23-11-06

North America's dependence on oil will force higher prices and lifestyle changes in years to come, a leading Canadian energy analyst warned a Denver audience in a recent speech.
"Ultimately we will get to the point where (oil) supply is unable to meet demand in an economically feasible way. That's the break point -- something has to give," said Peter Tertzakian, chief energy economist for Calgary-based ARC Financial Corp.

What will give, he said, is consumer behaviour that until now has been motivated by cheap and plentiful energy. Out of necessity caused by tight supplies and high prices for oil, consumers will gravitate to fuel-efficient vehicles and increasingly embrace working at home in lieu of commuting.
Tertzakian noted that fuel-efficiency gains from new automotive technologies largely have been offset by consumer preference for trucks and sport utility vehicles.
"We're suffering from vehicle obesity," he told an audience at the Canadian Consulate General in downtown Denver. "The fleet gets heavier and heavier."

Gasoline-electric hybrids are just a small part of the solution because they accounted for only about 1 % of North American auto sales last year, he said.
"If every car buyer bought a hybrid, it would still take 14 to 15 years to replace the fleet," said Tertzakian. His new book, "A Thousand Barrels a Second," refers to the current world rate of oil consumption. The book has been a best seller in Canada.

Tertzakian doesn't align himself with the "peak oil" theory -- the notion that world oil production will peak in coming years, followed by a gradual decline in which prices will keep rising. However, he acknowledged that production of light, sweet crude oil -- the type most favoured by oil refiners -- probably already has peaked and must be replaced by more expensive and harder-to-extract sources such as Canada's vast reserves of oil sands, and perhaps in the future, Colorado's oil shale.
His message of tight supplies, higher prices and the need to conserve and sacrifice used to rankle traditional oil and gas interests, many of whom believed that new discoveries and technologies would maintain strong production. That attitude is changing.

"Nobody in the industry disagrees that we will need development of alternatives and conservation," said Marc Smith, executive director of the Independent Petroleum Association of Mountain States.
"We're not trying to deliver the message that the salad days are here forever," Smith said. "Price and supply strictures will cause changes in consumer behaviour. But it's a question of whether it will be a hard landing or a soft landing."