My name is George and I’m addicted to oil

George W. Bush recently discovered that the United States is addicted to oil. This revelation comes from a man who lives in a big white house costing a fortune to heat, who travels in a Boeing 747, recently overnight to Iraq to say hello to the troops and takes a helicopter to go to his cottage at Camp David. And he’s calling everyone else addicted? Very interesting George! Have you thought about buying a smart car for your travels or even staying at home some times? Mostly conservation is something the other fellow should do.

The word addiction is defined as “Habitual psychological or physiological dependence on a substance or practice beyond one’s voluntary control”. I’m not sure that addiction is the right word. Addiction has a very negative connotation.

Perhaps everyone in the western world has grown up in society’s dysfunctional family where we are taught Consumption 101. The economy requires constant growth and promotes the biggest and most powerful car, the biggest house, and we live in the suburbs where you need two cars, a boat, a 4 wheeler and heaven knows what else.

Regardless of the label we apply to our lifestyle, the end result is the same. Our high consumption of oil will soon force us to confront extremely high oil prices when declining oil production fails to meet demand for oil.

How are we in Canada and the world going to deal with this situation? There are two scenarios that I would like to explore – either a hard or a soft landing.

If you are a pessimist or perhaps a realist, then the hard landing will make the most sense to you. The economy is interactive and higher prices will eventually affect behaviour and lower prices. It will also affect supply given several years. The pessimist believes that these changes will be too late to avoid the destruction of the economy. This scenario assumes an initial shortage of oil of only 5%, that no world rationing of oil takes place and that markets determine prices. Oil prices quickly rise to at least $300 per barrel. But it could be higher.

Gas at $4.50 per litre causes us grief on a personal basis. We can’t afford to drive to work if we live any distance from our job. If we’re lucky, we use a bicycle or a small scooter or public transport. Car and air tourism dies with the closing of hotels and restaurants. Automakers are not selling cars except the small models and go bankrupt. This affects hundreds of thousands of workers including all of the related industry suppliers.

Most of our food today travels thousands of kilometers to get to our table. The energy expended for air transport is much higher than the energy extracted from the food by us. Air is clearly the worst example, being 60 times more intensive than transportation by ship. The rising cost of food takes its toll on the poorer sector of society in malnutrition and perhaps some deaths. Those who can absorb the increasing cost of food will survive.

“Home heating” will become an oxymoron just like “jumbo shrimp” or “rap music”. A tank of heating oil will cost $4000. Natural gas prices will be very high but perhaps affordable. Electricity prices will increase by 60% to 16 cents a kWh. Some will freeze in their homes. Homes with poor insulation will be abandoned. In Atlantic Canada, wood heat will become expensive and the forests will be clear-cut by anyone with an axe.

You can expect the adjustment to these conditions will involve considerable public unrest and disorder. Politicians will be turfed out and others brought in to solve the problems. The road rage that we occasionally experience today is a very minor example compared to what humans will do to avoid starvation and freezing to death.

In this scenario, the government is seen to be initially ineffective as no preparation for the worse case is seen as necessary. Ultimately martial law is imposed and rationing of energy and food is brought in. The government has little room to help citizens as tax revenue is down due to the poor economy and increased welfare payments. Government pensions that are not fully funded will be reduced.

Just how bad our lives will become is a matter of opinion. Canada is a very wealthy country and may survive the initial 5% decline by price induced conservation, oil demand destruction (loss of jobs) and rationing. However, in succeeding years, as the shortages of oil become greater, it will demand tremendous sacrifices and impose great hardship on all. The end result of this scenario is an agricultural society living as our ancestors of the 1800’s did.

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