POLITICS - Its back. Can't you smell it? People are burning through gasoline again faster than you can say "Fill'er'up".
Last summer the summer driving season (beach parties, long weekends, vacations at the summer cottage, visiting friends and relatives) was so intense it drove oil prices up to a record $147.27 USD.
We had predicted Hundred Dollar Oil would come, especially with the world's easily accessible oil supplies dwindling and we're now so desperate we are going to tar (ie. the Alberta Oil Sands) and even coal (China is converting coal into gasoline) in order to fuel our cars when supply becomes low.
The shortage is most noticeable in the United States, which according to a 2007 CIA estimate consumes 20.68 million barrels of oil per day (almost one quarter or the world's total oil consumption, see the CIA World Factbook for more details).
After last summer's driving season was finally over, prices settled back down below the hundred dollar mark and even reached $35 USD earlier this year... but with the prospect of another driving season up ahead the prices have already shot up to $62 USD and many industry analysts are predicting the return of hundred dollar oil.
"The stage is currently being set for oil prices to skyrocket," says U.S. energy analyst David Fessler. Fessler cites the decline of such super fields as the North Sea, Alaska's North Slope, Mexico's Cantrell Field and Saudi Arabia's Ghawar Field – largest in the world – along with the extraordinary cost of producing crude from the few remaining newer crude sources such as Alberta's Athabasca tarsands and reserves six or seven kilometres below sea level off the coast of Brazil as signs that we are facing another oil shortage and skyrocketing prices.
"If demand in China and elsewhere returns to its previous rate of growth, it will not be too long before the same calculus that produced the oil-price spike of 2007-08 will be back to haunt us again," says economics professor James Hamilton of the University of California at San Diego. He and several others are predicting Two Hundred Dollar Oil by 2014. Maybe sooner.
"You're going to be back to $75 (U.S.) oil by the end of the year, and $200 (USD) per barrel within five years." says ex-oil tycoon T. Boone Pickens, now a champion of alternative energy.
It doesn't help that the oil industry has cut funding for oil exploration. Despite record profits, the industry isn't looking for new oil sources as much as it usually does, perhaps realizing its more profitable to drum up more money by playing into the doom-and-gloom of the growing shortage.
When oil collapsed more than 70 per cent from its July 2008 record high, many major oil firms slashed their exploration budgets claiming the lower prices did not cover the expenses of today's high-cost of finding new sources. High cost? Pfff. Utter nonsense. Their record profits tells a different story.
The Organization of Petroleum Exporting Countries (OPEC), has delayed 35 new exploration projects until 2013. About $100 billion USD worth of Alberta tarsands expansion projects are now on hold. Civil war continues to rage in Nigeria, America's fifth-largest source of oil imports and a source of frequent supply disruptions.
And when the global recession ends, demand in China, India and other growing economies will come back strong, and thus will push oil prices up faster and farther than ever expected. With the lack of new exploration it means we may finally meet the peak oil pinnacle.
(Peak Oil is the theory wherein oil demand finally out paces supply, creating on a graph a peak between declining oil supply and growing demand. After that point its guaranteed oil prices will skyrocket.)
To combat that eventuality many nations and the automotive industry are pushing the idea of cars that run on alternative energy, such as hydrogen (gasoline is many of hydrogen and carbon) and is actually a more efficient energy source, but North America currently lacks the infrastructure to distribute it. It would take several years to build the infrastructure required.
If we see $100+ oil again, perhaps permanently, we could see public opinion swayed to the point where hydrogen-distribution infrastructure is suddenly on the public agenda.
American, Canadian, Toronto & International News Commentary: Spreading Freedom in the Face of Tyranny
May 26, 2009
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