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A niche in new energy world

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Gracious! How the future has changed!

A year ago, the 2011 World Energy Outlook of the International Energy Agency predicted that oil imports by the United States would continue indefinitely but would decline. China was going to be highly dependent on Iraq, the Middle East and a few other oil producers in North Africa. Now, according to the 2012 outlook document issued this week, the U.S. will become the world's largest oil-producing country, overtaking Saudi Arabia about eight years from now, and will become a net oil exporter around 2030.

This will come about, the IEA believes, because U.S. oil drillers have found means of extracting oil that formerly was left in the rock -- the so-called "light tight oil" -- and because U.S. motor cars are going to become more fuel-efficient.

The agency now expects a surge of production after 2015 from unconventional sources such as drilling of light tight oil in the U.S., mining of the oil sands in Canada, deepwater drilling in Brazil and production of natural gas liquids. Fossil fuels are still being heavily subsidized and energy efficiency is only half-heartedly pursued, the agency found.

Manitoba is more spectator than actor in the oil patch. The province's hydro power helps displace some gas-fired or coal-fired power generation in the U.S. but has little impact in other Canadian provinces. Manitoba's greatest help to meeting the world's energy needs lies in energy-efficient technology and design, as seen in the success of the Manitoba Hydro head office building on Portage Avenue.

The World Energy Outlook is a careful attempt by a 28-member intergovernmental agency to peer into the future and save the oil-consuming countries from nasty surprises. The prediction that the U.S. will become a net oil exporter around 2030 should be considered a serious possibility. Like all forecasts, it is based on the facts as they stand today, and some of those facts change from year to year. The outlook now is different from last year's, and next year's outlook will probably be different once again.

It is consistently true, however, that the U.S. is producing more of its own oil and making its cars more fuel-efficient. The Obama administration, like the Bush administration before it, wishes to free the U.S. from dependence on oil imported from politically unstable places like North Africa and the Middle East, and that purpose is gradually being accomplished. The IEA now believes it will be accomplished about 2030.

As the U.S. moves in that direction, it might need output from the Alberta oil sands or it might not, depending on what supplies are available elsewhere at what prices.

This news supports the argument for shipping oil sands output westward across British Columbia and across the Pacific to Asian buyers. It also supports an argument for a leisurely pace of oil sands development. Growth in oil consumption, especially for motor transport in China, India and the Middle East, will outweigh the drop in demand in Europe, North America and Japan. The agency expects the oil price, which is now about US$90 a barrel, to rise to $125 a barrel (in 2011 dollars) in 2035, which might be something over $215 a barrel in current dollars. Canada need not worry that the world will lose interest in our oil or that we have to get it to market quickly for fear of a drop in price.

The drive for energy efficiency, highlighted by the IEA as a crucial part of energy policy for all countries, has already produced dramatic results in the most advanced countries. Manitoba Hydro Place on Portage Avenue shows that an excellent building, with geothermal heating and cooling and solar-powered ventilation, can operate even in Winnipeg's harsh climate. Manitoba Hydro has had little success selling hydro-electric power to neighbouring provinces, but the success of its energy-efficient head office building may prove to be an important contribution to cutting fossil-fuel burning around the world.

Editorials are the consensus view of the Winnipeg Free Press’ editorial board, comprising Catherine Mitchell, David O’Brien, Shannon Sampert, and Paul Samyn.

Republished from the Winnipeg Free Press print edition November 14, 2012 A10

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