Hamish Mcrae, one of the world’s best economic journalists, declared in the Independent last week that hardly anyone had predicted the price of oil would rise to $120 a barrel.
I am the most modest of men, but regular readers of this column may recall that I predicted oil at over $100 a barrel back in April 2006, and well north of that price in another column in July 2007.
I reckon this gives me the right to predict that the price of oil will soon fall – a bit.
So far, the economies of the BRIC nations (Brazil, Russia, India and China) are still growing strongly, but the old industrialized economies are definitely heading into a recession, and they still consume most of the oil.
This recession has not actually been caused by the high price of oil; the sub-prime mortgage scam is to blame for that.
But the recession is likely to drive demand for oil down far enough to bring the price back down to $100 – maybe even as low as $85 or $90 – a barrel before long.
An allegedly giant new oil field has been found off the coast of Brazil, but even if it lives up to the advertising, it will be five to 10 years away from large-scale production.
The world’s largest oil producer, Saudi Arabia, admits that there is now not enough spare capacity among the Organization of Petroleum-Exporting Countries (OPEC) to make any difference in the price of oil. Russia, the biggest non-OPEC producer, will probably see production fall this year.
And practically everybody else is already pumping flat-out.
So the price of oil will probably stay well above $100 for most of the time between 2010 and 2015.
But it probably won’t hit $200, because there will be a steep rise in the supply of non-conventional oil from tar sands, oil shales and other sources of heavy oil. Peak oil doesn’t mean the end of oil; it just means the end of sweet, light crude.
The Alberta tar sands, for example, are profitable if the price of oil stays above $40 a barrel; at $60, the far larger Venezuelan tar sands are a viable economic proposition; at $80, even the oil shales of the western U.S. look promising.
But by 2015, global tolerance for any process that involves high greenhouse-gas emissions – the equivalent of two barrels of oil must be burned to liberate three barrels of oil from the Alberta tar sands – is likely to be very low.
Indeed, there is likely to be a good deal of pressure to cut back on the consumption even of conventional oil.
Five years ago, global warming was a distant worry in most of the world, as well as in North America, where the denial industry had its headquarters.
Now it’s a high-priority concern in the United States (at every level below the White House, where change is coming shortly), Europe and even smog-choked China.
Throw in a few more climate-related catastrophes like Hurricane Katrina or the killer heat wave that hit Europe in the summer of 2003 and popular support for burning fossil fuels, one suspects, will not be very high.
Cutting back on the use of oil – and coal and gas – will not be a rapid or smooth process, but rising demand for energy alternatives and the passage of time will change that. Gradually the use of fossil fuels will fall. Most serious people everywhere now know that it must if civilization is to survive.
The political pressure to shut down extra-high-emission unconventional oil production may become irresistible. That’s why the Alberta tar sands producers now want to replace natural gas with nuclear power as the energy source for freeing the oil from the sand.
In 2030 and beyond, the demand for oil will probably fall even further. How do we know?
Because if it hasn’t, the collapse of countries into chaos because of global warming will ensure it does.
There’s more than one way to cut demand.
Gwynne Dyer is a London-based independent journalist whose articles are published in 45 countries.