Tuesday, May 15, 2007

Peak oil

In economics when you have a fixed supply of a commodity and a rising demand, the price is bound to go up. Gold and diamonds are classic examples. Just by the fact that our population keeps increasing faster than we can dig up gold and diamonds the value of these commodities will keep increasing. Plus, there are no good substitutes for gold and diamonds, so, as their price keeps increasing we don't end up substituting other commodities.

Are we in the same position with oil? The supply of oil is finite, but global demand for oil is accelerating – both because of population growth and because countries with the biggest populations in the world, namely, India and China are rapidly industrializing their economies.

Industrialization is a process whereby work formerly done by humans and animals is replaced by work done by machines. In Great Britain, where industrialization first began in the late eighteenth century, machines called steam engines ran on coal. During the early years of the twentieth century the internal combustion engine and the deisel engine replaced the steam engine. Industrialization switched from coal to oil. This switch coincided with the decline of the British Empire and the rise of the American Empire. Britain had ample supplies of coal but it had no oil. The United States had plenty of both.

In 1956 American geophysicist Marion King Hubbert estimated that U.S. oil production would reach a peak sometime between 1965 and 1970 after which the supply of domestic oil would decline. Although his forcast was ridiculed at the time it proved accurate.

Was it a coincidence that the first global oil crisis ocurred soon after U.S. domestic oil production peaked? If the Americans could have kept increasing oil production they wouldn't have felt as much pressure from oil prices when the Arab oil producing nations conspired to reduce supply.

The increase in price of oil in the 1970's was only temporary because the global supply of oil has kept increasing since then. Thus oil was cheap in the eighties and nineties, fueling a global economic boom which in turn caused demand for oil to skyrocket. But if the global supply of oil is finite, the question is, when will we reach peak global production? What with accelerating demand it probably won't be long. And when it happens the global economy is in for a series of shocks. We're not talking about running out of oil – when peak oil occurs supply can no longer keep up with demand as it has for the last 100 years. And when that happens the price of oil will go up and up and up.

Remember I talked about there being no good substitutes for gold and diamonds. Well, guess what? The same is true for oil. Sure there's lots of coal and it's cheap, but burning coal is very dirty. The pollution would prematurely kill millions and burning coal releases twice as much carbon dioxide as burning gasoline. Plus open-pit coal mining destroys and blights millions of acres of land. So coal is not a reasonable option. Nor is natural gas which is in the same position as oil.

What about energy alternatives like solar, hydro, wind and nuclear? All of them lack the portability of oil and all of them would take up to fifty years to be viable at the scale required to fuel our industrial economies. What about hydrogen? Even if it is a viable technology, which is questionable, it will take just as long or longer for a hydrogen based economy to come on tap. And hydrogen requires a source of energy to produce so we're back to square one. Our economies are based on cheap oil, and unfortunately there is no good substitute for oil on the near horizon. If peak oil comes fifty years from now we may be OK, but if it comes sooner, which is more likely given the huge increases in demand, we are in big trouble.

One of the lessons from the “Oil Crisis” of the 1970's was the phenomenon of “stagflation” - simultaneous recession and inflation – something economists had previously thought impossible. What they hadn't taken into account was that our economies are based on cheap oil. When the price of oil rises high enough it takes other prices with it, whereas the only incomes it raises are for those who run or own oil companies. With costs rising and most incomes not able to keep pace the economy slows to a halt.

We might want to consider this given the vulnerablility that the “free trade” agreement or (TILMA) between BC and Alberta puts BC, since the resulting huge disparity in wealth will give oil-rich Alberta a free hand to buy BC lock stock and barrel.

When we think of rising oil prices we mostly think of increases in the cost of transportation: the costs of driving and flying, for instance. But the effects of oil are pervasive throughout the economy. Even the food we buy in our supermarkets is vulnerable to the price of oil because every part of industrial agriculture is dependent on cheap oil, from the tractors, harvestors, pesticide and herbicide manufacture, crop spraying, and irrigation to the transportation and distribution of the produce.

We can do something about peak oil now, by encouraging government to invest in energy saving strategies, such as mass transit and supporting zoning bylaws that discourage suburban sprawl and ecourage higher urban density. The North American suburban lifestyle is a car-centric energy hogging dead end that will become untenable for everyone but the very richest citizens once the price of oil reaches a certain level – and it will.

We can be proactive now by using our cars less and walking cycling, and using the bus. We can start vegtable gardens and grow fruit trees and berries like our grandparents did. We can buy food from local smaller scale farms, or as near to local as possible. We can start to taper off of our addiction to oil now or we can go cold turkey later.

Nothing is certain. Oil production may keep increasing for the next fifty years. The hydrogen fueled “car of the future” may start to be mass produced in ten years. We can all keep assuming that everything will continue much as it has up till now. Or we can proactively change our lifestyles and our habits now so that we don't suffer the consequences when it becomes too late.

divided we fall

It's funny how a little thing like a provincial election can radically change the federal political situation. By beating the PQ for opposition party status in Quebec, the Partie Action Democratique has opened the way for Stephen Harper to make inroads in Quebec at the expense of the federal seperatist Bloc Quebecoise.

This brings me to the real subject of my column, which is unity and division in the Canadian left. I was listening to a CBC National documentary on the radio last thursday night that pointed out that although the NDP won its highest ever number of federal seats under Ed Broadbent in 1988, by running against the anti-free trade Liberals the NDP helped Mulroney's pro-free trade Progressive Conservatives get elected. Thus a phyrric victory, where getting the most seats became more important than stopping the free trade deal.

Some pundits would argue that during the 1990's the reason the Chretien Liberals won two of its three consecutive elections was that the right was divided. Now that the right in Canada is united under one party they are likely to win federal elections for the next ten years, as long as the left stays divided.

Chances are that the NDP under Layton or any other leader would reject any plan for merging with the Liberal party. And with good reason, because they would be swallowed up without a trace if they did.

But that leaves us with the real possibility of a majority Harper government that has no intention of inconveniencing the oil companies and Alberta by honouring Kyoto, that would like nothing better than to wholeheartedly join forces with Bush's spectacularly counter-productive “War on Terror”.

Elizabeth May the new leader of the Green Party was interviewed, along with Buzz Hargrove, Union leader. May, you may remember, concluded a deal with Stephan Dion that puzzled a lot of Canadians. The greens agreed not to run against Dion in his riding and the Grits agreed not to run in the riding where Elizabeth May is running.

Buzz Hargrove got kicked out of the NDP for advocating strategic voting in the last federal election. He tried to persuade labour to vote for strong Liberal candidates in some ridings and strong NDP candidates in others rather than split the left vote. Sounds like a good idea to me and Hargrove claims he's got the polling results to back him up.

Properly done, strategic voting could get us a minority government with the Liberals and the NDP sharing power – not a bad outcome for the left. It would be risky, but anything is better than electing a Bush-loving Harper majority government that would be in a position to wreak national and international havoc.

In our Skeena - Bulkley Valley riding we've got a strong candidate in Nathan Cullen. He's been an excellent environmental advocate. He'd make a great Minister of the Environment in a Coalition government. What do you say traditional Liberals? Why don't you think about it? Like I say, “if you can't join em, beat em.”