Prof says politicians blinkered on peak oil

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      A UBC researcher believes elected politicians swayed by the "moneyed elite" are preventing greater action on climate change and peak oil.

      Bill Rees is the originator of the ecological-footprint concept and professor in community and regional planning at UBC. He told the Georgia Straight that politicians should be "running for shelter" following the October 23 release of a report [pop-up in PDF format] on peak oil by Germany-based Energy Watch Group.

      The group's 101-page report analyses aggregate projected supplies of crude oil in 10 of the world's productive regions. According to the findings, world production of conventional oil peaked in 2006, supplies will now dwindle by about three percent per year, and by 2030 global supplies will be half what they were at the peak. Wars and economic strife were factors the group did not rule out. Current daily world consumption of oil hovers at about 80 million barrels. On October 26, world oil prices hit a record high, briefly surpassing US$92 per barrel.

      "Everyone is afraid of it [peak oil], but it might end up having good effects," Rees said. "What we have long needed are much more realistic energy prices that tell the truth about environmental damage. If we were paying the full social cost of automobile fuel–if we had a carbon tax that raised the price of gasoline to the real cost of using it–it would probably cost us $5 a litre."

      Premier Gordon Campbell recently declared war on climate change at the Union of B.C. Municipalities annual convention in Vancouver. However, Rees said the B.C. Liberal government refuses to cancel the $3-billion Gateway project–a twinning of the Port Mann bridge and a widening of Highway 1 from East Vancouver to Langley–which he said will cause an increase in greenhouse-gas emissions.

      "The people in power are part of the moneyed elite, the corporate sector, and they take their marching orders from major corporations," Rees said. "Nobody in Ottawa is willing to confront Alberta or the major oil companies, to whom we've sold off our natural assets. The automotive companies have enormous political clout because of the huge employment associated with them. And the fact they have continued to build totally market-stupid automobiles and are getting run out of the country is already panicking the politicians."

      Jake Jacobs, communications director in the Ministry of Energy, Mines and Petroleum Resources, did not make Energy Minister Richard Neufeld available for a phone interview by deadline.

      Matthew Simmons, a Texas energy-investment banker and author, has been warning of the likelihood of dwindling global oil supplies for several years. It led him to write Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy (John Wiley & Sons, 2005). Speaking by phone from Houston, Texas, Simmons, CEO of Simmons and Company International, described the Energy Watch report as "first-rate".

      "It looks at all the right data and does what all the people who are doing their homework are doing, by lining up all these decline curves," he said. "It is a very vivid picture."

      The Energy Watch Group report's authors, Werner Zittel and Jí¶rg Schindler, predict a drop in oil supply to 58 million barrels a day in 2020 and 39 million barrels in 2030, which Simmons said will lead to "some unbelievably bizarre human behaviour".

      However, one of B.C.'s best-known energy experts isn't alarmed by the scenario. SFU professor and author Mark Jaccard told the Straight he has seen "several reports just like this" and said it is highly unlikely that peak oil will result in what he calls the "cataclysm scenario".

      "We had a period in the 1970s where we thought we were running out of oil very quickly," Jaccard said. "The price shot up and there were people who said that by 1990, the price would be $150 and $200 a barrel–$300 a barrel today."

      Jaccard said that "clearly did not occur". He acknowledges that economics is not infallible, but it can effectively study how markets respond to prices.

      "When the price of something goes up, initially there is a slow [consumer] response, so the price can stay there for a while," he said. "The slow response is a decline in demand for that particular product and the development of either more of it–for people to find it–or the development of substitutes. Peak oil, of course, if you look at the peoples' Web sites, is only looking at conventional oil [supplies]. So their totals and their calculations do not include oil sands or oil shale, heavy oil, coal conversion, or bio ­fuels: all of the substitutes that kick in as the price of oil goes up. What we have been seeing over the past six years is a dramatic increase in biofuels, in oil from unconventional sources, and even conventional oil with things like enhanced oil recovery. And we have seen a slowdown in demand for oil as people have looked for alternatives."

      Added Jaccard: "We'll get these price spikes and falls over two- and five-year time frames, but, generally, the average price of oil won't be above $100 a barrel over the next 20 years. That is the average, so it can go to $150, but the average won't go above $100. That is because the cost of producing the alternatives to oil are, like, $50 a barrel."

      Rees said Jaccard's economics background makes him, by nature, a "technological optimist".

      "Mark believes, and there is truth in it, that prices do stimulate all sorts of unanticipated effects in the economy," Rees said. "They make alternative-energy sources that were initially not looking exciting suddenly look pretty good. So money starts flowing from oil and gas into some of these alternatives, and who knows? They may start paying off. Mark himself believes that there is no problem with oil, because we have coal, and coal can be cracked and refined itself to produce crude petroleum and even natural gas.”¦The cracking process, the conversion of coal into liquid fuels and gas is an enormously energy-intensive problem. It is like the oil sands: you use a high fraction of the energy to produce the coal itself."

      Both Jaccard and the premier have touted "sequestration" (or burying) of carbon emissions so they are not released into the atmosphere as a greenhouse gas. Rees said that it is not realistic for Jaccard to be justifying greater use of coal, which releases large amounts of greenhouse gases, because sequestration "is not a proven technology".

      "They [economists] refer to the principle of 'near-perfect substitution'–that human ingenuity stimulated by rising prices will find substitutes for existing technologies," Rees said. "If you can double the efficiency of what they call 'factor productivity'–the amount of goods or utility you get out of an input into a certain process–you can grow to twice your present size on the same inputs of energy and material. We have been doubling factor productivity successfully for quite some time. The point is, it doesn't have the effect of decreasing throughput [consumption]; it actually increases throughout, because prices fall and wages go up. So the gains from efficiency may actually accelerate consumption and not reduce it."

      On October 25, Alberta premier Ed Stelmach announced a $1.4-billion increase in royalties to the oil-and-gas sector on the back of a government-commissioned report. He did not implement a new tax on oil-sands production.

      Related stories:

      Supply crunch and rising demand pushes up oil prices (August 2, 2007)
      Clinton transcript on peak oil (June 29, 2006)
      Clinton raises alarm about oil depletion (June 22, 2006)
      Oil fuels city's food supply (February 2, 2006)
      Running on empty (October 6, 2005)