All I Want for Christmas is an Energy Policy

“The world’s energy system is at a crossroads. Current global trends in energy supply and consumption are patently unsustainable — environmentally, economically, and socially. But that can — and must — be altered; there’s still time to change the road we’re on.”

Is this statement from a mad eco-blogger off his meds?  Or is it perhaps from the supposed terrorist guy that Obama pals around with, Professor William Ayers?

No it’s just the 2008 World Energy Outlook released by the International Energy Agency (IEA).  The agency is the energy advisor to 28 member states, mostly the industrial world.  Typically, the agency has been very optimistic but recent reports have sounded alarm bells and are very somber in tone.  The base case of the IEA shows all liquids production rising to 106 million barrels per day in 2030, which is lower than the previous production forecast of 116, absent any policy intervention.  It also shows a one third increase in coal usage.

The report has been sandwiched between a lot of bad news such as the world’s present economic meltdown, the collapse of the GM, Chrysler and Ford, and global warming and has not received the attention it deserves.  The remarkable thing is that oil is directly involved in all three.

Here’s how…
Jeff Rubin, chief economist for CIBC, argues that “In the past, oil shocks have triggered global recessions by transferring billions (or now trillions) of dollars of income from OECD economies with typically very low savings rates to OPEC economies with typically very high savings rates.”  He also speculates that “If the global meltdown is all about defaulted subprime mortgage debt, a global recovery will have to wait until we see a bottom in US housing prices.  But if the global recession is primarily about the recent oil price shock, then the subsequent halving of prices from $147/bbl to little over $60/bbl now, and not a pick-up in Cleveland property values, is the real road to recovery.”

Earlier this year GM’s president Rick Wagoner admitted the obvious, “These higher gasoline prices are changing consumer behavior and rapidly.  We don’t think this is a temporary spike or shift. We think it is permanent.”

Previously, I had indicated that bankruptcy troubles at GM and the others would happen in 2009.  It now appears that GM may run out of cash before Christmas.  After the US provides a $50 billion bailout package, then Canada will be expected to come up with $5 billion as part of retaining our portion of the integrated industry in Canada.  That’s how the branch plant economy works.

It will be amusing to see how PM Stephen Harper will spin his free market principles into a capitalism bailout package. To maintain a veneer of capitalist philosophy, the taxpayers of Canada should receive an equity share in return for their $5 billion contribution.  The US government, as the larger contributor, would get most of the pie.  After all, the existing shareholders of the automakers haven’t held their management accountable for their actions and the companies are presently worthless.  Isn’t that how it works?

Oil didn’t kill GM directly alone.  Poor management over the decades failed to control costs or recognize the end of the oil era and adapt with appropriate vehicles.

The last of the three symptoms is global warming, which is caused by the burning of fossil fuel such as oil or coal.  The IEA report indicates that converting to alternative renewable energy or conservation will be costly but provide savings in energy.   For example to cap at 550 ppm would cost $4.1 trillion but saving $7 trillion in energy.  To reduce to 450 ppm would cost an additional $9.3 trillion between now and 2030 but return savings of $5.8 trillion.

Another big issue noted in the report is the rising depletion of existing oil fields, which is presently 6.7% on average.  The world must find new output of 30 million barrels a day by 2015 to maintain existing levels of production.  That’s the equivalent of three Saudi Arabia’s.

Increases in fuel demand and emissions will occur in non-OECD countries such as China and India.  In contrast, the US demand for oil has actually decreased in the first eight months of 2008 by 5.4% or 1.1 million barrels per day, when compared to 2007.  That’s the equivalent of almost four refineries the size of the Irving complex in Saint John.  It is likely that Barack Obama will aggressively move on reduction of US oil dependence in the coming years.

What we aren’t doing very well is attacking the disease instead of the symptoms.  The disease is addiction to oil.   Curing the root problem would require an energy policy that is integrated with our industrial objectives and public works expenditures.  Does New Brunswick have such a plan that is related to the real world of the IEA?  Well, we do have the self-sufficiency plan which it is rooted in the past and the dream world.

Remember that the IEA are optimists and they say we have to dramatically change our approach.  The real situation is a lot worse than most can imagine.  Energy Minister Jack Keir, could we have an energy policy by Christmas?  I won’t specify what year because I don’t want to be disappointed when I look in my stocking.

How do the Conservatives rate on Energy Policy?

Political campaigns are remarkably like war.  Lots of resources and blitzkrieg attacks disorient the other side.   To re-phrase von Clausewitz – “politics is war by other means”.   And it’s starting to get rough out there.   Political opponents are demonized (scary, not ready to lead, etc. ) so that any tactics are permissible.

But let’s look at energy policies.  What are the leaders of each party thinking about?

Stephen Harper is a master tactician of the political game.  Some say he’s got control issues or perhaps he just uses “enhanced management tools.”  He spots weakness and dive-bombs the opposition with attack ads, campaign or no campaign.  Take no prisoners is a description that comes to mind.  Hey, who knew that Karl Rove lived at 24 Sussex Drive? But you can’t argue with success.  He’s had the opposition on the run for some time.

