screw himself royally has increased greatly over the past 100 years…
I think hoping for the best and planning for the worse is always good advice…to do otherwise, well, just wouldn’t be prudent…
Canada already is the single largest oil exporting country in the world. More oil is exported from the Middle East, but from a half dozen different countries. Canada is number one as far as individual countries are concerned.
I say we all hitch a ride on the next commet that comes by. Get your black suits and sneakers while you still can.
People have been predicting worldwide doom since the beginning of time. None of them have been right so far.
The problem is that they only have to be right once.
Approximately 45-percent of the Ontario price for a gallon of gasoline are federal and provincial taxes. The current Prime Minister pledged to remove all federal taxes if the price exceeded 85¢ liter ($3.21 U.S. gallon). The price has crested $1.23 liter and there is still no sign he will keep his promise.
People have been predicting worldwide doom since the beginning of time. None of them have been right so far.
Sure they have.
The western Bronze Age civilizations collapsed around 1200 BCE. The population of Greece declined by 75%. Written language disappeared for several hundred years.
After the western half of the Roman Empire fell it took nearly a thousand years for the standard of living to return to where it was before the fall. Many technologies that had been in common use had to be reinvented hundreds of years later.
The Anasazi disappeared due to climate change and environmental damage.
The Maya civilization was destroyed by climate change and hostile neighbors.
Easter Island was done in by environmental damage.
A slow build up in soil salinity caused the end of many would be agricultural societies.
If you don’t want to restrict yourself to situations of “end of the world” type destruction then you can find many many examples of downturns in fortune that reduced previously rich and powerful nations into relative poverty.
I suppose in every case there was someone saying it can’t happen here.
Hi 210Delray, yeah, it’s me and thanks for your welcome back.
Qwerty, well said. Nobody in the initial article above said anything about the end of the world.
Some of us have to wonder, after looking around, if it getting close to the end of the American-centric civilization.
The British managed to have a soft landing after losing their empire in/soon after 1948, but then you’ll notice that they also moved from low yield coal as a major energy source, to high yield oil which brought their standard of living up for the average working class and middle class bloke and bird.
Let us be honest. America does not have that possibility. Cheap oil is in the past and there is nothing which can easily or inexpensively replace it.
The British still had industry and self control enough to “export or die” to pay off their war debts after World War II.
Let us be honest, American cannot pay off its massive debts even by manufacturing and exporting, because we’ve exported most of these jobs, and even with a 100% tax rate on all businesses and taxpayers, it has gone past the point of being able to pay off the debts.
American very likely will NOT have a soft landing coming out of preeminence, whether it is next year, 2012, 2020, 2050 or whenever.
$225 per barrel would only one more straw on the camel’s back, whether it is the one which breaks the camel’s back, we don’t know. Yet.
Please don’t shoot the messenger if you don’t like the message. I’m no happier about it than anyone else. And those europeans who have been looking down their nose at us and some British who distained us for decades, well, you’re going to have to soon carry your own can in regards to defending your own selves with your own young men and women, and spend your own money for future wars. We won’t be able to afford to help bail you out for a third time.
The oil market is experiencing the effects of the Export Land Model where oil producers only export what they have left after satisfying their own needs. This causes exports to decline faster than oil production as time goes by because oil exporters are fast growing economies due to oil wealth.
Russian car purchases were up 60% last year for example. Venezuela sells gas for 25 cents/gal..
Saudi Arabia and Iran also have very cheap gas. Countries like these have high growth rates for oil consumption.
Since oil production is relatively flat, the market has to allocate what is left over for export. It does this by raising the crude price to a level where demand is destroyed somewhere.
It is destroyed first in poor countries. But as wealthy importing countries bid ever higher for shrinking exports, the price of crude must accelerate even faster because there is a lot of money chasing available supply.
This is scary stuff. Who knows how high prices will have to go when the wealthy are bidding against each other. $500?
At some point, the price of a barrel of oil is going to peg out.
Right now, what is holding diesel to $4/gal while gasoline is slowly working it’s way to that amount? Something is maintaining the price of diesel.
rtz :
Winter’s pretty much over so maybe the decline in demand for home heating oil is helping keep diesel prices stable.
