Rising prices spread fear at the pumps
Ken Gray
The Ottawa Citizen
Friday, May 02, 2008
You drive past the gas station in Orléans and the sign says your fill is going for $1.22 a litre. Blame it on Russia.
The world's largest oil producer reported that its output decreased for the first time in 10 years. It delivered one per cent less oil than a year ago.
What's disconcerting about this little-known fact, trumpeted recently on the front page of The Wall Street Journal but getting little play elsewhere, is that the scenario unfolding in Russia is being repeated the world over. Essentially, its Siberian oil fields are aging, becoming tired, the easy-to-reach oil declining.
It is not alone. The world's great oil deposits -- the North Sea, Mexico's Cantarell deposit and Alaska's Prudhoe Bay -- are seeing their production diminish despite astronomical demand.
So what of production from the Organization of the Petroleum Exporting Countries? Its output is flat, in part due to declining fields.
Usually the price of oil has an elastic effect on output. Higher prices stimulate increased production. Nevertheless with all-time-price highs being reached regularly, world production is flattening. And some experts are concerned that many countries have wildly over-estimated their reserves.
Over the past four years, the cost of a barrel of oil has risen from $30 to $111. And yet, there has not been a corresponding production response. It sounds very much like what experts in the field call peak oil. That is, the world is producing as much oil as it ever will and that production will gradually decline as time passes due to diminishing reserves. Those same experts are reluctant to say when peak oil will be reached. We're in the neighbourhood, though.
Think not? Well, recently, T. Boone Pickens, the billionaire energy investor, told Bloomberg News he doesn't expect world oil production to exceed 85 million barrels a day because of depleting existing wells. He thinks oil will reach $150 a barrel.
And then what is the No. 1 priority of General Motors? Producing the Volt, an electric plug-in car with a gas generator that keeps the battery charged on long trips. T. Boone Pickens and General Motors adjusting to expensive oil -- it doesn't get much more establishment than that.
So what does this mean to the person driving past the gas station in Orléans? Higher prices. A different lifestyle, maybe a radically different lifestyle someday.
The American Automobile Association estimates that in the United States, driving habits will change at $3.50 a U.S. gallon, with the price now in the low $3 range.
Food stores south of the border are offering $10 off in gas if you buy your groceries with them. Motels are handing guests $50 gas cards. But in Canada, we're driving with gas in the $4.62 a U.S. gallon range already, with taxes and all. Yet, our driving habits haven't altered much. But for how long and at what price will they change?
When that occurs, the adjustment will be massive. The suburbs could be hollowed out through demographics (who needs a big home when the youngsters have moved out and who wants to heat it?) and when residents finally discover that the cost in time and money for the SUV isn't worth the daily drives. Pity long-distance commuting towns such as Rockland, Carleton Place and Arnprior. They are in for a shock.
Ottawans will flock to transit (already, with $1.22-a-litre gas, ridership is up as much as 6.9 per cent year over year) but our system is petroleum-dependent and labour-intensive. City finances will be further battered by increased ridership on buses that are heavily subsidized by the municipality.
Ottawa City Council naively killed the workable electric north-south light-rail project (slated to finish next year at a remarkably low cost) and now the mayor and staff have produced two badly flawed transit proposals in the past two years.
City staff's latest plan doesn't even get electric light rail to Orléans, Barrhaven and Kanata by 2031, only halfway in fact.
City council needs to realize our transportation problems are now, not in some far-off fanciful date 20, 30 or 40 years in the future. Peak oil won't
wait for them. The latest rail plan is expensive and not good enough. Build one line, without transfers, to Barrhaven, Orléans or Kanata while adjusting bus
and car traffic to accommodate a surface line through downtown. Forget the costly, time-wasting tunnel. Build one rail line while planning the next two routes.
Electric rail must be built quickly. If not, we're in trouble.
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