Tag Archives: peak oil

T. Boone Pickens: Let’s transform energy — with natural gas

The US consumes 25% of the world’s oil — but as energy tycoon T. Boone Pickens points out onstage, the country has no energy policy to prepare for the inevitable. Is alternative energy our bridge to an oil-free future? After losing $150 million investing in wind energy, Pickens suggests it isn’t, not yet. What might get us there? Natural gas.

Column: Energy Prices Will Force Changes

My latest column in The StarPhoenix

In the past two weeks I have written about energy and the coming oil shortage that is driving oil and gas prices higher.

When you are talking about peak oil, many authors see this as the end of mechanized civilization and suggest we will head back to a pre-industrial revolution existence. Since I’m not much of a horseman and don’t have a lot of oxen around to plow my backyard, I find the more hopeful scenarios a little more plausible.

UCLA geologist Laurence C. Smith describes in his book, The World in 2050, a world that has shifted to the north because of climate change and the access to natural resources it has provided. It’s a world that’s short on resources and the northern cities (such as Saskatoon) are in a position to benefit from this shift.

Smith believes oil prices will continue to rise, but offers some hope that the world can support biofuels and provide the food we need. By taking the right steps, we may even have enough oil left for future generations both to drive and to make plastics.

While the future will present excellent technological possibilities, he feels, none will be on the market by the time we need it. That means escalating fuel prices and interim technology to bridge the gap.

Smith paints an interesting picture of the northern cities. Saskatchewan’s North and the Northwest Territories have an abundance of resources in a world struggling to meet the demand. We see the evidence already. BHP Billiton has moved into downtown Saskatoon, PotashCorp is expanding, and Cameco is expanding with a new building near its offices on 11th Street.

The city’s north industrial area is full of mining supply companies in addition to many new businesses that service a variety of resource-based industries and niches. That is only going to get bigger. According to Smith, by 2050 there is a good chance that climate change will impact the marginal farmland north of Saskatoon, with a longer growing season and greatly improved yields.

Low commodity prices which plagued the province in the 1980s have turned around, with all commodities in demand now. While the rest of the world was buffeted by high energy and food costs, Saskatchewan continues to grow.

In a world that is struggling to power and feed itself, Saskatchewan resources are going to continue to be vitally important. It also means the province faces a decision on whether to save the money for future generations – as Norway has done with its resource royalties – or spend to fund government operations, as Alberta has done.

High oil prices will also lead to a revival in parts of Saskatoon. Caswell Hill has seen a revival because of its many character homes and its proximity to downtown. The same thing will happen to Riversdale and 20th Street.

Expect the gentrification that has started on the east side of Riversdale to continue to expand as the value of being close to downtown and public transit services grows.

Saskatoon’s core neighborhoods could be front and centre for significant urban renewal. It’s good news if you are in a field where your income rises with the boom, but the world and city could get a lot smaller if you are outside the boom and your income stays flat.

It’s going to also be a city where the Saskatoon Food Bank, the Friendship Inn and other social service organizations will have to play a bigger role. During a time of rising rents, we saw demand at most food-and shelter-based organizations grow exponentially or max out capacity. Toss in rising transportation and food costs, and more families will need more help. Affordable housing and an expanded public transportation service could define whether our city continues to grow or declines in future generations.

The next couple of generations will be crucial. Eventually new fuel sources will be mastered -we already understand them, we just can’t make them cheaply – but until then, Saskatoon will have to walk a delicate line between being the gateway to a declining and valuable base of natural resources, and taking the steps to protect those affected most by the boom.

It could be the most important series of decisions made since John Lake decided the winters can’t be that bad and called this place home.

Column: Oil prices will force changes

The StarPhoenixToday’s column in The StarPhoenix

Former CIBC economist Jeff Rubin was one of the first to say that oil would hit $100 a barrel, back when it was around $20. Now he is suggesting it could go to $200 in the next short while unless there’s another global recession.

While many call for more drilling and oil exploration, the world simply doesn’t have the capacity to keep up with demand.

Despite requests from U.S. presidents, OPEC has not been able to meet the supply demands. High oil prices don’t just impact us at the pump, but the previous price of $147 a barrel brought global economic growth to a halt and contributed to a banking collapse felt worldwide.

As prices climb, Barack Obama has authorized a 60-million barrel drawdown from the U.S. Strategic Petroleum Reserve.

He blames Libya, but it’s much more than that. If it were that simple, releasing oil from the reserve would make sense, just as it did after hurricanes Katrina and Ike.

This time the problem is that oil prices were higher than $100 before the fighting started in Libya, and global demand was already in excess of a record 87 million barrels a day. The fact is the world is running low on oil and we haven’t been able to find the capacity to meet the demand. The U.S. military recently expressed concerns that we could see a precipitous decline in worldwide production by 2015. England is looking at gas rationing as soon as 2020.

Despite what some write, the planet isn’t out of oil; we have just taken all the easy-to-get-at oil.

From now on, we will be spending more to reach harder-to-get oil while depleting reserves elsewhere.

A perfect example is the Alberta oilsands, which were not feasible at $20 but now are attracting billions in investments. Yes, we have reserves, but they are expensive to extract.

The good news is that Canada is a global exporter of crude oil. Like many other Canadian provinces throughout history, Alberta’s willingness to scar its natural landscape in the pursuit of resources will ensure there is significant oil for us for years to come. The bad news is that we both sell crude at world market prices, and 60 per cent goes to the United States.

