World demand for fossil fuels growing

CNRL Horizon oil sands upgrader near Fort McMurray, Alberta.

There is a growing misconception among policy makers in Canada that demand for oil has peaked and, as a consequence, large scale projects such as Teck Resources Frontier oilsands mining project are obsolete.

Nothing could be further from the truth.

There are, of course, a sizable number of people who wish to see demand for oil end tomorrow and the world embrace the so-called low carbon future of wind, solar and electric vehicles.

From their prospective it is just a matter of persuading or coercing people to change their habits, invest more money in renewable energy and abandon the internal combustion engine.

The problem is the demand for oil is what economists term relatively inelastic. Oil is the lifeblood of an economy, providing gasoline and diesel for transportation and feed stock for a host of indispensable products of the modern age.

So inelastic is demand for oil that studies show that even a doubling of price will reduce demand by a mere 10 per cent.

The most realistic studies suggest that global oil demand will reach about 126 million barrels per day by 2050 from current levels.

That sounds reasonable inasmuch as demand for oil increased by about 30 per cent in the past 20 years.

Underpinning those studies are some hard investment numbers. Investors are currently pouring $1.8 trillion into fossil fuel development annually in anticipation of returns over the next 20 to 30 years.

There is no doubt, of course, that demand for all types of energy will grow over the course of the next three decades. Global demand will grow by leaps and bounds as nations develop their economies. That is the reason China and India are building thousands upon thousands of coal fired electricity plants, nuclear power plants and as well as renewable energy projects.

But demand for fossil fuels will continue to grow. Natural gas, for example, is seen by many analysts as the transitional fuel of choice as we move forward (?) to the so-called net zero carbon economy.

What will be Canada’s role in meeting the demand for oil and natural gas in the decades to come?

Given our immense reserves of oil locked in the oilsands and equally immense reserves of natural gas, we ought to be well placed to benefit from the global demand for both fuels. There are literally trillions of dollars to be made in the coming decades.

Yet here we are at an impasse with urban ecofanatics pushing their zero growth ideology in the guise of indigenous land rights.

The irony, of course, is that the very indigenous people they purport to represent and champion support resources extraction projects such as TeckFrontier and CoastalGasLinks because they are the best means of lifting their communities out of poverty.

It is truly mind boggling.