The two main provincial political parties, the B.C. Liberals and the B.C. NDP, don't like talking about peak oil. They both seem to think it's good public policy to build a new multibillion-dollar bridge across the Fraser River.
Today, I've been reading Jeff Rubin's startling new book, Why Your World Is About to Get a Whole Lot Smaller: Oil and The End of Globalization (Random House Canada, $29.95). And I've got to say, it's pretty depressing to think that the two people with a shot at becoming premier both seem completely oblivious about international oil markets.
Rubin is not some left-wing flake who can easily be dismissed by B.C. Liberal Leader Gordon Campbell and NDP Leader Carole James. He's the former chief economist at CIBC World Markets, and he presents a compelling case that the future is not going to be a continuation of the past.
Sky-high oil prices caused the global recession. And as soon as the economy starts to recover, it will likely be hobbled again by rapidly rising oil prices.
This requires some innovative thinking on the part of our provincial leaders. The Greens seem to be the only ones with a clue about the whole nature of peak oil—which suggests that once global oil production peaks (or has peaked), it will result in an inevitable decline in supplies. The mismatch between demand and supply will cause wild price gyrations, crippling economies around the world.
Rubin's analysis of demand for oil in oil-producing countries is particularly riveting. He notes that demand has declined in areas where it was traditionally the strongest—i.e. North America and Western Europe.
However, demand for oil has risen sharply in oil-producing countries, such as Venezuela, Iran, and Saudi Arabia. That's because governments in those countries have suppressed the price of oil for their own citizens.
"So great is the popular demand for fuel subsidies that in many OPEC countries higher world oil prices actually raise oil consumption, in total defiance of conventional economic logic," Rubin writes. "Subsidies turn what otherwise is rational economic behaviour on its head."
So as supplies decline, overall demand can continue increasing, benefiting OPEC producers. "If you are Hugo Chavez, the oil market is a virtuous cycle where self-indulgence leads to self-enrichment," Rubin writes.
It's too bad that Campbell and James are too busy to read Rubin's book. Because if they did, they would both overhaul their platforms, kill the Gateway Program, and place a lot more emphasis on generating alternative energy.