Under NAFTA rules we can increase production; we just can’t stop shipping to the U.S. what’s already agreed upon. In other words, we export the bitumen, give the profits to foreign investors and then get to purchase the refined products. I am not sure that was thought out particularly well.

Saskatchewan has oil reserves – not enough to get invited to OPEC, but more than a billion barrels in the ground in active wells. But the proceeds are sold at market rates, so the scarcity in the world supply will mean tougher times for Saskatchewan residents even if it’s our own oil we are buying.

How much tougher? It affects different demographics differently. For some it will mean no more cheap golf weekends in Las Vegas. For others it means that they can’t put food on their plate or drive to work.

In 2008 Saskatoon saw rents skyrocket and food prices increase significantly. The shelter where I work has a food program largely paid for by the provincial government. It was designed to help families who had more month than they had pay check. In 2007, it served around 40,000 meals a year. In 2008, that number doubled. In 2009 and since then, it has served more than 100,000 meals a year.

A lot of the problem was high rent, but much of it was rising food prices. People kept saying apologetically, "I just can’t make it anymore." That was at $140 a barrel. What’s it going to be like at $200 a barrel?

Every city in North America is in this situation. Designed and conceptualized when fuel was cheap, we built this city to drive in. Circle Drive surrounds us (kind of); Idylwyld, 22nd Street and Eighth Street cut through us.

We have several functioning bridges at any given time. In some ways, at the moment when it feels like we got the answers right, oil and energy prices could change the picture fundamentally.

The good news is that we aren’t the first city that has had to face a reinvention moment. The bad news is not many handled it correctly.

Some more reading if you are interested

Column: Handling debt poses challenge

Today’s column in The StarPhoenix.

The StarPhoenix Former mayor Henry Dayday wrote to council in May questioning how much debt the city was taking on and how Saskatoon residents were going to pay for it.

He pointed out that the city has $175 million in debt on its books and potentially another $225 million related to new projects, which will take a toll on cash reserves and add a lot of new debt.

As he sees it, it’s a total that was expected to push the city to its debt limit of $400 million, which is starting to remind some of us of the 1980s.

A look at the city finances leaves a couple of impressions. First, $400 million in civic debt is a lot of money and to be at our debt ceiling makes many people nervous. It’s like when you’ve run up your credit card to the limit. Not only can you not do anything until it’s paid down, but paying it off takes up a lot of money that could be spent elsewhere. Let’s hope the city at least gets reward points.

Does that mean that civic finances are in bad shape?

Some on city council say it does, but Standard & Poor’s recent report on city finances maintained our AAA credit rating. The bond rater does mention some clouds on the horizon – higher debt from the capital projects and some pension liabilities. Reading the S&P report shows it’s concerned, but not especially so, about Saskatoon’s debt level, which it expects to peak in 2014 at about 30 per cent of revenues. It’s a lot of debt, but it’s not crippling.

Looking at other western Canadian cities, an independent benchmark of Saskatoon’s finances and services (we are compared to Regina, Calgary, Edmonton and Winnipeg) was tabled on Feb. 23. It shows our credit rating to be higher and we compare favourably to other cities in most services offered and how much we pay for them.

The only area we really lag behind is in mosquitoes per capita (Winnipeg), NHL franchises and CFL teams.

Not surprisingly, we will soon lead the group in large, box-like riverfront art galleries.

When it comes to debt per capita, Saskatoon is at $526.91. Regina is at $549.80, while Calgary leads at $2,310.61. Moose Jaw has the highest per capita debt of Saskatchewan cities, at $1,168 At $400-million debt, our debt per capita would start to look like Moose Jaw’s – high, but manageable. As for taxes, our per capita tax burden compares well not only to that of other western Canadian cities, but it’s around half of the Canadian average.

It’s not how much debt a city has, but how it will pay for it. It’s a question Dayday raises and one worth exploring. Looking at growing cities with high debt levels, Red Deer’s debt limit is 1.5 times city revenues and it is approaching 90 per cent of that limit.

Its plan is to pay down its $183-million debt $2.1 million a year, which is similar to trying to pay off your credit card by making the minimum monthly payment. Calgary budgeted debt reduction into its mill rate increases in an attempt to lower its burden, despite its growing economy and larger tax base.

Paying off civic debt is not a lot of fun and a mill rate increase may be something that Saskatoon may have to do. In his letter Dayday says: “The city has been experiencing a boom period, but as in the past we know that times change.”

In the 1980s it was low commodity prices and in the ’90s it was taming a massive provincial deficit that made for a most significant challenge. Both held the city back, which contributes to the spending debate now.

How many of these capital projects have been discussed and planned for years?

Before we get too caught up with what to cut, we need to have a discussion about what those challenges in the future will be. Rising energy prices, the lifeless and debt-ridden American economy and global warming. Two of those issues will reshape Saskatoon beyond recognition both positively and negatively, and all three of them, if handled poorly, could severely hinder the city’s ability to pay off its debt.

You have to start the discussion somewhere, so in next week’s column I will look at how rising energy prices will reshape Saskatoon.

Here are some of the background links.

Next week’s column is about the impact peak oil is going to have on the city and how it will affect our long term future.  This won’t get much more of a passing mention in next week’s article but both the Rockefeller’s and Bill Gates are betting on algae being the future of carbon based petroleum.   That being said, Shell is betting against it.  It’s an interesting possibility, even if it won’t come to market in time to stop massive crude oil price shocks.

