The chief economist at the International Energy Agency says peak oil is nigh and that we, as a society, need to start seriously planning for a world without it. Dr. Fatih Birol, in an interview with the U.K. Independent, said total production of oil is likely to peak within 10 years and that most of the biggest oil fields in the world have already hit peak and are declining rapidly. His comment that the peak will come in 10 years is far earlier than most governments are planning on, if they’re planning at all. Some believe we’ve already hit peak, at least when we talk of “conventional oil” production.

“One day we will run out of oil and we have to leave oil before oil leaves us, and we have to prepare ourselves for that day,” Dr. Birol said. ”The earlier we start, the better, because all of our economic and social systems are based on oil, so to change from that will take a lot of time and a lot of money and we should take this issue very seriously.”

 He went on to say that with peak comes higher and higher prices and increased concentration of power in the handful of countries in the Middle East that have a 40-per-cent share of the market and likely more in years to come. The timing of that interview couldn’t have been better for Nissan, which unveiled its new LEAF electric car over the weekend.

Nissan plans to start selling the LEAF in late 2010 and hopes to go into mass production in 2012. This is a slick-looking car, one that promises to be affordably priced. And unlike other offerings, the battery will be leased, putting all the risk in the hands of Nissan. As I said before, there’s been too much focus on GM’s Chevy Volt, as if it’s the only electric game in town. Fact is, there are many plug-in vehicles — hybrids and all-electrics – being launched between 2010 and 2012. It’s a good sign, because these are the kinds of products we need to transition away from oil, as Dr. Birol so widely advises. We also need several models to enter the market to encourage more investment in the infrastructure needed to support these cars.

Dr. Birol’s  warning and Nissan’s unveiling of the LEAF (among other EV announcements of late) add even more weight to Ontario’s proposed subsidy for purchasers of plug-in hybrid and all-electric vehicles. (more…)

The International Energy Agency is getting a bit worried. It sees that low oil prices — or at least low compared to last summer — have led to under-investment in energy infrastructure, particularly exploration of oil and gas. It also knows that when the economy shifts into recovery mode demand will pick up fast and supply will be slow to respond. It predicts there will be a supply crunch by 2012, and of course that means oil prices will be rocketing back up.

This scenario, of course, may be understating the problem about to hit world economies, says former CIBC chief economist Jeff Rubin, whose new book Why Your World Is Going to Get a Whole Lot Smaller hit the market today. I’ve got a feature book review here, but in a nutshell Rubin believes conventional oil production has already peaked and unconventional production won’t be able to keep up with demand once global economies recover, and not just because of the incredible appetite the Chinese have for oil. Rubin argues that excessive consumption in the Middle East, massive local subsidies there for oil, and the use of oil-fired power plants to run energy-intensive desalination facilities will shrink the amount of oil supply that OPEC puts on the world market. Ultracheap cars to appear in India and likely to spread around the world, thanks to Tata Motors, will mean even more demand for oil products.

Oil prices are destined to once against skyrocket into triple-digit territory, and the impact will be inflation on everything, including our food and the fuel we use to drive our cars and heat/power our homes. In fact, gas prices will become so high that people will be forced to ditch their cars, housing prices in the suburbs will plunge, urban areas will grow more dense, and there will be a renaissance in local agriculture and urban farmers’ markets. The high cost of transporting goods from far-off markets will lead to the re-emergence of domestic manufacturing. High oil will override any labour-cost benefits that countries such as China can offer.

What Rubin is describing is essentially a deathblow to globalization and a return to regional economic trade, similar to what world trading patterns were like in the 1970s. (more…)