You say crisis. I say opportunity

The Chair's report on the 34th meeting of G8 leaders earlier this month states: "In response to the sharp rise in oil prices ... we emphasized the need for increased production and refining capacities ..."

Then, in the Environment and Climate Change section of the same report is the statement: "We seek ... the goal of achieving at least 50-per-cent reduction of global emissions by 2050."

While I'm surprised not to have seen someone among the hordes of media covering the Hokkaido Toyako Summit pick up on the glaring inconsistency between these statements, it is a perfect demonstration of the public-policy schizophrenia surrounding socioeconomic and environmental issues.

If retired Calgary geologist and Canadian Hunter Exploration co-founder Jim Gray is correct, and I believe he is, increasing oil production will be a lot harder than G8 leaders expect, making the much-trumpeted goal of lowering global emissions a little easier. Mr. Gray is a legend in the oil and gas exploration industry, a champion of charitable works to improve the human condition from Canada to Africa to Pakistan, and a thoughtful observer of world affairs. In a recent Washington speech, he explains why "global peak oil production" may not be far off:

Sixty per cent of the 87 million barrels-per-day global oil production comes from countries where fields have already reached peak production, and decline rates in many of the world's largest fields appear to be accelerating.

Four million barrels-per-day must be brought on each year just to sustain current output. This means that maintaining current production levels will require that half of global production will have to come from wells not on stream today. Growing production will require a much higher proportion of new wells.

It could take up to a decade to overcome technical and construction challenges before much ballyhooed new discoveries such as Brazil's super-deep offshore finds can commence production.

Around 80 per cent of global oil production is from state-owned fields in countries having various combinations of political instability, social dysfunction or geopolitical power agendas.

In the face of these sobering supply realities, rising incomes and subsidized fuel prices, combined with population growth, continue to drive increased consumption in developing countries. China alone is putting nine million new cars a year on the road. The International Energy Agency predicts developing country oil-demand growth will drive world demand to over 100 million barrels a day in the next 20 years. Jim Gray says peak oil will occur well before that: "I believe that achieving ... 100,000 barrels per day will be extremely difficult." He's not alone in this assessment. I share his view, and so do many of my colleagues who also spent careers working to find and develop energy supplies.

Mr. Gray also points out that for the first time since the dawn of the hydrocarbon age: "We now live in a very different world ... a supply constrained world" and "higher prices will alter historic trade patterns and competitiveness, resulting in a new set of winners and losers globally. At $130 [U.S.]per barrel, global oil trade is over $11-billion per day, or almost $4-trillion annually, $3-trillion of which goes directly to producing-state treasuries." Needless to say, this means an enormous transfer of wealth and power to these oil-exporting states.

All this leads a man who spent his career successfully finding new oil and gas fields to his most startling conclusion: "An energy crisis will soon be upon us." But his next words echo the sign he still keeps on his desk after all these years: "Crisis means opportunity." Mr. Gray's energy-opportunity recipe for Canada calls for continued investment in development of our vast hydrocarbon resources, including natural gas, the oil sands and clean coal, as we work to increase nuclear, hydro and wind power production.

Crisis-level energy prices have already hit the auto and airline sectors hard. Now, the second wave of oil and gas costs internalized in almost every aspect of our lives is hitting almost every Canadian business and family. There is no way to escape the inflationary impact of rapid price escalation without job losses and standard of living reductions. But Canada is better positioned than any other Western developed country to turn the impending global energy supply crisis into opportunity. Our oil and gas resources mean we won't be dependent on ideologically hostile Venezuela, the potentially unstable Middle East, violent and volatile Africa, or geopolitically ambitious Russia. Canada's energy exports generate a huge trade surplus, while other Western countries suffer skyrocketing energy trade deficits. We have world class hydroelectric resources, a nuclear power sector that can do much more and a nascent wind power industry. What's needed is the combined vision of both federal and provincial governments to work with business in achieving our potential. Adjusting to a global energy crisis won't be easy, but we would be wise to remember that little sign on Jim Gray's desk.

Crisis means opportunity...