Those Canadian oil sands are the modern equivalent of strip mining. We are destroying a pristine country.
And why? Because the environmentalists won’t let us drill offshore for new oil!!
Good to see that most people here see that we can’t go on like this forever.
I heard that the threshold to a major disruption in American habits with oil is somewhere between $4 and $5 per gallon.
Natural gas is not the answer to anything. Enron touted that and we all know what happened to them. Alberta tar sands eat up gobs of natural gas in the process of extracting the oil from the sand.
As I tell my good American buddy in WNYS, Americans need to get over the non issues (abortion and guns issues and terrorism bogeyman) and get on with the real issues (climate change, anti Americanism, oil dependence, deficit/debt (personal and federal), education, Christian fundamentalism.)
gsp, what you fail to realize is, besides the amount of people who post on blogs and forums such as this, NOBODY GIVES A ****. I’m waiting for the next documentary – someone will walk around a typical American middle-class area knocking on doors and asking questions. I predict that 80% of those asked won’t even know that there ARE issues other than gas prices, abortions, “terrorists,” gay marriage, and TRUCK NUTZ (come on, people!! WHO CARES??).
Sure, most will have more in credit card debt than could ever be paid off when minimum payments are actually calculated, but that’s the “norm” now.
I’m no prude; I’m definitely behind the times myself, and I’m not expecting everyone to instantly major in research and politics. BUT, what the “typical American” seems to be doing is almost intentionally blindfolding him- or her- self from current situations. It’s so easy to get caught up in the “little things,” making the big picture way too easy to ignore.
Conspiracy theories aside about whose fault this is, there is always SOMEWHERE for ANYONE to take action, no matter the area they choose.. What happened to the protests? People asking questions? Demanding change? The heart and soul of our country is the right and ability to protest, yet all people seem to be worried about is getting a bigger, better, more expensive SUV since Joe Blow next door just “upgraded…”
A $225 barrel is going to hurt… a lot… it’s already hurting at $125.
Gardiner Westbound said: “Approximately 45-percent of the Ontario price for a gallon of gasoline are federal and provincial taxes. The current Prime Minister pledged to remove all federal taxes if the price exceeded 85¢ liter ($3.21 U.S. gallon). The price has crested $1.23 liter and there is still no sign he will keep his promise.”
From this, we in other countries (including the USA) can commiserate with you about politicians who can’t seem to remember what they promise on the road during election time, and don’t seem to care.
We have McPain running for Prez blabbing about how if HE were Prez, he’d cut taxes on gas.
Deja Vu all over again by about January 2009.
SUV sales contribute to the current economic picture. What can happen when SUV profits no longer reach UAWs? What happens when the money no longer reaches the next person in line? This is a conclusion we need to be willing to accept. Perhaps folks will adjust and Americans will keep most of their standards of living or perhaps not. Its something we need to be willing to accept.
There are a lot more criteria to use to focus on for what one uses to judge ones living conditions (standard). I may find it better (overall) to give up my Bimmer and move to a Civic. As with everything else, with an increase in living conditions come the responsibility to willingly accept that this too shall pass. Sometimes for the short term better, sometimes not.
I cannot control others, they will learn these lessons themselves to some extent over the course of their lives. I need to be willing to enjoy the heck out of my living conditions and accept others have a right to come to their own conclusions.
So I do not need to worry about the economy today. I do not have a substantial ability to change it to my benefit. I have some cash, I’m aware of economic conditions to some extent. I have nothing to feel ashamed of. I have a little money, I’m a little hungry and I have shelter. I think I’ll take a shower, go get something to eat and enjoy this beautiful day. Which I am grateful for. Also I’ll explore this elaborately dynamic economy/society/landscape some more.
Hey, for those of you with short term memory, we’ve just experienced the price of oil going up 10X, 900%, in the past decade.
And through all that our only REAL economic problems now have been caused not by oil but by too many buying houses!
What’s another double on oil? That should be nothing!
Ummmm,
Bullshit?
just now in (Since you guys don’t take in the good news) Brazil has “found” 2 new major oil-fields. Supposedly this will get us up to almost Iraqui proportions. Can’t wait to live in an oli emirate!!
