“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.