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Why Canada needs an energy strategy now

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  • P. Neuman self only
    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.
    Message 1 of 1 , Aug 14, 2004
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      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."

      Pat N

      --------- Forwarded message ----------
      From: "janson2997" <janson1997@...>
      To: fuelcell-energy@yahoogroups.com
      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

      DAVID CRANE

      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
      barrel.

      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@....

      http://www.thestar.com/NASApp/cs/ContentServer?
      pagename=thestar/Layout/Article_PrintFriendly&c=Article&cid=1092434678
      257&call_pageid=968350072197

      j2997









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