Seriously, new oil fields are found all the time. They’re just harder to get at. But you think extraction technology is stopped? Look here to us in Brazil, we incredibly are showing the way! There are immense oil fields in the ocean floors.
Oil will come down. We just need a few scared market speculators to drop their positions, and then so will everybody else. Back to 50 to 70 bucks a barrel. With todays income per capita that is cheap energy.
With the added incentive of keeping alternative fuels viable.
Yeah, call me a dreamer.
I fully expect about 30 yrs from now, in my old age to be filling up my personal transport device with gas
The thing I just can’t get past is how the big oil companies have seen profits increase as much or more than the price of gasoline has risen — it just shows that “the price of a barrel of oil” doesn’t seem to have all that much to do with the prices we’re paying at the pump. Presuming that a relative handful of millionaires and billionaires own some significantly larger share of oil company stock than “the rest of us,” it just seems to be another instance of the movement of wealth away from the average American and into the hands of the those within that legendary “top one percent” of the wealthiest among us.
That said, just what is this “price of a barrel of oil,” anyway? I don’t get the impression that the big oil companies “pay” for barrels of oil — they are PRODUCING the oil. So, is this a “spot price” for what must be a tiny amount of “independent refineries” that aren’t owned by the big oil companies? Oh, I understand that this price per barrel has to do with some kind of commodity market trading, but again, “Who’s actually BUYING this stuff at those prices? Anyone?
It just seems to be so utterly, utterly ARTIFICIAL. Has the cost of pouring oil into huge oil tankers and reeling them in actually increased at all? Especially when our tax-paid military is giving those tankers the best security that “other peoples’ money” can buy?
Most of this stuff just doesn’t add up to me. Except for one very clear fact: There certainly isn’t any actual “competition” in the oil industry. Once upon a time, our leaders were “trust busters,” but that has certainly turned completely to the opposite direction, now hasn’t it?
Folks, there are two things we need to understand:
Malthusian worries about population growth are obsolete. No global overpopulation looms ahead. Before most of us are dead the most critical issue in almost all developed countries will be population decline. Not from war, disease or famine, but because not enough babies are born to maintain population levels or to prevent the average age from climbing.
And we need to understand the economics of the oil business. Most importantly, Exxon, Chevron, etc., rarely own that oil in the ground—the landowners do. And when an oil company lifts that oil, the landowners expect to get their share of the full market price for that oil. As do all others with an economic interest in what’s produced; not least government.
Anyone who thinks Malthusian worries are obsolete should read this article: http://www.washingtonpost.com/wp-dyn/content/article/2008/04/26/AR2008042602041.html
Anybody keeping up with the rice shortage news? Apparently the richer countries are overstocking and buying more stocks no matter what the cost. The 3rd world countries can no longer afford it and people are eating (literally) mud pies in Haiti.
Now, somebody want to explain this away for me? Will this mean that new farmers will be created after a few years of high food prices in these countries? Does this mean that food prices will drop again? Will this polarize these poor peoples so that they are more eager to follow nutcases like Bin Laden?
I figure the high oil prices will make certain people very wealthy until the price of everything else catches up. Note that I didn’t say that oil would go back down – just that everything else catches up. Will require a decade maybe of high prices. The difference between now and the 80s will be low interest rates.
Some observations, each of which can justify a monograph:
The rice situation vividly illustrates how groups of otherwise smart people in the aggregate sometimes harm their own interests. Overall, global hunger and food pricing have been problems of distribution, not supply, for many decades. The world produces more than enough food for 6+ billion people, but mal-distribution results in gross inequities. This is largely reflective of economic disparities, but not exclusively.
There are localities where rice is short, ability to pay is scant, and consequences are both dire and real. But this is not the case for the US. In fact, the US grows far more rice than its population consumes. We export about half the rice we grow, and we could put more land under rice cultivation. Nevertheless, last week Costco and Sam’s Club moved to limit a run on bags of rice larger than 20 lbs. because restaurant owners and bulk food buyers, along with some individuals, were stripping stores of supplies on *anticipation* (read fear) of higher prices or shortage. Yet America has a glut of rice relative to intrinsic domestic demand.