Energy costs are the sword of Damocles hanging by a horsehair, and will have serious consequences for each of us.  However, this is not apparent when viewing the Conservative website. Of the eight key priorities on the Conservative website, energy doesn’t make the list.

Our PM has been using short-term tactics and guerilla warfare to build support and destroy enemies.  His long-term vision is less clear.  One of his greatest successes has been the fee on gas-guzzlers and the ecoAuto rebate.  The rebate was cancelled after the 2008 model year.  The relatively low program cost of $150 million couldn’t have been the cause of its demise.  Was it GM unfriendly and had to go?  Luckily, he retained the fee on gas-guzzlers.

His need to retain or increase his power will always trump good policy. The diesel tax cut is a good example.  Stephen is an economist and knows that lowering the price of a product encourages the use of it.  Two cents will lower the cost of fuel by 1.5%.  Since fuel is only one third of transportation cost, the actual reduction in product cost will be ½ of 1% if it’s passed on to consumers.  Since most food comes from the US, this only affects transport within Canada.  So, there’s virtually no effect on your head of lettuce from California.

If you own a diesel car, it will save you $24 a year. This policy will cost the treasury $600 million a year, have questionable results, but it will buy votes.

The National Energy Board recognizes that conventional oil is declining in Canada and that imported LNG will have to take the place of domestic natural gas production in coming years.  Export applications do not have to consider whether Canada has adequate natural gas reserves, as was the case before 1985. Only tar sand development, which has a low net energy output, is on the rise.  Should we be proud of the ecological fallout in Alberta?  Will other countries eventually ban the import of these products or penalize us for carbon output?

Does Stephen still believe that Canada is an energy superpower? What was his purpose to promoting this view of Canada’s energy resources?  Should Canada have a national security policy on energy with actual physical reserves?  Should there be an east-west pipeline through Canada?  What about an east west DC electric transmission line?

An important question remains unanswered: How will we heat our homes in the future at reasonable prices? Those with oil heat in the Atlantic Provinces are in for a rude awakening.  Quebec has cheap electricity and Ontario has natural gas, for the moment.  The votes of Atlantic Canada make little impact on the national scene.

Although the price of oil is now lower than its peak in June, it will rise again in the near future as world production starts a decline in roughly 2010.  The investments required to meet the energy challenges of the 21st century will take a significant number of years to achieve.  We should have started decades ago.

How will we get around as fuel becomes very expensive and is rationed?  How will our economy and jobs survive the shock of energy shortages and prices?  How does Stephen feel about conservation of energy?  Ignoring the problem of peak oil doesn’t make it go away.

My rating given to Stephen Harper for a lackluster energy policy – F.    His lack of attention and understanding of important energy issues is counterbalanced by his desire to spend money on boondoggles like patrol vessels for the arctic.  And $490 billion over the next twenty years for the military to participate in overseas adventures with the US.

Maybe Canada should opt for Free Trade in Cars

Are Canadians paying too much for their cars?

Last year the US dollar lost considerable value in relationship to the world’s currencies.  When the Canadian dollar hit parity and indeed rose above the US dollar, it became strikingly apparent that cars were still considerably cheaper south of the border.  It became an embarrassment for the car manufacturers and some announced reduced “Canadian” pricing.  Like the innocent soul that I am, I went back to sleep assuming that the problem was solved.

Wrong!  A little research on the websites of various automakers shows a different story.

Honda sells vehicles that range from 7% to 48% more expensive in Canada.  Lower end cars show less difference.  For example, the Fit is close, coming in at 7% higher in Canada.  The Civic hybrid is 17% higher ($22,600 vs. $26,350).   The S2000 sportscar is 48% higher, about $16,000 more expensive here. The Toyota Prius is 24% cheaper in the US ($22,220 vs. $27,600). And I could go on and on but you see the tendency.

GM and Ford seem to have closed the price differential by marking down the differences with discounts.  GM has a “pricing allowance” of $16,000 on the Cadillac Escalade.  Ford uses the terms – “family pricing and delivery allowance”.  It looks like they don’t actually want to lower the higher price on a permanent basis.

What I find incredible is that cars can be sold cheaper in Alaska than in New Brunswick.  The Mazda 6 sport sedan is 25% ($5,400) more expensive in Canada. In fact the destination charge is only $700 versus over $1200 for Canadian locations.  Are we overcharged by auto manufacturers?

Some of the reasons tossed around for the difference are a bit strange.  Are Canadian interest rates really lower?  Do we get more incentive deals than the US?  Could we really negotiate a better deal because there is more profit than south of the border? Do cars sold in Canada have different warranty coverage and different features? One thing is certainly true. Exchange rates vary from week to week.

We spend roughly $53 billion on new vehicles each year and if we’re paying roughly 15% too much, it’s costing us $8 billion extra each year.  Wouldn’t this be a fair job for the federal government to investigate and act? Obviously, we have to consider the exchange rate and other valid costs that could be proven by the manufacturers.

