Skip to main content

Not too long ago, in 2009, a retired bank economist with a large public following made quite a splash with a book predicting how soaring oil prices would change our lives.

By his forecast, oil would hit $225 a barrel by 2012. Instead, it got about halfway to that price and hovered there for a while; today, it's plunging back well below that level. Unexpected events blew his prediction out of the water – the lingering effects of the Great Recession, much slower world economic growth and oil demand, new shale discoveries in the United States, continuing turmoil in the Middle East.

This economist's error resembled those of others, who asserted, with the usual declaratory certitude of such prophets, that the world had reached "peak oil," that we were headed toward the "end of oil," and that the world would be transformed by clean energy.

Story continues below advertisement

The prediction was a bit like the one made in 1996 by another guru who made heaps of money predicting that the real-estate boom was "over" owing to the boom, bust and echo of a forthcoming older population. Oops.

The certainty of uncertainty is a rule that never seems to guide those who assume that the future, even the near future, will be much like the past. So now, with oil prices tumbling and natural gas prices falling, yesterday's assumptions are once more called into question.

Despite rhetoric about being an "energy superpower," Canada remains a price-taker for fossil fuels. (Superpowers set the terms and conditions for their activities.)

As such, when prices fall, projects are delayed or abandoned, as with Shell and Total walking away from bitumen oil projects in Alberta, citing high costs, low oil prices and pipeline uncertainties.

As such, when U.S. natural-gas supplies soar and prices fall, the old assumptions about inexhaustible U.S. demand go belly-up. And as such, when fossil-fuel prices fall and pump prices decline, consumers are less inclined to buy fuel-efficient cars, clean energy options look temporarily less appealing, and the environmental movement, if it's honest with itself, loses some wind in its sails.

The certainty of uncertainty does not often induce caution or forward thinking.

For example, the government and people of Alberta have known for a long time about fossil fuel price volatility, their province being a price-taker. But instead of substantially reducing the province's dependence on royalties from this uncertain source – it accounts for 30 per cent of all government revenues – by introducing a sales tax and putting the royalty money in a fund, the province gets fiscally whip-sawed.

Story continues below advertisement

Worse, a case can be made that lower oil prices make pipelines somewhat less urgent, because what's driving down demand is a prolonged weak world economy and an upsurge in supply.

Those pipelines were in trouble anyway, again because of the certainty of uncertainty, caused by a surprise Supreme Court of Canada ruling that unanimously overturned a B.C. Court of Appeal decision on aboriginal title. It will make any natural resource project, especially one crossing the traditional territories of many aboriginal peoples, difficult or even impossible to achieve within a reasonable time frame.

By the time British Columbia secures agreement on liquefied natural gas terminals and the pipelines necessary to connect them to supplies, chances are that other countries will have met the demand in Asia on which the province is counting so heavily.

Not only is B.C. a price-taker, but it operates in a global market where the complications of domestic procedures are a competitive handicap. Markets do not wait on Canada or its provinces. There being a shrivelled market in North America for natural gas, B.C.'s only option – like Alberta's for future oil exports – lies beyond this continent.

Until recently, it had been assumed that slower growth in the developed world would be more than compensated for by booming demand in the developing world, especially the BRIC countries: Brazil, Russia, India and China – but now growth there is slowing, too.

A whole lot of people, and some governments in Canada, bet heavily on fossil fuel prices continuing an inexorable march – if not to $225 a barrel, then at least to some higher plane. That assumption has crashed, and with it go many certainties of not so long ago.

Story continues below advertisement

Report an error Editorial code of conduct
Comments

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

If your comment doesn't appear immediately it has been sent to a member of our moderation team for review

Read our community guidelines here

Discussion loading…

Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.