The bumpy road to the future goes through Saskatoon

Barack Obama is said to be thinking about tapping the United States Strategic Petroleum Reserve.  For those of you who have have never heard of the Strategic Petroleum Reserve, here is Wikipedia

Strategic Petroleum ReserveThe US SPR is the largest emergency supply in the world with the current capacity to hold up to 727 million barrels (115,600,000 m3). The second largest emergency supply of oil is Japan’s with a 2010 reported capacity of 583 million barrels (92,700,000 m3). Also, China has begun construction and planning for an expansion of a SPR that will place their SPR at 685,000,000 barrels (108,900,000 m3) by 2020, surpassing Japan.

The United States started the petroleum reserve in 1975 after oil supplies were cut off during the 1973-74 oil embargo, to mitigate future temporary supply disruptions. According to the World Factbook, the United States imports a net 12 million barrels (1,900,000 m3) of oil a day (MMbd), so the SPR holds about a 58-day supply. However, the maximum total withdrawal capability from the SPR is only 4.4 million barrels (700,000 m3) per day, making it a 160 + day supply.

Back to Obama

Administration officials have sent mixed signals in the last several days about the possibility of opening the reserve, which is a rare step. Energy Secretary Stephen Chu said on Friday that the administration was monitoring prices, but he seemed reluctant. “We don’t want to be totally reactive so that when the price goes up everybody panics and when it goes back down everybody goes back to sleep,” he said. A few days earlier, Mr. Chu said that the administration was watching closely, but expected oil production that had been lost in Libya because of unrest there would be made up by production elsewhere.

Not question Energy Secretary Chu but who is going to pick up the slack?  OPEC is planning on raising their output by one million barrels a day but that has as much to do with Saudi oilfields coming back online after maintenance than it does about an ability to raise production.  According to Wikileaks and other sources, Saudi Arabia can’t and neither can anyone else.  As Jeff Rubin blogs, only a recession is going to stand in the way of $200/barrel oil and as we found out last time, when oil gets to be higher than $100/barrel, the price is more than global markets can afford and oil dependent economies enter into a recession.  Previous record high prices of $147 per barrel prices brought global economic growth to a halt.  According to Rubin, gas is about to hit six pounds a gallon (£1.32 pounds/liter) and the British government is already considering rationing systems which could be needed by 2020.

This isn’t about rising prices rising because of Libya or Egypt.  If it was that simple, releasing oil from the Strategic Petroleum Reserve would make sense, just as it did after Hurricane Katrina.  The problem is that oil prices were higher than $100 per barrel before the protests started in Egypt.  Global demand was already in excess of a record 87 million barrels per day. It was yet not about potential supply problems from Libya or anywhere else in the Middle East, it is just that the world is running low on oil and we haven’t been able to find the oil stocks to meet demand.

If the President of the United States admitting that the world is running low on oil in a press conference, this would cause a lot of damage to consumer confidence, create even higher price spikes and inspire Tea Party supporters to chant “Drill, Baby Drill” at Sarah Palin campaign stops, and perhaps start the painful transition to the future.  Or you can just pretend it’s a temporary problem and tap the Strategic Petroleum Reserve.  Leadership and getting re-elected are often two qualities that are often in tension with each other.

Closer to home energy independence isn’t an issue, Canada is an oil exporter but we do sell our oil on the open market which means as oil goes to $200/barrel on the open market, we pay $200/barrel oil.  A couple of years ago when we bought the cabin, it was almost $70 to fill the tank on the Honda Accord which had an impact on how we shopped, vacationed, and lived.  It was part of the reason why I drive a 1993 Ford Festiva today.   At one time you have a mini-van or a SUV for long trips, the time might be coming that we have smart car’s for the same reason.

As a province, $200/barrel does wonders for the balance sheet of the Saskatchewan budget.  It makes any finance minister look like a genius.  Look at what Alberta oil revenues did for Stockwell Day (before he put on a wet suit).  It also will generate higher food prices as more and more of the continent’s arable land is converted from wheat and corn we eat and is earmarked for ethanol production.  That’s great if you are an oilman or if you are a grain farmer.  Well actually since 99% of Alberta’s oil reserves are in the oil sands, it’s only great if you are a huge multinational oilman in Fort McMurray.

It’s not so great if you are a consumer, someone in England looking at $2.09/litre for gas or someone that is looking at another summer of skyrocketing food prices here in Canada.  With elections on the horizon in Ontario, Saskatchewan and perhaps across the country, you don’t hear a lot about energy and food prices or creative policy solutions that are going to provide any relief to us in the future with oil or natural gas prices long term.

In fact, Canada doesn’t really have an energy policy at all, unless you consider pump it out as fast as we can as an energy policy and that’s not a sustainable policy.  To break down the problem, I’ll look at it by sector.  Let’s take a look at natural gas first.

According to the BP Statistical Review of World Energy, Canada is the third largest producer of natural gas but ranks only 21st in the amount of proved reserves.  In Alberta, which produces 80% of Canadian gas, the average initial productivity of a gas well has declined by 72% since 1995, meaning we have to drill nearly four wells today to equal one average well in 1995.

As Stats Canada points out, Canada’s between December 2006 and December 2007, gas production is declined 8.7% with the Alberta Energy and Resources Conservation Board feels that we will see a further overall decline in Alberta natural gas production of 35% from 2009 levels by 2019.