What has been Ottawa’s response so far? Mr Flaherty suggests that we shop around.  Well it’s presently quite difficult to import a car from the US, thanks to our government bureaucracy.   Real “free trade” in cars would allow Canadians to buy a car in the US and bring it into Canada paying only the sales tax.  Anything more is a trade barrier that ensures higher prices in Canada.  When enough cars come across the border, the prices at Canadian dealers will migrate towards the same level as in the US.

During research, I came across a recent article in MACLEANS magazine by Colin Campbell that indicated the same tendency is showing up in all consumer goods, not just cars.   A couple of interesting quotes  “The reality is that what you can buy in the States for a dollar costs $1.35 up here. That’s the reality they should be facing, not this other smoke and mirrors.”
From Professor Avi Goldfarb quoted in the article “It’s not so much that the Canadian consumer is willing to pay higher prices. It’s much more that the Canadian consumer doesn’t have a choice,” he says.

Canadians don’t make higher salaries than in the US yet we pay more for everything we buy.  The answers being given to us are inadequate and unacceptable.   We are paying probably hundreds of billions of dollars in excess of fair prices.

It’s time we ask Stephen Harper what he plans to do about this gouging machine supported by his government.  And the next time you go to Chapters to buy a book, bring along some American money.  If there is a US price listed, you might get a bargain.

here’s a website I ran across after writing this article.  it’s great for those who want to take real action and save money by importing a car from the US.    http://www.carswithoutborders.com/

Where is New Brunswick’s Green Vehicle Policy?

These are interesting times.  A remarkable historical event is unfolding before us at breakneck speed – the beginning of the end of the oil era and the gasoline car.  On a superficial level we get emotionally involved with our cars and it’s such a pain.  Either there’s a repair bill, or higher operating expense these days with gas going through the roof.  It makes you want to reach out and sign on the dotted line for a new shiny reliable model.  But wait a minute.. Let’s think about this a little deeper.

My car just cost me $73 to fill up and it isn’t a large tank.  My sister’s van with a 90-liter tank costs $125 to fill each time.  She recently bought a small car.  The saving in gas bills makes their payment.  The older van sits in her driveway and is used sparingly.  Such is the discipline of higher prices.

The Federal government introduced the ecoAUTO Rebate program for two years.  Penalties are being levied on big gas-guzzlers and bonuses given for vehicles that sip fuel.  Looking closely, it seems to have been the proverbial horse designed by a committee (ends up as a camel).  It has selections that are totally illogical unless one realizes that the domestic auto industry has a powerful lobby.

Take the example of the Honda Fit, 6.6 L/100 km, not being included in the 2007 Federal government ecoRebate program by .1 liters / 100 km.  Honda was not impressed as it’s competitor, Toyota’s sales took off and their figures dropped.  As a result of quick re-engineering by Honda, it now qualifies for 2008.

Under the flex fuel category, the Chevrolet Impala at 12.3L/100 km, and the Chrysler Sebring, at 13L/100 km, is eligible for a $1000 rebate.  The Sebring uses double the fuel of the Honda Fit.  Impala is made in Oshawa, Sebring from Illinois, and the Fit is from Japan.

The federal program ends in December as Transport Minister Lawrence Cannon indicates that “it has served its purpose in raising consumer awareness of fuel-efficient models”.  Can you follow that reasoning?  A recent CBC story says higher than expected buyer interest will result in overspending of the program budget.

There are five provinces that offer a sales tax rebate for hybrids – BC ($1,000) PEI ($3,000), Quebec ($2,000 for vehicles under 6L/100 km), Ontario ($2,000), Manitoba ($2,000).  A number of these programs will be phased out in coming years, presumably as the technology evolves and price differentials decline.  If you buy a hybrid in Ontario, the combined rebates are $4000.

The rationale for these programs had been primarily reduction of greenhouse gas, and not peak oil.   In the last year, the peak oil theory has made the jump from blogosphere to some main stream media.

As gas price rises, all of the usual suspects (declining US dollar, speculation, and instability in oil producing countries) have been rounded up but will be eventually released.  The idea that we are at the peak of oil production will eventually gain credence in the general population.

The International Energy Agency (IEA) recently indicated that world oil prices were “justified by fundamentals…  Often it is a case of political expediency to find a scapegoat for higher prices rather than undertake serious analysis or perhaps confront difficult decisions.”   It’s very startling to hear such clarity from that organization.

In a column last October, I indicated that when gas rose to about $1.60 a liter, replacing a gas guzzler vehicle with an efficient model would pay for itself from reduced gas bills.  Well, we are almost there!  If the tendency continues we could be there within several months.

If you have to buy a new car in the near future, you might consider the future cost of fuel.  It could be at $3 a liter in the next several years or even higher.   We just don’t know.   Consider the case of a full size vehicle like the Dodge Avenger, or the Chevy Impala.  At roughly 12 L / 100 km, that’s 2400 liters for the average driver (20,000 km).  Annual fuel cost of $7200 a year ($600 per month) is higher than your car payment.

