Five things I’ll be watching closely in 2011

I’m looking to see a few tipping points in 2011 and, quite honestly, I’m strangely optimistic that the new year will bring some positive change, even if it’s unlikely to be around climate policy. The energy transition we’re in has been slow, but in retrospect, we’ve come a long way on many fronts. My Clean Break column today — the last one of the year — takes a look at five areas I’ll be watching closely. There are more, of course, but the limitations of print kept me to five.

Happy New Year to all.

Rising oil prices? Wheat and corn? Copper? Rare-earth metals? Get used to it… this isn’t speculation

Economist Paul Krugman writes in the New York Times about our Finite World and points out that the rise in commodity prices that will continue into 2011 isn’t as much about speculation, as it was in 2008, or about excessive money creation driving runaway inflation. It’s about one simple thing: we’re running out of stuff, and we need more stuff. Think about it, the world — North America and Europe, in particular — is still struggling to climb out of recessionary doldrums but oil is about to crack $100 a barrel? One might understand triple-digit oil prices if the global economy were on fire, but it’s not on fire — it’s struggling to stay lit. What will happen when it is on fire? Scary, the thought. Krugman’s column is, as usual, worth the read.

Jeff Rubin: latest views on BP oil spill, shale gas, oil sands and peak oil

Oil prices are at a two-year high, and a big part of this is surging demand from China. Platts reported this week that China’s oil demand surged to an all-time high in November and demand for the first 11 months of 2010 is up nearly 11 per cent over 2009. The Chinese government has even moved to raise the price of domestically refined oil to keep demand (and inflation) in check. Expect prices to rise into triple-digit territory in the first quarter of 2011, says economist-turned-writer Jeff Rubin, author of award-winning Why Your World Is About to Get a Whole Lot Smaller. He also believes that in 2011 we’ll surpass the $147-a-barrel mark that we reached in July 2008.

It has been about 18 months since Rubin’s book came out and since that time a lot has happened around the world, including the BP oil spill. I figured I’d get an update from the former chief economist of CIBC World Markets. My Q&A with him, which I had a chance to do last week, can be read here in the Toronto Star.

I found his thoughts on shale gas most intriguing: “Is shale gas the sub-prime mortgage market of the natural gas market? Is this one giant con and investors are being conned into thinking there’s a huge supply of gas at $4 when it really costs $7 or $8 to bring it to market? In the fullness of time economics will assert itself, just as it did in the sub-prime mortgage market.”