Monday, November 2, 2009

The Future of Democracy in Canada: A Personal Journey. Part V: Peak Oil and the End of Inexpensive Energy

The Future of Democracy in Canada: A Personal Journey
Part V: Peak Oil and the End of Inexpensive Energy

The challenges which face our democratic system as a result of Peak Oil can not be understated. Indeed, much more than our democratic system is at risk due to the looming energy crisis. In keeping with my theme related to democracy, however, I’ll try to stay as focussed as I can in my discussion regarding the potential impacts which Peak Oil will have on our Canadian society.

First off, I guess I’d better explain the concept of Peak Oil. You may wish to visit Wikipedia or just type the term into the search engine of your choice, though, because my brief little explanation will certainly not do the science behind the term the justice it deserves. But rest assured that there is science at play here, due to the fact that oil, like all fossil fuels, are a non-renewable resource. That means that what’s in the ground today represents the absolute sum total of the resource, and there is no where else from where this resource can be obtained.

Peak Oil is probably best associated with the Hubbert Curve, named after the eminent geologist who first postulated this phenomenon. Picture a traditional upward than downward sloping bell curve. That’s it. The bell curve represents total production. The top of the curve, which is right in the middle is the peak. We’ve been steadily climbing the production curve ever since we first started drilling for oil. Where we are at in the curve right now is open to speculation. Some believe we are already at the peak, many others believe we are close to it.

Interestingly, although Hubbert was highly respected in his field, his predictions about Peak Oil were not taken seriously. Hubbert, based on his analysis, indicated that the U.S. production of oil would one day "peak", meaning that there would come a time when production began losing ground, and the overall number of barrels of oil produced in the U.S. in a day would begin decreasing. He indicated that, based on the industrial planning which takes place in the oil industry, that there would be about a 30-year lag time between the height of prospecting (finding new oil fields) and the production peak.

The interesting thing about Peak Oil is that you don’t know you’re peaking until you’ve looked at the production numbers for a series of year past the peak. Only in hindsight can you say with certainty that there was a peak. For the U.S., the industry peaked in the late 1960s. And although new fields continued to come on-line in the U.S. throughout the 70s and 80s, total overall production was never higher than those heady days of the late 1960s.

OK, so that’s the U.S. What about the rest of the world? Well, back in the early 1970s, when the first Oil Crisis hit us western democracies quite hard, the oil companies began prospecting like there was no tomorrow. The results were new discoveries in the North Sea and Alaska, among other places. In the North Sea, the oil was more expensive to extract, but given the market conditions, still a very viable alternative.

And that’s one other thing to keep in mind about Peak Oil. As we continue up the Hubbert bell-curve, keep in mind that easily extracted oil is already all gone, and that we are largely now extracting oil which is harder to get at or of a lesser quality (and therefore more expensive). I’ve heard that at the outset of the oil-driven portion of the Industrial Revolution, that you could extract 20 barrels of oil for only 1 barrel’s worth of energy used in the extraction process. Today, the ration is closer to 4 to 1 globally, and it’s a lot more expensive for certain types of extraction, such as tar sands oil, which I’ve read is closer to 3:2, but may be as high was 2:1. Note that these numbers are constantly being refuted, and I make no claim on them, other than to say that the overall trend is to get an increasingly smaller bang for your oil buck invested in extraction. However, others do make on a claim on those numbers, and you might want to look into that further for yourself.

One of the big problems is, of course, demand isn’t likely to be decreasing any time soon. In fact, demand will continue to increase world-wide as China and India ramp un industrial production. Even in a situation where the western democracies choose to conserve oil, it is incredibly unlikely to speculate that the overall demand for oil will flatline any time soon. Oil has driven our economy for the past 100 years, and we are addicted to it. Without oil....

Well, there’s the rub. Without oil, what kind of future do we face? Think about all of the things which we use oil for. Transportation. Heating. Agriculture. Product production. Our whole darn integrated global economy is based on the availability of inexpensive oil. Right now, there is no viable alternative to oil with which to run our economy.

Peak Oil is not predicting the immediate end of oil, as many in the media, government and oil industry would confusingly have you believe (so that they can brush it off as a crank position. "There’s still plenty of oil in the ground you know". That’s when they bother to talk about this at all). Instead, it’s the end of cheap oil, and that’s just a factor of Basic Economics 101. When the demand goes up and supply goes down, what happens to price?

On the downward slope of the production bell curve, keep in mind that demand remains high, and continues to increase for quite some time. This makes the purchase of the commodity more expensive. That means in Canada that we will be faced with higher gas prices for our cars, home heating, the price of food (which requires oil inputs from our oil-dependent transportation system, not to mention from the oil-based factory farm practices which produce the food). You can expect Canada to find itself in a situation of spiralling inflation, as consumers compete for a diminishing but necessary resource with their hard-earned dollars.

