Vancouver Sun Published: Friday, June 19, 2009
World oil reserves fell last year for the first time in a decade, according to the latest statistical review from BP, an oil company that has changed the meaning of its moniker from British Petroleum to Beyond Petroleum.
Does it herald the coming of the global apocalypse that peak oil catastrophists have prayed for? Will it bring about the end of globalization, as former CIBC economist Jeff Rubin predicts in his book, Why Your World Is About To Get A Whole Lot Smaller?
Maybe. But oil markets are not static like theories are. Supply and demand fluctuate in defiance of our attempts to determine their direction.
Rubin seemed clairvoyant when his January 2008 forecast of $150-US-a-barrel oil nearly came to pass. It reached $147 in June last year before it crashed below $40 a few months later. He didn't warn us about the drop. Prognosticating is a tough business.
The BP review pointed out that global oil consumption slipped in 2008 by 0.6 per cent to 84.4 million barrels a day, the first decline since 1993 and the largest since 1982. But the drop in demand was largely confined to the mature economies of the OECD. In non-OECD countries, consumption was up -- by 8.1 per cent in Venezuela, 5.3 per cent in Brazil, 4.8 per cent in India and 3.3 per cent in China. In fact, China accounted for three-quarters of global growth in energy consumption.
Oil production rose by 0.4 per cent last year, led by increases by OPEC producers, and that trend continued last month as oil prices recovered to the $70 range. OPEC expects consumption to decline by 1.9 per cent this year, or 1.6 million barrels a day to 83.8 million barrels a day, while the International Energy Agency has raised its global demand forecast by 120,000 barrels day to 83.3 million barrels a day.
These numbers suggest that oil prices are being driven by the usual economic factors, rather than alarm over a depleting resource. Indeed, the BP report published last week stated clearly that the challenges the world faces in growing supplies to meet future demand are human, not geological.
The lack of investment by non-OPEC countries has deprived the world of two million barrels a day, the IEA said, adding that an additional 4.2 million barrels a day are in abeyance because of a drop in capital expenditures. OPEC has warned that, without more investment, prices are heading back towards $150 a barrel.
Rubin believes oil will top $200 in the coming recovery and, as it becomes increasingly expensive over time, wreak havoc on the global economy, bringing an end to international trade, tourism, out-sourcing and our consumption-oriented lifestyle.
There will be no more cheap goods from China, lamb from New Zealand, or strawberries from California in February because transportation will be too costly. Manufacturing will be repatriated, steel mills restarted and suburbs will be ploughed under and revert to farmland as commuters flee to the inner cities and onto public transit. Rubin promises a more livable world than the one we'll leave behind.