The alternative would be something like the Toyota Prius or Honda Civic hybrid at roughly 4.5 L / 100 km. Only 900 liters are used annually, which translates into $2700 ($225 / month).

The former CIA chief James Woolsey drives a hybrid and compares the local gas station cash register to a collection box for al-Qaeda.  Whether a link as direct as that can be drawn is difficult for me to say.  However, the best way to moderate prices for gas will be for all people to use less.

Do we have a plan in New Brunswick to ensure that most vehicles sold have excellent fuel economy? The life of vehicles is typically 12 years.  Are we planning for a transportation alternative after the personal car era is finished?

We’re about two years into the mandate of Shawn Graham’s government but I haven’t seen an energy policy and little transparency.   We do hear the phrase “Energy Hub” quite often, describing private sector energy investments for export.  At what point will “peak oil”, a once in the lifetime of this planet event, sink into the consciousness of this government?

“Big Three” look at big losses

“It was the best of times, it was the worst of times” to use the words of Charles Dickens to describe the world today.  Perhaps these words are equally true at any time, but they seem appropriate enough today.

In the best of times category, we are seeing the long overdue death of the Hummer and the dying gasp of the SUV, those ultimate symbols of consumerism, disrespect for the environment and the resources of the earth.

The individuals who bought those gas-guzzlers have been pawns in a big marketing game.  GM, Ford and Chrysler knew a good thing by positioning the large vehicles as status symbols with big price tags and profits over $10,000 per unit.  They co-opted the American and Canadian government CAFE standards to allow large vehicles and SUV’s a pass on fuel economy.  The big three automakers are now fighting a wintertime retreat from Moscow.  They are getting massacred by Honda and Toyota among others, who have had a better strategic vision over the years.

GM’s results over the years have varied from a high of $10 Billion in 1984 to a loss of $38 billion in 2007.  In the last ten years, they’ve lost money overall.  Let’s be generous and assume an average $2 billion annual profit over the last 30 years.  That’s not a great return on sales of $200 billion. Recently, GM’s VP Bob Lutz indicated that it would cost an average of $6,000 more per vehicle to meet the new CAFE standards.  If that is the case, GM has a problem as consumers will have less disposable income for cars in the future.  Toyota indicates that it will meet the 35-mpg standards well before the required date of 2020.

The CAFE standards will soon be the least of the American automakers problems.  Higher gas prices will make the standard irrelevant, with consumers demanding vehicles giving 50 to 100 mpg, no matter what kind of silly marketing schemes Detroit comes up with.

What has been the “butterfly effect” of GM on the US and world economy? Obviously, GM is no butterfly but a recent film by the same name or the 1947 film “It’s a wonderful life” with James Stewart illustrates the concept that a relatively small action can have a great effect in the future.

One can only wonder what would be the alternate future if GM had embraced fuel efficiency for both small and large vehicles (SUV’s).  Supposing that the world gas usage (including US) was 2 million or 5 million barrels a day less than it is today.  This would have been a real possibility.  Supply would be greater than demand and the price would still be at $55 per barrel or less.  The world’s oil bill would be $2,300 billion less in 2008 (86 MBarrels *365 day* $75/b difference).  These are large sums by anyone’s standards as the Canadian federal budget is $550 billion per year.  This is equivalent to the entire cost of the Iraq war until 2017.  GM, in turn, would be profitable today.

I see the big three automakers headed towards bankruptcy in the next few years.  GM is burning through cash at a rate that precludes significant changes to their products and cost structures that would be required. Are GM and the others too important to be allowed to fail?  Will the public be interested in a bailout of this size?

Rick Wagoner, CEO of GM, seems to understand that the oil prices are not coming down but does he really understand the implications of peak oil in his bones?  Can someone who earns $15 million a year not fully understand the fuel supply that his products run on?

GM has some new products in development, one being the Volt, an electric car.  The car will cost $40,000 and run 40 km before the backup engine kicks in.  At that price, it is not initially intended as a high volume contender.

This column has mentioned the lack of consumer choice in vehicles that have good mileage ratings and that are available elsewhere.   A car dealer would say that they don’t meet the North American standards, but that sounds like thinly veiled labour protectionism as the climate / emission / safety standards in Europe should be capable of harmonization to North America.  The cars work perfectly well in Europe.

“There are 113 off-shore models (mostly Europe) that get over 48 miles per imperial gallon in a combined rating,” according to an article by MSNBC earlier this year.  The fact that very few are available here is an admission of failure by our government to foresee and manage the liquid fuel crisis.

The big three automakers and labour unions are managing government policy and Canadians are now paying a significant premium for that dubious privilege.  Where are all of the free market pundits when you need one?

I haven’t heard them saying that a little more competition would shape up GM and the others?  Isn’t that their mantra?

What’s in your future as oil prices rise?

The ancient city of Pompeii was destroyed by the volcano Vesuvius in 79AD and the majority escaped.  But 3300 people died during the 24-hour eruption, even though there was ample time to flee.  Similarly, we see people staying in the path of hurricanes and dying.  Humans often fail to appreciate a dangerous situation, make a poor decision and perish.  Explaining some of the dangers that exist in our energy supply may help people make better decisions on their future.