Even the industry magazine, Oil Week says Alberta has “squandered” a lot of their natural gas.

It is not commonly known that 80 to 90 per cent of Alberta has had declining natural gas production for a number of years. In the extreme case, northeastern Alberta has seen production drop to 35 per cent of its peak 10 years ago. Even the Alberta Deep Basin, where production grew by over one billion cubic feet (bcf) per day between 2003 and 2007, has struggled to maintain production levels in the last couple of years.

Unfortunately, even the most optimistic predictions of unconventional gas drilling and production cannot mask the terminal decline that is afflicting the Alberta gas industry as a whole.

AJM Petroleum Consultants geologists estimate that raw gas production in Alberta has already dropped from peak by nearly 3 bcf per day, but at 11 bcf per day of sales gas, Alberta is still currently in third place behind Russia and the United States in worldwide daily gas production.
Alberta will not run out of gas anytime soon. But the fact is we have squandered our easily produced, low-cost natural gas resources and have very little to show for it. Without the government ensuring that Alberta is the most attractive place in the world to explore and develop natural gas, the significance of Alberta´s gas industry to the Albertan and North American economy will wane quite rapidly.

Of the major gas producers in the world, only Canada has a lower reserve to production ratio than the US.  In Saskatchewan, SaskEnergy practices a policy of hedging and has done a pretty good job of protecting Saskatchewan consumers from price spikes.  Despite as supplies dwindle the price will keep getting higher and higher.  Because SaskPower uses natural gas for it’s peaking stations, this not only affects us keeping our houses warm in the winter but also just keeping our air conditioning and energy efficient lights on in the summer.

While I enjoy taking a drive out to the Gardiner Dam on a lazy summer afternoon every year, it only generates less than half of what the Queen Elizabeth II peaking station does, which relies on natural gas.  Saskatchewan just opened the Lily Wind Farm near Moosomin which contributes 26.4 MW of energy to our grid and is only one of three wind farms in Saskatchewan (generating about 200 mw) that generates 5% of SaskPower’s needs.  According to SaskPower, they have gotten almost everything they can get from wind general as it can only generate 8% of our province’s electricity needs.  This is a problem because as the province grows, the need keeps increasing and according to SaskPower, they are generating as much power as they can.  Saskatchewan currently consumes 3,600 megawatts on average.  We are going to need to generate another 1,200 to 1,750 megawatts by 2020 because of mixture of growth and the fact that some of our coal fire plants are being decommissioned.

An even more severe problem is our oil supply.  As Ralph Klein loved to point out, Alberta has the second largest supply of oil in the world, right behind Saudi Arabia (or even more than them as you never really can trust their stated oil reserves) with 174 billion barrels of recoverable oil in the oil sands.  Now that part we agree with but comparing it to Saudi light crude oil isn’t a fair comparison.  Oil sands recover is very energy, capital, and time-intensive to produce compared to easier conventional light oil.  As Jeff Rubin wrote in his book, Your World is About to Get Smaller, the fact that we have to go after that hard to get oil proves we are running out of oil.  While the Alberta economy has benefitted from the massive investment of capital and resources to extract oil from the oil sands, there is still not a lot of oil being produced.  Estimates of five million barrels per day by 2025 have been toned down to three and a third, which is still nearly triple current production.  This would take Canada’s total production of oil to 4.1 million barrels of oil a day which would allow us to remain energy sufficient but since oil in Canada is sold at market prices, still pay the same amount as the rest of the world in terms of price and believe me, we will need to purchase a lot of it.

Globally, finding the numbers of how much oil is left is hard to determine.

According to the Oil and Gas Journal (2009), proven reserves of oil worldwide at the end of 2009 amounted to 1,354 billion barrels — a marginally higher volume than estimated a year earlier and the highest level ever attained. Reserves have more than doubled since 1980 and have increased by one-third over the last decade. Half of the increase since 2000 is due to Canadian oil sands reserves; most of the remainder is due to revisions in OPEC countries, particularly in Iran, Venezuela and Qatar. There are continuing question-marks over the estimates for some OPEC countries and their comparability with the figures for other countries. Notwithstanding these uncertainties, OPEC countries account for about 70 per cent of the world total reserves, with Saudi Arabia holding the largest volume.”

At 2009 rates of oil demand (84 mb/d), 1,354 billion barrels is enough for a little over 44 years.

Future World Oil Production

Which means that we will see rising prices from now until the oil runs out… or gets to expensive to go after.  This is what will make it a rough transition for Canadians.

Canadian lifestyle isn’t the most energy efficient.  Canadians are among the highest per capita consumers of energy in the world, exceeding even Americans and most nations that don’t have subsidized energy policies.  We consume about five times the world average and more than 80% of this consumption is fossil fuels.   Why so much?  Part of it is geography based.  It’s cold up here which means that we spend a lot heating our homes in the winter and a lot of energy cooling them down in the summers.  The other geographical feature is we are spread out.  In the last two weeks I did four trips of 827 kms from Saskatoon to Winnipeg and there isn’t a lot between them (no offense to Regina or Brandon).  We have electoral districts the size of some countries that are so vast that candidates need to fly around them to campaign effectively.  With much of our economic power in relatively few cities, we rely on cheap ground or air transportation to move goods throughout the country.  Agriculturally many of our inputs are petroleum based and of course high fuel costs mean higher costs for farmers and producers in terms of machinery and transportation.  With the elimination of the Crow Rate in the 1995, much of Saskatchewan’s train and grain handling infrastructure was eliminated or changed making it even more expensive and fuel intensive to get grain to market and then to bring that grain back to us.  I can give you a hundred other examples but however you look at it, Canada is dependent on cheap energy and we love to exploit it for our own use and to drive our economic growth.