Meanwhile, in parts of India and Africa, there are local shortages or other areas where rice is priced out of reach of poor families, even it it’s at hand. Drought, weather, fuel costs and improving living standards in previously-poor areas all contribute.
Relatively small inputs can have amplified psychological effects. So while the volume of corn production for fuel ethanol doesn’t explain by itself a number and scale of grain scarcities, the marginal impact of land, time, resources and cultivation diverted from food to fuel does add price pressure.
Bio-fuels may have a legitimate place in our evolving fuel mix as we mitigate dependency on oil, but moving land out of food cultivation and into fuels — especially when doing so is water and fertilizer intensive — is foolish and unnecessary.
Farmers and (let’s separate them) agribusiness have incentives to maximize near-term return for their activities, and this sometimes leads them away from long-term stewardship of the land they use. Government subsidies encouraging corn-for-ethanol production result in land transfered from wheat or other crops to corn, plus there’s a drought in the wheat-growing regions of Australia. Now there’s a flour shortage so wheat prices are rising and some farmers are expanding wheat acreage at the expense of something else. And then there will be another “something else.” And yet in the US and EU, there remains arable land kept fallow by government policy. A little holistic thinking about the problems would offer a policy median between the harm of a state economy in agriculture, and the vicissitudes of unchecked markets of shortsighted individuals. If only.
Again, just as I have suggested in prior texts about the power individuals have for preserving the domestic auto industry or responding to climate change or managing their energy economics, once again I ask: what will you do to shape the world you want?
Wealth is the world’s greatest contraceptive. But it also tends to make people want to eat more meat. That’s inefficient from an environmental and food distribution standpoint. It takes more than 10 lbs. of grain to yield 1 lb. of beef, and considerable water. More of everything to process it safely and move it around. As an American, living in a country where food prices are, by global standards, incidental for middle-class folks, are you willing to eat less meat? Especially less corn-fed meat? Are you willing to just eat less? Are you willing to stop buying bottled water and instead go back to the tap? It’s probably cleaner water anyway. Are you willing to leave that extra couple of 20 lb. bags of rice on the pallet at Costco and take a little risk the price might be a bit higher in a month? What are you willing to do, if you believe these problems are real?
Malthus has less than 50 years left to terrorize our thoughts. After that, global population will have peaked and be in extended, gradual decline, if we are sensible and keep the wealth-generating machinery going. We will be able to grow enough food for the 9 billion global population at peak. The problem will be distribution as it always has been for the last hundred years or so.
The amount of food thrown away every day by just the restaurants in any major city in the US or EU would sharply improve the caloric requirements of some large populations in Africa, India and rural China. Add the heaps discarded by individuals and families. And the foodstuffs paid for, taken off the market, and stored by government payments, and you can see lots of ways to narrow the gaps.
As I said before, I’ll vote for any presidential candidate who will pledge to work for ending government funding of foodstuffs-for-ethanol. If we’re going to have biofuels, let it be from by-products, waste, or non-crop lands. Better yet, let’s extract untapped oil, boost clean coal, subsidize mass adoption of residential and commercial rooftop solar, go big on solar farming in our empty southwestern interior, build a continental water husbandry network, get serious about sensible uses for water, and think twice before hoarding or filling your plate to the rim. Mitigating food shortages and moderating pricing starts with each of us.
In the 1950s, the world was going to starve, but the Green Revolution of the 1960s and 1970s pushed away disaster. In the 1970s, we heard it before: energy prices will arrest or take back the gains of the Green Revolution and climate change will complete our doom. In 1975, new oil was forecast to be elusive. The world was headed from 3 billion to a nightmarish 6 billion people. We’d never be as well off again. Doom ad infinitum. But oil fell. Food moderated. Commodities slipped. Economic productivity rose. We’ve been here before, fighting a war without taxing for it, credit crunch, expensive money, weak dollar, yadda-yadda; yet ingenuity is more distributed than ever and serious science and innovation is proliferating. The export markets enlivened by a weak dollar dwarf the domestic contribution of the housing economy, by 4 to 5X. We *could* totally SNAFU the economic management task at hand, but it’s not inevitable. Let’s stop talking ourselves into a panic.
Phil