About two years ago, my first columns looked at peak oil and the gradual decline of oil production that would be coming soon.  A shortage would raise prices dramatically and affect our ability to buy gas for our cars, heat our homes and have a job.  It’s not exactly the same urgency of Pompeii, but quite serious.  The author Jim Kunstler calls it “the long emergency”.

I remember discussing peak oil with the management of Saint John Energy.  Their response was similar to the average man in the street – denial, belief that more oil will be found, or that human ingenuity (technical solution) would conquer the problem.

Today peak oil is sending a few tremors through the economic system and while more people are aware, the majority are not. Many people sense we’re in trouble but haven’t connected the dots. I’m going out on a limb and make a few more predictions for the coming years. There is a range of outcomes, based on our response to the problem, which goes from bad to horrible.  If you don’t want to know, please turn the page and have a good life.

1) While we may see a short-term decline in price in 2008, the overall tendency will be prices rising to unbelievable levels within several years.  The price of oil has doubled as worldwide production capacity has virtually stalled.   A decline of capacity will soon start and perhaps be at 50% of present day levels by 2030 or by 2040 if we’re lucky.  Either way, it’s bad news.  Note that an oil decline of 1% equals a 1% decline in GDP.  You lose your oil and your economy contracts.

2) The price of food will rise significantly over the world on a continual basis.  The productivity of farmers (the green revolution) was related to its major inputs, which are oil and fertilizer.  With a decline in oil and fertilizer, we can expect food shortages and significant starvation related deaths in the next twenty years – Not necessarily in Canada as we have the means to avoid being priced out of the food market. Can the present industrial agriculture model be maintained without enough oil for farmers or transportation of that food to distant lands?

Based on the exhaustion of the resource base of our planet, whether it is fish, steel, coal, oil, or other commodities, it seems evident that the long-term carrying capacity of the earth is less than the present world population of 6.6 billion people.  The exact figure is a matter of some debate.  The expected shortage of food will kill billions of people.

3) The airline industry is in serious trouble.  The problem has long term roots in high cost fuel and it is not going away.  Worldwide, airlines expect to lose somewhere between $2.6 and $6 billion dollars in the current year.  Subsequent years will provide further grief with rising ticket prices, lower passenger volume, contracting schedules and bankruptcies throughout the industry. In the long term, perhaps beyond 2015 or 2020, air travel will be available only for the wealthy, government, military, and specialized high value cargo.  There may be a return to nationally owned carriers for small countries who don’t want to be totally isolated when commercial carriers go under.

IATA chief executive officer Giovanni Bisignani notes. “Skyrocketing oil prices are changing everything. The situation is desperate and potentially more destructive than our recent battles with all the horsemen of the apocalypse combined.”

The airline industry misery will spillover to the manufacturers of airplanes, like Airbus and Boeing, as orders are cancelled.  The airlines will need the more fuel-efficient planes but won’t be able to afford to purchase them.

4) The North American auto industry has hit a large pothole and is out of alignment.   GM announces closure of several auto plants featuring large vehicles virtually admitting that peak oil has arrived.  In the short term, people will be scrambling to find cars with the best mileage they can.  GM, Ford, and Chrysler will re-organize to provide cars with better mileage.  They may go bankrupt within several years.

Unfortunately, the best mileage cars are sold in Europe, not Canada.  For example, the Ford Focus diesel gets an average rating of 59 miles per gallon in Australia, the Philippines, Thailand and Europe but not Canada.  Isn’t that strange?

But enough predictions for today.  It’s too depressing.  The geologists and thinkers who believe that energy scarcity will dominate the agenda for the next 100 years were right on target while all of the government agencies and oil companies predicting no problems for the next 50 years had their heads in the sand.  It seems to be difficult politically to admit that oil is a huge problem and we’ve built a society based on a fuel that is disappearing.

Is there hope that we might see our three levels of government take control of the Titanic and change course?  The fog has lifted and the iceberg is before us.  There are things we could do.

On Big Issues, Graham’s Government has earned a ‘D’

Does it bother you trying to compare the real price of an airline ticket or vacation? Taxes or fees can more than double the first price you see.

One of the best I’ve seen recently was a car dealer who sent a card to my residence and thousands of others. It appeared that I had won $1000. I turfed the card as being a gimmick, but a friend took the bait and his “win” was a fishing rod which, bought in bulk from China, probably cost $5. The fine print showed 56,000 fishing rods and one $1000 prize. It seemed to be working for them based on the volume of people at the dealership. You can’t sell to a customer until they show interest or step through the door.

Governments do marketing (sometimes called spin) over a long period, which culminates on Election Day. They’re selling a brand, a dream for a better tomorrow because there is little they can do to change today. They have to convince you that they care for you, that they are good stewards of your money and that you are better off if you vote for them again.

