A conflict over ethical oil

By now anyone who follows energy, economics, or the environment has probably heard the term "ethical oil". If you are not familiar with it; it was coined by Ezra Levant in his book Ethical Oil: The Case for Canada's Oil Sands. It also coined a lesser known term "conflict oil".

Recently a new blog came to my attention which was influenced by Ezra's book and it's causing quite the stir amongst environmental groups not sure how to counteract the image being portrayed. This image or argument is essentially that right now society requires oil, so would you rather get this oil from unstable, civil rights violating dictatorships or from friendly democratic Canada. This argument is painted for you in colorful contrasting advertisements which pop up on the blog showing the clear contrast between "life" and "death" (green or orange), along with exaggerated images to reinforce the idealism. A happy worker in a green field for "life", and a destroyed oil excavation site with Hugo Chavez imposed over top for "death" for instance.

Inside the site is scattered with cherry picked statistics, such as the employment statistics for nearby native communities. It is certainly a clever ploy by Big Oil which more or less renders the environmental aspect and argument moot as no matter what anyone says regarding environmental impact the response has become "well would you rather have 'ethical oil' or 'conflict oil'?". Clever indeed.

What the website fails to mention however is that as long as we have dependence on oil the world will always require conflict oil. Lets put this in perspective, here is a chart showing world oil consumption and production. Do you see the spread between European oil usage and production? How about for North America? Never-mind even about Asia-Pacific, but consider it none-the-less. For this argument we will not look at it as we don't need to. So roughly from that chart, you could say that if Europe and North America didn't import (or export), production would need to increase by what? 20million/day? 30million/day? Well according to Canadian Association of Petroleum Producers Canada's total production in 2010 was 2.8million barrels / day. By 2025 they estimate 4.3!!! (Keep in mind, this is the oil industries estimates, not the *REAL* numbers.).

So here is what I ask you Ezra, how is your argument for Canadian oil relevant at all? The world doesn't just need oil, the world needs conflict oil. There is no magic bullet to make that not so, and no amount of Canadian ethical oil (rated at 1.5million barrels / day in 2010 (World usage = at least 85 / day)) will change that. Do you know why Ezra? Because unlike ethical oil, conflict oil doesn't need $100 / barrel to pretend a profit is coming in.

The oil sands are environmentally damaging and are not financially viable. We don't even know what the untold costs in environment and water usage are. They will never ever ever add up to more than a drop in the world oil usage bucket, because production is inefficient. It requires too much energy to make a barrel of low-quality "oil" from these projects of last resort. Remember when $70 / barrel was "expensive" and enough to make Alberta a profit? What happened to that? now we need $100. What happened is the input costs caught up with the output costs, and we don't want to know what happens if a sudden market move drops oil well below the input costs as it takes time for those price fluctuations to reach production. In other words the oilsands *only* bring in profit during sudden upward market moves in oil up until the time input costs rise due to the cost of oil. Get it?

Conflict oil vs. Ethical Oil is a straw-man argument. The infinite growth economy doesn't care how many people die to fuel it, or how much of the environment is destroyed. All it cares about is fueling more growth, which needs more resources, or the debt pyramid we've sold our kids into will collapse on our heads. You've been warned.

PS: Here is another reason to not buy into ethical oil vs. conflict oil.

* Updated | 08/08/2011: Well it's Monday now. The U.S. S&P downgrade has taken effect in the market; and what do you know, this appears in my twitter feed. Yea, wow. Amazing I know. Get it yet? The oil sands are a MONEY LOOSER. The price CAN NOT climb forever. What is worse: we are selling our resources short, without our own stock or "strategic petroleum reserve". That's right, we have no SPR.

Understanding the real 'why' behind Alberta's transmission lines

climatechangecentral.com

These power lines are causing quite the uproar in Alberta as of late. Lots of accusations flying around about money greased deals and corruption. The controversal land use law is driving debate all around the province. I'd like to give my take on the transmission lines themselves as I believe it's about money, greasing deals, but also largely about U.S. and Chinese oil supplies.

To set the stage for my argument I would like to point to this article from StatsCan / 2005. I've chosen 2005 as that is when we were in the high growth stage of our last oil boom.

Alberta is Canada’s biggest per capita consumer of energy. In 2003, Alberta’s per capita consumption was two-and-a-half times higher than the national average. Between 1990 and 2003, per capita energy consumption increased by 11%. That surge was not entirely due to a sizeable increase in population. A big part of the increase in total energy consumption resulted from industrial activity in the province.

The most notable portion of this paragraph is that we are the biggest per capita consumer, and that most of this energy demand is from industry. This video from Alberta's gov't gives a run down of their plans for the future, released at roughly the same point in time as the StatsCan article:

So at the time of this video, Alberta was producing 1.5 million barrels / day, which they hope to increase to 5 million barrels / day by 2030. So in 2005 Alberta's industry was about 28% of the total industry Alberta wants by 2030 which also means industrial power demand is 28% of the total power demand Alberta can anticipate from industry in 2030.

The problem with this is that the world uses near 90million barrels / day today, so the oil sands are only providing 1.5 million barrels of that, regardless if we have even 500 billion years worth of oil we still are only providing a drop in the bucket in actual oil produced. That oil is all still in the ground and useless to us at the moment.

Now most Albertan's know that primarily the U.S. receives our oil, but few realize that many other huge oil consuming economies like China also have big investments in the oil sands, and for good reason: they really really need that oil. Not only do they really need it, but they really need it cheap. Now think back to that statscan article I linked above and the fact most power demand increases in Alberta is directly from industry and in Alberta that industry is mostly oil sands. Some warning bells about our economic structure should be going off right about now, that our energy production has huge power consumption demand.

Most of our power production also seems to be being built up north such as this one and this one. Why would they be being built up north, and not near Calgary where Alberta's population needs power the most? Well reading the article should give you a hint:

Energy Alberta Corporation has chosen Peace River, Alta., as the site for its proposed $6.2 billion nuclear power plant.

 Yup, they chose it! Now what reason would a power generation company have to choose a location that is nowhere near the population of the province? Well my bet would be money, stakeholder money to be specific.

So, how is this relating to the power lines you might be asking? Well consider that the U.S. and the Chinese are the primary investors in our oil infrastructure. Consider that there are riots in many of the key oil producing nations which it can be assumed that Government's have been aware of and preparing for. Consider that our oil is expensive to produce and that the U.S. and China rely on cheap energy to fuel their massive economies.

So, using simple logic what is the reason the government is pushing power lines on Albertans that Albertans pay for 100%? Is it to sell power to the U.S.? Probably a little. Is it to grease the pockets of power companies and politicians? Yup. But the deep down reason? The power consumers don't want to pay for the full generation and transmission costs of the future. It's preferable to the eyes of big business that we pay for it. Naturally it is cheaper to consume power if the power is being generated close to you. Albertans will be paying the transmission costs that industry should be paying instead.

Do not support this scam, demand power plants are built near our populations. I refer to this as classic "privatize profits, socialize losses" policy making and as uptag has noted is not reflective of the population's power demand at all.