So what happens when oil hits $200/barrel?  While we like to blame the banks for the current economic chaos and they have a lot of explaining to do, it was oil that hit $140/barrel that pushed the world into recession and oil prices are headed on up again.  Even at today’s $118/barrel, that is enough to push us back into a global recession, even if it is not as severe as the previous one.  These recessions may be a way of life.  Oil prices go up, we head into recession which drives demand and oil prices back down.  The cycle continues itself when there is an economic recovery as demand goes up and so does oil prices starting the cycle all over again.

Yet no government at any level seems to have any idea about what to do about this.  Stephane Dion might have been correct with his Green Shift in the long haul but a carbon tax was a hard sell as any tax that encourages changed behaviour is going to be attacked.  We saw this with Jack Layton wanting taxes lifted on home heating fuel.  While we should be encouraging people to shift away from expensive and carbon emitting heating sources, there is a tax on home heating fuel which means that someone is going to rail against it.   Every time gas taxes, opposition parties across the country call for gas taxes to be cut, as if repealing taxes will solve the problem of diminishing oil reserves.

What are the solutions?

For some there is always the assumption that technology will bail us out.  Years ago we heard about Ballard Fuel Cells and how they were going to change anything.  Then they gave up because you can’t make it work at a price point that makes sense.  Then it was electric cars.  In Saskatchewan’s winter, a Chevrolet Volt will only drive about 25 miles before it has to switch to the motor.  There is ethanol which has made a big difference in Brazil with their flex fuels but in North America, the same crops we use for food are being switched to ethanol production.  This lead to some of the large increases in food prices we saw over the last couple of years.  To meet his 2030 targets of 60 billion gallons of ethanol being produced, almost 400% more corn will need to be used which means even more price increases.  For those of you who think that someone should challenge these goals, let me remind that the state of Iowa grows a lot of corn and has this thing called the Iowa caucuses.  Iowa voters love high corn prices and high paying refinery jobs.  My point is that the best technology or common sense doesn’t always win out.

The good news is that north of the border in Saskatchewan, SaskPower seems to be taking some of the steps needed.  Revitalizing and expanding our electrical grids, diversifying into wind, and even offering incentives for people to produce their own power and sell the electricity back to them (an idea that doesn’t make a lot of sense right now because of the time it would take to recover your investment but it’s a step in the right direction).  Saskatoon has made some noise about using the weir to generate a limited about of hydro power as well as building a test wind turbine at the landfill site.  Some municipalities are taking advantage of solar power to keep the lights on in schools and places like Harry Bailey Aquatic Centre.    These make a difference but in the end don’t generate/save enough megawatts to make up for the loss of coal burning plants and increased electrical needs of the province.  While the decision to bring nuclear power to Saskatchewan was controversial and rejected, I can’t help but wonder if 20 years from now when Saskatchewan and much of North America is struggling with an overwhelmed grid, we will regret not forging ahead with clean energy.

With natural gas, SaskEnergy tries to make it as inexpensive as possible to upgrade to a super high efficient furnace.  At the same time I can’t help but get a sick feeling in my stomach every time I hear that an energy company has been acquired whose specialty is extracting hard to get to natural gas deposits.  The viability of these technologies means that we can look forward to more and more price increases in the days ahead.

What do we do about an increase of oil prices.  This is going to impact Saskatchewan in many ways.  Since the elimination of the Crow Rate, Saskatchewan’s rail infrastructure is diminished which is going to cause us grief in the transition into a world of scarcity.  In case you forgot, Warren Buffett just bought Burlington Northern Santa Fe Railway for $34 billion because he sees the importance of rail travel in moving freight to market at a fraction of cost of ground transportation.  There does seem to be some understanding of this on a federal level.  In Saskatoon we are familiar with the Asia-Pacific Gateway and Corridor Initiative as it contributed $20 million to complete Circle Drive  The federal rationale is that these projects will improve access to the Canadian National Railway’s rail yards south of Montgomery in Saskatoon.  The other big project in Saskatchewan is $27 million to the new CPR intermodal facility west
of Regina and upgrading the road connecting highways 1 and 11.  It’s a start in making it easier and cheaper for freight, fuel, and food to move to us and to our export markets.

Locally, it changes the way that tourism happens.  When we go out to the lake, we tend to go out for two three day weekends a month in the summer.  It costs us $30 if I take the Festiva, $70 if we take the van an of course $100 if we are taking about both vehicles.  While we are out there, Wendy will run out of something or make a menu change and Mark and I will drive into Strasbourg for what we need.  Other times we head down to Regina for a Rider game or because I ran out of things to read and we need to visit Chapters.  It often costs us another tank of gas by the time things are all said and done.  That’s fine at $30/tank or $50/tank for the Accord.  It’s not fine when it is $100 tank.  That will change our consumption patterns dramatically.  Instead of 10 quick trips out, we may instead move to three extended trips.  There won’t be any gravel road photography or quick trips into town.