Given the short memory of most people, politicians only give you a break in the last 12-18 months before an election. In the first two or three years of a mandate, you often get to feel the cattle prod. Usually, there is a time lag between a change in policy and when the public perceives an actual change. Has there been too much haste to achieve concrete results before the next campaign starts, probably in 2009. Has the thought process on policy been overlooked?

If Shawn and the Grahamites were a band trying to make a name for themselves, some of their tunes would be the “self-sufficiency reel”, the “UNBSJ breakdown” or a recent cut called “French Immersion –the late waltz”. Is this the best that we can get?

Changes to public policy should start from a clearly defined problem and evaluate a series of solutions, which are weighed from many different angles – in other words, a serious business case. What was the clearly defined problem that required the removal of UNBSJ and the solution of a polytechnic?

What is the definition of self-sufficiency for tomorrow’s world of global warming and energy scarcity? What are the concrete steps that will start the process and how will it work. We were invited to participate in a dream of self-sufficiency that we might all have contributed to and believed in. But it collapsed due to a lack of intellectual clarity at the start and poor execution.

The Early French Immersion review identified a real problem but picked an inferior solution. Was there no time for negotiation and finding a middle ground? To achieve a September 2008 implementation takes time to organize apparently.

There are some bright spots. The government has accelerated the creation of wind power facilities and this should reduce our dependence on oil fired generation to some degree. They are investigating a second Lepreau, which has some positives and of course negative aspects.

As much as I disagree on some of the approaches of this administration, what this government seems to lack is the ability to listen and it is failing to act on the incredible danger to us all from peak oil. Listening to Jack Keir recently, he appears to understand some of the dimensions of the problem. He has unfortunately failed to produce an energy policy and specific approaches that could ease our way into the post-carbon era.

The era of continual growth fuelled by oil is coming to an end. Should Shawn Graham be asking Stephen Harper for $137 million to twin 55 km of Route 1? Let’s evaluate two different ways this money could be invested.

1) Spend on twinning Route 1 – No additional revenue is evident once the road is built but some additional maintenance costs are required for snowplowing and expensive repaving at 10-15 year intervals. No payback from this project. In fact, it is a drain on resources.

2) Provide a $2,500 subsidy for any New Brunswicker’s who upgrades to a fuel-efficient car – Let’s say over 40 mile per gallon. The $137 million would fund 55,000 cars spread over a number of years. Each vehicle would burn 1300 liters less fuel a year than the previously owned gas-guzzler. At $1.50 a liter, which it may be quite soon, it would save $1,950 per car per year. At its maximum impact, the money back into the pockets of our citizens would be $107 million per year. This money is no longer going offshore to Saudi Arabia but staying in our pockets to spend locally. The payback could be as little as 1.5 years.

I won’t go into program details because there are many ways that this program could be designed. Is 40 miles per gallon an aggressive enough target? Would Buzz Hargrove of the Canadian AutoWorkers approve of this idea? Of course not. GM mostly sells gas guzzlers. What the example shows is there are ways to slow down the effect of high oil prices and produce less CO2.

The Liberal government has shown some courage in addressing certain issues and for that reason, I would give them a D on overall performance instead of an F.

Could the government be more creative and effective? Yes, very easily.

Jevons Paradox and the value of conservation

William Stanley Jevons made an observation about the usage of coal in England in 1865, when the increased efficiency of the Watts steam engine actually caused the use of coal to increase rather than decrease, as he would have expected.  The use of the improved steam engine in a wide spectrum of industries increased coal usage as a direct result of the cost-effectiveness of coal.

Today, a number of people use the paradox to argue that increases of energy efficiency only leads to more use of energy and that attempts at conservation are doomed to fail. For example, “if cars double their gas mileage, then people will drive more.”  They’re mainly wrong for the following reasons.  First, when fuel costs are rising rapidly, such as hitting a resource production ceiling in the past several years, any increase in the efficiency of passenger cars and trucks will reduce the litres burnt, not the actual cost of a tank of fuel.  Airline fares have been increasing even though the efficiency of jet engines increase with newer technology.   Reason: fuel prices are rising faster than airlines can upgrade their fleets.  Westjet is an example of a company that invested heavily in newer efficient planes and it shows in their profits.

On the home front, adding extra insulation will reduce the amount of oil, natural gas, wood, or electricity used to heat your house.  You are unlikely to change the setting on your thermostat far from its normal level.  In a rapidly rising cost of energy environment, all categories of conservation will produce good results.

Secondly, some categories of usage, like transportation of goods are relatively fixed.  For example, the amount of produce transported from California to Canada each week is unlikely to change greatly based on a decrease in the cost of transportation.  We can only eat so much lettuce.

In the infinitely slow path to energy efficiency, our friends south of the border recently passed an energy bill mandating an increase from 25 to 35 mpg, a 40% increase in vehicle fuel standards by 2020.  The increases start in 2011, but there are a number of loopholes related to alternative fuel, trucks and swapping of credits.  The entire bill is 1055 pages and deals with a huge variety of topics from incandescent lamps to biofuel.   Was the legislation partially a pre-emptive strike to ward off more severe legislation on car mileage from California and 12 other states who wanted SUV’s and light trucks treated the same as cars and higher mileage implemented sooner than later?

