Why Canada needs an energy strategy now
- Excerpt: "So the real issue is how the world squares demand and supply.
The focus, especially in the United States, is on boosting demand. This
explains U.S. pressures on Russia to boost supply; its diplomacy in West
Africa to boost supplies there; its diplomatic pressure and set up of
military bases in Central Asia; its pressures on Mexico to allow Big Oil
to move into that country; and even the war in Iraq to help bring massive
Iraqi supplies onto world markets."
--------- Forwarded message ----------
From: "janson2997" <janson1997@...>
Date: Sat, 14 Aug 2004 10:15:07 -0000
Subject: [fuelcell-energy] Why Canada needs an energy strategy now
Why Canada needs an energy strategy now
Klaus Rehaag, head of the oil markets group at the International
Energy Agency, in a presentation last month asked, "Is the world
facing a third oil shock?"
The first such shock occurred in 1973 and 1974, when the Organization
for Petroleum Exporting Countries quadrupled the world price of oil,
contributing to nearly a decade of stagflation in the global economy.
The second oil shock occurred in 1979 and 1980, when Islamic
militants overthrew the brutal dictatorship of the Shah of Iran,
resulting in a doubling of the world oil price, which contributed to
a serious recession in much of the world and to the subsequent Third
World debt crisis.
With oil prices edging over $45 (U.S.) a barrel this week (though
still lower in inflation-adjusted terms than the peak in the early
1980s), and growing concerns over threats to supplies from the Middle
East and Russia in a world where there's little spare capacity, there
is talk of a third oil shock. Moreover, and more disconcerting,
futures markets point to an oil price of $39 (U.S.) next year and
prices for oil deliveries 10 years from now exceeding $35 (U.S.) a
An oil shock means reduced economic growth, increased inflation and
higher unemployment as more dollars are needed to pay for energy,
leaving fewer dollars to be spent or invested elsewhere. The effect
can be seen in everything from higher personal driving costs and
bigger airline fares to higher trucking costs for manufacturers and
bigger boards of education bills for school busing. The higher oil
price is equivalent to a tax increase.
In a paper earlier this year, the IEA estimated that a $10 (U.S.)
increase in the price of a barrel of oil would cost the global
economy $255 billion in lost output in the first year alone. Oil
prices are more than $10 higher than they were two or three years ago.
Yet the real issue is not that the world is suddenly running out of
oil � it isn't � but that demand is growing faster than supply
because of a decade-long underinvestment in bringing on new supplies,
tanker fleet and pipeline capacity, and refining capacity.
The IEA estimates world oil consumption at 82.2 million barrels a
day, with this forecast to raise to 100 million barrels a day by 2020
and 120 million barrels a day by 2030. Much of this growth will come
from China, India and other major emerging market economies.
So the real issue is how the world squares demand and supply. The
focus, especially in the United States, is on boosting demand. This
explains U.S. pressures on Russia to boost supply; its diplomacy in
West Africa to boost supplies there; its diplomatic pressure and set
up of military bases in Central Asia; its pressures on Mexico to
allow Big Oil to move into that country; and even the war in Iraq to
help bring massive Iraqi supplies onto world markets.
Clearly, as Rehaag argues, one challenge is to mobilize the
investment dollars and gain access to potential oil-producing regions
in order to increase supply. We will continue to need oil even with a
low-carbon and high energy-efficiency strategy. As older oil fields
are depleted, new reserves have to be found, both to replace depleted
reserves and to meet new demand. This, in itself, requires major new
investment in exploration and development.
What is being underplayed in this effort to match supply and demand,
though, is the potential to reduce demand, such as through stringent
fuel-efficiency standards for automobiles. In Canada, for example,
the sharpest increase in energy demand has been for transportation as
consumers insist on driving gas-guzzling sports utility vehicles
rather than more energy efficient cars.
Yet the coincident need to reduce greenhouse gas emissions that are
accelerating climate change should � with the desirability of also
reducing the need for high-carbon fuels such as oil � lead to a
demand strategy that focuses on fuel efficiency; new technologies to
reduce the need for oil such as the move to hybrid vehicles and to
hydrogen-based fuel cells; and to investment in smarter urban
planning and public transportation.
The failure to curb the demand for oil in the richest countries such
as Canada and, in fact, to reduce demand could be the real source of
a future oil shock, with all the economic pain and political
instability this would imply. This is why we need an energy strategy
in Canada. We don't have one today.
David Crane's column appears on Wednesday and Saturday. He can be
reached by fax at 416-926-8048 or at crane@....
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