Getting out to enjoy Saskatchewan or see friends may not be as easier or inexpensive as we have grown accustomed to it being.  STC has been an institution in Saskatchewan for decades, even if it isn’t your preferred way to travel.  I’ll be honest, bus travel is not my favourite.  Body odour, drunk passengers, and stopping at every small down between hear and Edmonton has added hours to what should be a pretty quick trip.  Will STC or Greyhound offer a first class bus  between Saskatoon and Regina or between Saskatoon and Calgary that features free wifi, movies, and a steward?  As the economics of travel change, there is going to be new opportunities.  The dream is always going to be high speed rail but as the Acela’s average speed of 120/kph is only slightly higher than that would be of a bus (or my Festiva for that manner) between Saskatoon and Regina.

Oil isn’t just connected to transportation, it’s connected to the food we eat and rising costs of oil lead to higher fuel costs.  Higher costs of fuel mean that input and transportation costs are higher, both from the producer to the mill and from the mill to the store.  Since fuel costs are higher, we have more acreage being dedicated to ethanol production, making food crops even scarcer.  Also you have China buying up vast tracts of land around the world so that their farm workers have jobs and their people have food.  Food grown in Africa and is shipped to China only adds to the world food price pressures and drives up global prices.

Much of what we purchase is not local but is shipped across the country.  The watermelon on the shelf at Safeway or Superstore today was not grown locally, it may not have even been grown on this continent yet at the same we don’t have the infrastructure to eat locally.  While the Saskatoon Farmer’s Market is a great venue and a fun place to spend a Saturday morning, it doesn’t provide the volume, variety or the frequency to make it easy or cost effective to eat local.  Oddly enough Wal-Mart is leading the charge in this area as they foresee a future where fuel costs are going to alter the way we eat.  Who know if Safeway, Supertore, and Sobeys will follow Walmart’s lead or be forced to drastically alter how they get food to our tables.

The Canadian Wheat Board is an export agency but it is going to need to change to allow for more locally grown and produced wheat products or it’s going to have to create a local infrastructure to allow for cheaper food production in local markets.  Years ago some Manitoba farmers wanted to set up a pasta plant and sell it their own wheat.  This is against the law in Canada (which still boggles my mind) as you can only only sell to the Canadian Wheat Board at a price they set so the plant idea died.  In some ways it means that as consumers we are caught in the same cycle with food as we are with eat.  Food shortages in China drive up international prices and we pay more in Saskatchewan for crops that we produce here.

While I don’t think we are going to run out of food, it is going to cost us more and will pay much more for the variety that we want.  This is going to alter the landscape for Saskatoon’s lower class.  The Bridge on 20th does almost 70,000 meals a year, the Salvation Army does 100,000 meals a year, the Saskatoon Food Bank has 15,000 visitors a month or 180,000 a year and while I can’t speak for The Bridge and the Food Bank, the Salvation Army’s increase is partially linked to rising fuel costs.  These are going to be people who are least likely to have a Chevy Volt or a Toyota Prius and don’t have easy access to a neighbourhood grocery store.

The interesting thing is that it may cause a reordering of our civic lives.  High fuel and food prices have hit cities before.  Jeff Rubin looks at Sarajevo during the U.N. sanctions and fighting drove fuel to $6/litre.  To go back even further, England spend years with fuel and food rationing from the start of WWII until 1954.   Even today in some islands in the Caribbean, food and fuel prices are extremely expensive.

What happens?  Cars get parked, bicycles come out an life becomes local again.  Local grocery stores, corner stores, and coffee shops start to become the centre of culture rather than the malls and the big box stores.  Food becomes seasonal again.  We may even start to grow gardens.  The city of Saskatoon is redesigning and rebuilding Mayfair Pool.  Since I moved to Mayfair has been irrelevant because I can go to any pool I want in the city.  Why do I need to go to my local pool when I can drive to Lawson Heights Civic Centre and enjoy the wave pool?  Gas prices or as in England, gas rationing will make us think twice.  In the future local spaces like Mayfair Pool will become important again, as will my local church, my local pub, and my neighbourhood coffee shop, even if it doesn’t sell Starbucks.  The world will get smaller but I don’t know if it is going to be worse.  It’s just going to be different.

The losers in all of this are bedroom communities or exurbs that don’t have a sustainable local economy.  A friend told me that she spends $500/month in gasoline to commute into the city for work.   What happens when that doubles?  You either find work in your community or you do what thousands of others do, you move a lot closer to work.  Some will discover that local economy but other towns will slowly go away.

We are left with two choices as a city.  As Rubin puts it, fundamentally change how we live or get caught in a cycle of recession after recession.  Neither choice is going to be solved by a little more oil being put on the markets by the Strategic Petroleum Reserve, Saudi Arabia, or the Alberta Oil Sands.  It’s too big of a problem.

Tomorrow I’ll spend some more time looking at Saskatoon’s future in terms of peak oil.

Peak Oil is here

Jeff Rubin in the Globe and Mail

…Mr. Husseini acknowledged Saudi production is never likely to get to Aramco’s 12.5 million barrel per day target. Instead, the country is struggling to produce even 10 million barrels a day and it may soon encounter a production peak after which flow rates will inevitably decline. Yet the International Energy Agency is counting on Saudi Arabia to produce no less than 14.6 million barrels a day by 2035.

Mr. Husseini’s revealing assessment of the Saudi oil industry goes a long way to explaining why President George W. Bush’s personal pilgrimage there in 2008 during the height of the last oil crisis was only able to elicit a token 300,000 barrel a day production increase. Other than a limited amount of heavy oil that many of the world’ s refineries can’t process, the kingdom has little more to offer today.

Chronic delays in new development and over-reporting of reserves by Aramco paint an illuminating picture of an oil industry that has struggled merely to keep up with depletion. Production is still below the levels reached in the 1970s. And thanks to the Saudi economy’s voracious appetite for its own massively subsidized oil, less of its near-peak production is available for export every year.

While the U.S. embassy cables acknowledge Saudi Arabia still has the capacity to raise prices should it withhold supply, it no longer has the capacity to prevent prices from rising because it can’t boost production sufficiently to meet world demand.

If Saudi Arabia no longer has an ability to raise production, who does?

Still, one way or another the global oil industry will have to produce six million barrels per day more oil than last year to offset the four million barrels per day that is lost to depletion each year, and the nearly two million barrels per day of new crude demand that another year of global economic growth will generate. (Last year, Chinese oil demand alone increased by almost one million barrels a day.)

Looks like the Ford Festiva was a good investment after all.

2009 in Review

This is late but we all need to deal with disappointment in our lives.

Memorable events for 2009:

Favorite books I read in 2009:

Favorite TV Shows I watched in 2009:

Favorite movies I watched in 2009:

  • Cue tumbleweed.  I never watched a single movie in 2009.  I bought a lot of movies but just never watched any of them. 

Favorite food for 2009:

  • I rediscovered my love of Shreddies.

Best Sporting Moments of 2009:

  • Denver starts the season 6-0.

Worst Sporting Moments of 2009:

  • Toronto Blue Jays stunk, Calgary Flames lost in the playoffs again, Saskatchewan Roughriders can’t count to 12 without going over, Denver firing Mike Shanahan and then alienated most of their talented players.

Christmas Gift Guide: Gifts for Really Smart People | 2009 Edition

You need a gift for someone smart, someone who wants to know about everything – what happened, how it works, why it all got started. Fortunately, the globally curious have a lot of hobbies which makes them kind of easy to shop for, even if you don’t always remember to sleep and eat.  Below are some ideas for the smart people in your life.  If you are looking for something not so elitist, check out my other Christmas Gift Guides.

Sangean WR-11 AM/FM Table Top Radio :: CBC Radio and NPR sounds so much more profound coming from a wooden radio.  Speaking from personal experience, there is something about sitting around a radio on a hot summer day, sipping iced tea, while reading a good magazine.

Lomographic Holga Starter Kit :: You could get them a DSLR but they already have a digital camera they like.  You could try and get them something a little different and get them a Lomo camera.

The Invention of Air by Steven Johnson :: I blogged about it before and this is a great book out the life and work of Joseph Priestley, the Yorkshire dissenting theologian and chemist, who then went on to emigrate to America and advised the creators of the new republic—Thomas Jefferson, most notably—on how best to run their country.

This is an intelligent retelling of a rather well-known story, that of Joseph Priestley, the Yorkshire dissenting theologian and chemist, and then went on to emigrate to America and advised the creators of the new republic—Thomas Jefferson, most notably—on how best to run their country.

The Long Emergency by Howard Kunstler :: Kunstler has a remarkable look at what peak oil will mean for western society.  Don’t take my word for it, check out this interview in The Morning News and this article over at Rolling Stone before you buy a couple of copies of this book, one for the person you are shopping for, one for yourself, and one to lend to your friends.

Why Your World Is About to Get a Whole Lot Smaller: Oil and the End of Globalization by Jeff Rubin :: This is another fascinating look at what the future will look like with higher oil prices.  Globalization is powered by cheap oil and without cheap oil, our world, economy, and the way we live is going to go through a massive transition.  While a lot of books about economics can be dry and hard to get through.  Both the Long Emergency and Why Your World are both very accessible, interesting, and very well written.  They will also make for some fascinating discussion over the breakfast table on Boxing Day.

The BLDGBLOG Book by Geoff Manaugh :: What a wonderful book.  It’s not just a book about architecture, it’s a book that reimagines what urban spaces can become.  The book is more than just text, it is full of fantastic diagrams, graphics, draws, and unbelievable photographs.  I read it once for the content and then read it again and just soaked in the photos and graphics – they are that good.

The Lost Massey Lectures: Recovered Classics from Five Great Thinkers by Martin Luther King Jr., John Kenneth Galbraith, Jane Jacobs, and Paul Goodman.  In case the person you are shopping for has read those, check out, More Lost Massey Lectures: Recovered Classics from Five Great Thinkers

Speaking of great thinkers, if your loved one hasn’t read A Heretics Guide to Eternity by Spencer Burke and Barry Taylor yet, they really need to.  Spencer and Barry received a lot of criticism from some people who were threatened by their ideas but the book offers up an important voice to the conversation about salvation, eternity, and the church.  Plus if the person you are shopping for is really that smart, they can handle new ideas.

While I am a fan of paper, have you thought of giving the gift of ebooks with a Amazon Kindle?  It’s only 10.2 ounces, lighter than a typical paperback.  It downloads books in Under 60 Seconds over the 3G Wireless network.  Despite that, you have no annual contracts, no monthly fees, and no hunting for Wi-Fi hotspots.  It’s battery can run for one week.  You still have to pay per download in Canada but at least we can get it here now.

If you don’t think they want a Kindle, how about Sony’s Digital Touch Reader? By supporting both industry standard formats, ePub and PDF, you can access books at Sony’s eBookstore, check out books from public libraries, access over 500,000 free public domain titles from Google, as well as sharing sites, online aggregators and personal publishers (Internet access is required).

Chess for Three? You heard me right, a three person chess game.  This unique hexagon shaped board is designed for three players putting a new twist on a beloved classic. No new rules; still the same chess you know and love! Set includes board and 3 different colored chess pieces.

Your own personal card cataloging system :: It seems like book thieves are everywhere these days. Even your closest friends will try to keep your rare, out-of-print novels if you don’t keep an eye on them. And no one really wants to pay $60 for another one. Thankfully, there now is a solution to your book-losing woes. The Personal Library Kit provides everything you need for keeping track of books, and an eye on those shameful book thieves.  Of course card cataloging your books is only half the battle, keeping them organized is the second half.  Sure you could use LibraryThing but check out this old school way of keeping your cards organized.

The Complete Collection of National Geographic :: Sure Wikipedia is great but there are things covered in old National Geographics that Wikipedia has never even heard of.  While you are at it, have you considered getting a subscription to magazines like The Walrus, The Atlantic, or the New Yorker?  How about Architectural Digest, New York Times weekend edition, or something else that will feed their mind and inspire great discussions over coffee?

Mark was given a copy of Planet Earth: The Complete Series by the Reimers for Christmas and he loves it.  Not only does Mark love it but so do Wendy and I.  Its a series we will watch again and again and harkens back to the days of Mutual of Omaha’s Wild Kingdom where the entire family gathered around the television to take in the sites and sounds of animals we came to learn a lot about.

I know the commute would be horrible unless you lived in New York City but a membership at Paragraph would be a lot of fun.

Christmas Gift Ideas and Gift GuidesIf I missed anything or if my suggestion made you think I was absolutely crazy, let me know in the comments. You can access the current edition and previous years list of Christmas gift guides here.

Warren Buffett’s $26 billion gamble on the next big thing

This is huge

Burlington Northern Santa Fe Railroad is purchased by Warren Buffett and Berkshire Hathaway

Most investors looking for the "next big thing" seek out whiz-bang investments like alternative energy, lifesaving biotech drugs, handheld Internet devices and, for doomsayers, hard assets like gold.

Railroads, which had their heyday in another era, are rarely mentioned as a must-have investment for those looking to get rich.

So why is Warren Buffett, arguably the world’s most famous and successful investor, betting more than $26 billion of his spare cash to acquire all of Texas-based railroad Burlington Northern Santa Fe?

On Tuesday, Buffett turned heads on Wall Street when he placed his biggest bet of his career on rails — and the battered USA economy, for that matter.

Here is why he is doing it.

"Burlington Northern Santa Fe last year moved, on average, a ton of goods 470 miles on a single gallon of diesel, and society has an enormous interest in using less oil to transport goods," Buffett says.

Indeed, Buffett very much likes the green component to his rail investment, likening it to an energy-saving play.

"Each train displaces 280 trucks on the road," Buffett says. "When it comes to spewing pollutants there is nothing more efficient than trains. It is very much in line with the future goals of society. While the railroads won’t take over the world it is something that is part of the future."

Okay, this is why this is interesting to me.  Buffett is making a massive investment based on the idea that Peak Oil is real and it’s going to influence how we travel, move goods, and our way of life.  You also can’t notice that in some ways, he is betting against cars or at least how expensive it is going to be to get from Point A to Point B.  That is something that will reshape not only the transportation of goods but cities, how we interact as communities, and where we live.  It’s something that you never hear from government officials, probably because governments are good at a lot of things but planning for the future is not one of them.

It’s a conversation that the church needs to have.  For the last two decades the idea has been big campuses with lots of parking on the outskirts of town or in the suburbs.  The question I have is as gas prices rise, those in lower income brackets will see their world get a lot smaller, will the churches just be refuges for those who are rich enough to get to them or even worse, will the impact on the church, be the same as it expected for sprawling and emptying out suburbs.

BP finds giant new crude oil field in the Gulf of Mexico

Deepwater Horizon

First the good news and that is British Petroleum has found a giant crude oil field in the Gulf of Mexico.

It may be one of the biggest oil finds of the year, if not the decade. In recent weeks, executives at BP’s exploration centers in Houston and London have been closely tracking the progress of a very deep well that BP contractors were drilling into the seabed of the western Gulf of Mexico. In late August the exploratory well, known as Tiber, was completed. On Sept. 2, BP announced that it had made "a giant oil discovery." BP’s chief of exploration, Michael Daly, terms the Tiber find "very significant" and says it is even "better" than the Kaskida field, another huge BP property in the Gulf of Mexico, with an estimated 4 billion to 6 billion barrels of oil in place.

Of course the bad news is that this isn’t exactly a Jed Clampett type discovery which he discovered while shooting some possum in Arkansas.  This is oil that is in the deepwater Gulf.  So you have to go down a couple of miles of water and then a couple of miles of rock to get it.  The Tiber well is the world’s deepest.  It’s the kind of oil you don’t go looking for if you aren’t running out of oil elsewhere in the world and it isn’t the kind of project you undertake unless you expect to have high oil prices for a very long time.

Of course drilling in the Gulf of Mexico isn’t the easiest thing in the world to do.  Check out what happened to BP’s Thunder Horse platform during 2005’s Hurricane Dennis.

Thundre Horse sinking in 2005 Things like this, Hurricane Katrina, Hurricane Ike… tend to take a toll on production.