Around the world, there are countries with higher standards than North America. China has already a 35-mpg standard in place.  Europe and Japan standards are over 40 mpg.
Here in Canada, our energy policies are guided by American legislation. The automotive companies are integrated across North America and have driven the agenda.  Perhaps Stephen Harper will now feel comfortable raising our mileage standards to meet those of his friend George.  Don’t expect to see anything different or better.  The auto industry will have to invest billions of dollars in retooling factories to meet the requirements of lighter, more aerodynamic vehicles.  The aluminum and carbon fibre industries are big winners and steel, being heavy, will be replaced where possible.

Canada’s “new” government has been interested in clean emission technology.  This follows the American lead on misdirecting the public.  Common sense alone makes it clear that burning less fuel reduces emissions of all types, whether CO2 or other varieties, less expensively than technology alone.    The auto industry has wanted to keep its high profit margin SUV and trucks at all costs, even at the risk of its long-term demise.

It is unfortunate that politics is an averaging process where you give a little bit in each direction and end up often in the same location with the same problem.  The American legislation is too little, too late and we will soon see the California’s of this world forcing deeper changes.

What most people don’t realise is that we are starting on the second half of our oil reserves.  This is the tough expensive oil to recover, and the worst part of it will be the gradual decline of world production.   $100 oil will seem cheap in the near future and the resulting economic catastrophe will be unprecedented.

Jevons was concerned that the supply of coal would run out in his time.  He couldn’t foresee that coal use would be partially displaced by the rise of oil for 150 years and that other reserves would be found.  Likewise today, we are concerned that oil is starting a decline very soon.  There is a small chance that we will find technological solutions to our energy needs in time.  There is also a small chance that we will find additional reserves of significant size.

However, there is a much larger chance that we will not solve the problem and we will suffer greatly.  In 1865, there were 1.2 billion people on this planet in a mostly agricultural lifestyle using little energy.  Today, we are 6.6 billion people who use a great deal of energy.

What should be our resolutions for 2008?  Certainly, we should plan for higher efficiency in all of the products that we purchase.

Get your free car – Part 2

Not long ago, I talked about the Renault Logan, a car with good mileage and a very low sticker price that made converting from a gas-guzzler to a better mileage car virtually free, based on gas savings. Unfortunately, it is not available here in Canada yet.

First of all, it should be clear that I don’t support one particular manufacturer of vehicles. We should all celebrate superior fuel and emission technology wherever it may come from. In recent surfing, I came across the Volkswagen Polo BlueMotion, which is sold in Europe for roughly $20,000. It has a combined mileage rating of 60 miles per imperial gallon (4.7 liters / 100 kilometer).

The average vehicle travels 20,000 km per year (12,000 miles) for discussion purposes and the cost of gas is $1 dollar per litre. The annual fuel cost for the Polo at 60 mpg is $908. A typical gas-guzzler at 20 mpg would cost $2,724 per year in fuel. The difference saved is $1816 per year, which although substantial, is not quite enough to make the payment on the car.

What is likely to happen within several years are dramatic increases in fuel cost. My calculations indicate that fuel at $1.57 / litre would provide enough savings to pay for the vehicle over a long period. BINGO! You now get your car free, paid off with the savings ($2,851) you would have made at the gas pump every year. (Calculated with interest at 7%, payments over ten years) If payments can’t be stretched that far, the car will cost you money out of your pocket.

The Polo is a 1.4 L three cylinder turbo-diesel with CO2 emissions of 102 grams / km. In comparison, the best vehicle on Natural Resources Mileage list is the Prius hybrid, which has 98 grams of emissions and a fuel rating only slightly better. The Prius costs $10,000 more than the Polo.

Alas in real life, you can’t have your car that almost makes it’s own payments, because they aren’t sold in Canada yet. You might ask your Member of Parliament or local Member of the legislature why we don’t insist that manufacturers sell more models with excellent fuel ratings.

After the oil embargo of 1973, fuel efficiency standards called CAFE (corporate average fuel economy) were introduced in the United States. As with all things, enthusiasm waned as fuel prices took a dive and Canada never saw the need to define its own objectives. Groups such as the Sierra Club of Canada note that while Automakers stonewall efforts to increase fuel economy in North America, they are implementing improvements in Europe.

In a discussion with Jack Keir, the Minister of Energy, it was suggested that the Provincial government is preparing a program to help New Brunswickers purchase vehicles with high fuel economy. This would be in addition to the Federal program in place.

The amount of the subsidy per vehicle or the method of program delivery is always subject to debate. It would be possible to finance this program by only a cent or two at the pumps. A one-cent increase per liter affects the average person by $16 per year. The revenue would be $15 million. Considering that approximately 30,000 vehicles are purchased in NB each year, perhaps 6000 units would be high economy units. The subsidy could be $2500 on the 20% of vehicles purchased.