Inflation leads to economic instability, and has in the past thrown a lot of people out of work. This will happen again, particularly since there will be a decreasingly supply of oil available to run our industrial economy (or at least a significantly more expensive supply). Industry will be forced to "rationalize", and that likely means "downsize". This will in turn lead to additional pressures on our economy.

And you can forget about those cheaply made-in-China products which we’ve become so dependent upon to enrich our lives (and I’m as guilty here as anyone else, what with my own laptop having just bit the dust this past weekend...I’m already in withdrawal mode, and am starting to feel my whole world...shrinking...!) because the costs of making these products in China or where ever are also going to be on the increase due to greater energy prices. And then factor in the increases to transportation costs.

Everything is going to become more expensive, and there will be fewer Canadians making money. That’s one of the biggest challenges we face from Peak Oil.

Is our institution of Democracy here in Canada robust enough to address this imminent situation? I don’t believe it is, and largely that’s because I don’t believe that our government, be it Liberal or Conservative, is going to be ready to admit to Canadians that the good times have come to an end. They will not be alone amongst western democratic governments in this denial of reality. Since democracy inherently works on presenting the best set of options to those who are voting for you, what chance would a political party which advocates the imposition of austerity measures have?

Such a political party wouldn’t even have to run on a platform of energy rationing to be ineffective. Just telling people that our lifestyles need to change as a result of the crisis which we find ourselves in the midst of is going to limit popular votes, and nullify the voice of such a Party. Our government has spun the truth about the climate change crisis now pretty much since day one; if we continue to lack for an adult conversation about climate change, which is a pretty popular topic right now, what chance do we have to address Peak Oil?

At least when we start sliding the slope, we’ll be able to point to rising energy prices and say "this is directly impacting our health and well-being today". Unfortunately, the solutions which we might try to address Peak Oil may be to lower government taxes on the product, and make gasoline and home heating oils less expensive, or at least to offset those increases in price. The problem here is that if we do so, our governments will lose needed revenues which could otherwise translate into investments in infrastructure which would assist Canadians in truly dealing with the crisis in the end of cheap energy.

Make no mistake here, successive Liberal and Conservative governments have been cutting away at taxes for decades now, although the Taxpayer Federations would have you believe otherwise. Our government have lost hundreds of billions of dollars in revenues through tax cuts, which have primarily benefited the richest in our society at th expense of public investment which would benefit all. Cutting taxes on oil after the peak will be another wasteful exercise which the majority of Canadians, facing higher prices, are likely to embrace.

There will be consequences to these decisions, however. Our economy has always created winners and losers, with the losers grossly outnumbering the winners. As they say, the rich get richer and the poor get poorer. With the end of cheap oil, we are likely to see even more of a split between rich and poor, through the democratic choices we make at the ballot box regarding the level of appropriate taxation.

Without public sector investments, the least wealthy in our society will start to feel the pinch. Likely this will manifest itself in a very real way when the working poor can no longer afford to get to work due to higher gas prices and a lack of commuting options. In situations where there are an increasing number of unemployed, coupled with shortages in energy and food, what might happen? I think that this mix will be explosive.

With the ballot box an ever-decreasing option for citizen engagement with government, how might Canadians begin to engage? Is it possible that if events continue to unfold as predicted, and we find ourselves in a situation where the economically disadvantaged feel that they can no longer rely on the good of the greater society just to get by, I think that we are going to see a significant level of agitation and social unrest, starting with civil disobedience, but leading potentially to violent clashes with whoever is in authority.

When change can not be affected at the ballot box, there are likely going to be attempts made to affect it through other means. Over and over and over again our Government continues to prove to Canadians that it is not ready to take the actions necessary to address the crises which we find ourselves in the midst of. With a complacent and co-opted media, there is really no one leading the call for action.

When inaction is no longer viable for a significant segment of our society, which will have largely already turned away from democratic processes, we can expect dire consequences.
I do not advocate this approach. I am merely saying that I believe Canadian democracy is in trouble because we are not being honest with ourselves about what the future holds. I believe that we need to demand change in all of our governmental institutions (starting first with passing fair election laws where the will of the people as expressed at the ballot box actually translates into governance). If we do not begin to change, than change will be thrust upon us, and it will likely not be an expression of the democratic majority. Instead, it will be reactionary.

And what sorts of measures might our government take to address this sort of reactionary change? Well, there are models for that scenario as well.

(Continued in Part 6...)

1 comment:

Sudbury Steve said...

Boy, some things really irritate me. So here I am, in the midst of a massive rant about a lack of media coverage around Peak Oil, and what do I see? This article in today's Globe & Mail, which looks to be the beginning of a series of articles or blogposts about life after the peak. Do read Jeff Rubin's article, which besides being much more concise than mine, is published on the G&M website: