As many readers are aware, Saudi Arabia has the reputation of being the one oil producing country in the world that can, at short notice, add upwards of two million barrels of oil per day to the world market. Over the past several years Saudi Arabia has spent over 100 billion dollars to increase its capacity from about 11 million barrels a day to 12.5 million by 2009.
In January and February of this year, soon after world oil prices broke the one hundred dollars-a-barrel barrier, both U.S. President Bush and Vice-President Cheney made separate trips to Saudi Arabia to request that the Kingdom increase its oil production in order to help reduce the price of oil. The Saudi’s refused, stating that oil prices were being driven by speculators rather than shortages. Then, in mid-April, came the surprising announcement from Saudi Arabia’s King Abdullah that new oil finds should be left in the ground for future generations of Saudis.
Restricting expansion to increase the productive life of their fields is a prudent move on the part of the Saudis for it will ensure greater long-term wealth. Other major oil exporters, including Russia, Norway, and Angola, are adopting policies similar to those of the Saudis.
With world crude oil production stalled at around 76 million barrels a day (the remaining 12 million comes from natural gas liquids, volumetric refinery gains, and biofuels) and growing world demand, any limits placed on production can be expected to result in a production plateau.
A production plateau would impact the world’s consumers in three ways. First, the inevitable decline in world oil production (often referred to as “peak oil”) will be delayed. Second, world energy prices will continue to rise as countries such as China and India increase their demand for oil. Third, energy shortages will become more commonplace as competition increases for limited quantities of oil.
Whether the production plateau has been reached yet is a moot point, because the impact of higher energy costs is already being felt across the world:
New drilling technologies may well help delay the onset of the plateau or even lengthen it, but its arrival is inevitable. Barring an environmental backlash restricting Alberta’s tar sands production, the conversion of the tar sands into synthetic crude will offset the decline in Canada’s conventional crude production. Horizontal drilling techniques will allow the extraction of oil from the Middle Bakken shale oil field straddling North Dakota and Saskatchewan. Although Middle Bakken is being presented as a significant find, it is small with an estimated recoverable reserve of three billion barrels (about one-half of the total US annual oil consumption). Larger significant discoveries have been made recently, such as the Tupi field off the southeast coast of Brazil, with an estimated reserve of between five and eight billion barrels; however, its depth (in 2,140 metres of water, under 3,000 to 4,000 metres of sand and rock, and finally 2,000 metres of salt), specific gravity, and geology will make production a challenge.
The need for energy security policies that reduce energy consumption and replace insecure energy sources with secure ones is of paramount importance to Atlantic Canadians. Many of the region’s energy policies are being driven by climate change, meaning that policies tend to focus on energy efficiency rather than energy security—where the two overlap, there can be strange results—take transportation as an example.
Transportation, the single largest end-use of energy in the region, is, not surprisingly, a major source of greenhouse gases. In Nova Scotia, municipal and provincial politicians, sensing votes, are calling for a wide variety of transportation projects, including the creation of an expanded network of four-lane highways from Yarmouth to Sydney, a third bridge (or a tunnel) across Halifax harbour, and roadway atop an existing rail-bed for container trucks in Halifax—all in the name of energy efficiency.
Undoubtedly, spending several billion dollars on these projects will result in short-term solutions that reduce congestion by allowing vehicles to move more freely and hence improve energy efficiency. There may also be some minor reductions in greenhouse gas emissions. However, if past experience is anything to go by, these projects will also induce more traffic, thereby negating the intended benefits.
But, one might argue, with rising oil costs and potential oil shortages, why would these projects encourage more traffic? If anything, changes in the world price of oil will discourage traffic. The logical conclusion to this line of reasoning is that building more infrastructure for vehicular traffic is a waste of resources, capital, and energy.
With world energy markets entering uncharted territory, it is clear that the days of inexpensive oil are over, meaning that many assumptions about transportation—like long commutes, holidays in the Caribbean, and fresh grapes flown in from Chile are over as well. All our transportation decisions, whether moving goods or people, will be dictated by the cost and availability of energy.
Most governments and their policy makers have been ignoring the warnings that oil is finite. An oil production plateau will give a brief window of opportunity to implement energy policies that address the long-term energy security needs of Atlantic Canadians. In transportation, this will mean significant modal shifts, from air and road to rail. Rail is an efficient mover of both goods and people, and can be powered by a number of different energy sources, including electricity.
Transportation and energy security go hand-in-hand: as oil supplies become less secure, modern transportation systems become unreliable and unaffordable. Rail is one of the few modes that can meet the transportation requirements of the future. Governments must introduce policies to stop rail abandonment, restore railways, and encourage the movement of goods and people by rail. Jurisdictions that fail to develop such policies will be literally off the rails when oil production reaches the far edge of the production plateau and begin its inevitable decline.
Atlantic Construction and Transportation Journal—May 2008