Think of this idea as a lottery ticket where a huge number of people win big every year. Your ticket is $16 / year and you decide if and when you want to win. When you do, the feds chip in $2000, the province $2500 and your gas bill saves you $1800 a year. If the price of fuel rises, the savings are high enough to pay for your new vehicle over time. The odds on this bet are considerably better the Lotto 649.

Now if we could only get some exceptionally high economy vehicles on sale here. Detroit based manufacturers have consistently been trying to convince us that we need 320 hp in a car. They don’t realize that the real target is 100 mpg and it isn’t far away if they could focus on the future.

Hummer versus Prius: Who wins

There is an old joke about why sharks don’t attack lawyers. Answer – professional courtesy. Sharks do attack other sharks, however. Rosie O’Donnell and Donald Trump, both entertainment sharks, have been verbally biting each other gathering excessive news coverage. In contrast, the average print columnist rarely attacks other journalists because they are usually too busy writing to worry about what someone else may be saying.

But let’s make an exception and examine what drives the news makers and the reporters who transmit the message to you. CNW Marketing Research spent two years gathering information on the relative life cycle cost of different vehicles, called the “Dust to Dust” report. Public interest was definitely aroused by their suggestion that the Hummer is more environmentally friendly than the Toyota Prius. Common sense would indicate that the Prius, which uses considerably less gas, emits considerably less CO2, costs considerably less to purchase than the Hummer, would be the superior vehicle from a environmental and consumer cost point of view.

Most people buy a vehicle to meet their needs for transportation and typically the mileage varies little from year to year. To help choose that vehicle, we compare fuel economy figures provided by government test data that uses a standard course.

Remarkably, the CNW study indicates the Hummer H1 would last 35 years and is driven 379,000 miles before being scrapped. (Good luck in finding parts after 15 years) In contrast the Toyota Prius was judged to last 12 years and be driven only 109,000 miles before final adieu. This is a difference of 347%. The ultimate measuring stick of this report is a cost per mile, making any difference in mileage very significant to the final costs. Are the owners of small cars really that different than large vehicles?

The CNW study also considers the energy cost of the complete life cycle such as construction cost and disposal of the scrapped vehicle parts, which is an excellent idea. However, there are few details on how this is calculated for different vehicles. In addition there is no consideration of the cost of CO2 contribution of various vehicles.

A number of other studies have shown the cost of disposal of a vehicle to be roughly 5% of total costs. CNW includes a charge of 30 to 65% of the total costs for the disposal of the non-recyclable parts of the vehicle. The increased weighting of this aspect reduces the value of fuel economy. Not enough information is shown in the report to judge whether it is a reasonably based environmental accounting method.

The response of some journalists was predictable. George Will, of the Washington Post, accepted the report at face value, indicating that a campaign without precedent is underway to indoctrinate the population on global warming. His implication being that there is really no harm to buying a Hummer, that we can’t really reduce CO2 emissions and that the other guy (China) isn’t playing his part anyway. The Globe and Mail, Car and Driver and many other publications raised no questions either.

The easy ride given by the press wasn’t to be found in the environmental community such as the Rocky Mountain Institute or the Pacific Institute. Those groups initiated reviews of the available documentation, with RMI pointing out “the deep divide between CNW’s study and all scientifically reviewed and accepted work on the same topic”. Dr Peter Gleick of the Pacific Institute indicated that “the report’s conclusions rely on faulty methods of analysis, untenable assumptions, selective use and presentation of data, and a complete lack of peer review.”

The EPA green vehicle guide gives the Toyota Prius the best rating on GHG’s, air pollution and mileage ratings of 60/51 mpg but the Hummer had a poor pollution score and no data on the mileage ratings. I did find the H2 Hummer ratings listed elsewhere at 10/13 and the H3 at 16/19 miles per gallon city/highway.

So we have two questions of interest. Why would a report effectively assassinate the benefits of hybrid cars and promote the value of large vehicles? Secondly, should seasoned journalists have raised red flags about a report with claims that were outside the common sense box?

In a worst case scenario, CNW may have tailored its research to benefit its subscriber’s interests. Portrayed in a generous light, CNW has demonstrated incompetence in the design and execution of its research. The 400 + page report is three hundred pages too long.

The Society of Professional Journalists suggests that “public enlightenment is the forerunner of justice and the foundation of democracy. The duty of the journalist is to further those ends by seeking truth and providing a fair and comprehensive account of events and issues”.

Have you read virtually the same article in different newspapers written by different journalists? Theoretically this shouldn’t happen but press releases often become news stories without serious research. Call it “cut and paste” journalism or just working to a tight deadline but the result is the same. Many journalists missed the boat on this item.

The standards of journalism are relaxed to a degree for op-ed columnists and the right / left wing ideology sometimes creates an interesting counterpoint to the standard view of journalists. George Will and Neil Reynolds, as staunch defenders of the status quo and the corporate interest, have let their denial ideology trump basic journalistic values. They can best be considered as light entertainment with little educational value.

If the evolving energy crisis related to peak oil weren’t so serious and compelling, one could laugh about the folly of those involved in this process. Unfortunately, the CNW report is essentially corporate dis-information that will add to the general confusion on energy matters over the world.