By Andrew Farris
Oil is the most important energy source in our world today. It provides more
The economics of oil are dominated by the looming threat of
In today's economic environment, where the so-called "easy oil" has been mostly extracted, oil companies are turning to oil reserves in more technically and geographically challenging places. Canada's oil sands are an important example of the shift to these so-called unconventional oil resources. The oil sands are one of the largest remaining stores of oil in the world and if extracted would provide Albertans, and Canadians, with considerable wealth. Unfortunately the oil sands have serious handicaps: extracting that oil can cause considerable local environmental damage, and also makes an outsized contribution to Canada's climate-change causing greenhouse gas emissions. Along with the increased cost of getting at this oil, it also requires a lot of energy, which we will see, is an important handicap to the long term viability of the oil sands.
British Columbia has some conventional or "easy oil" deposits in the province's northeast, next door to Alberta, but these will soon run dry. There are other oil deposits spread across the province's sedimentary basins, and especially in the waters around Haida Gwaii, but oil drilling anywhere else in the province has yet to commence. For now the province's oil industry is using new techniques to get at the previously inaccessible supplies of oil that remain in the northeast.
Since we have built much of modern civilization around using oil, it is no surprise that oil has many social, health and environmental impacts that range from smog to urban sprawl. These factors, in addition to oil's contribution to climate change and ourincreasingly risky dependence on the fuel, have led to calls for a switch to a post-oil transport economy in many countries around the world.
Oil, as a fossil fuel, is formed through similar processes to coal and natural gas: organic matter that accumulates over millions of years is then heated and pressurized inside the earth until the organic matter breaks down and rearranges the molecules into carbon and hydrogen rich compounds that form oil.
This is a process that has been occurring on earth for the past 600 million years, but there have been some times and places in this planet's past where the conditions for the formation of oil have been better than others.
Once the biomass has been layered thickly onto the seafloor, it becomes overlaid and mixed with silts, eventually trapping the future oil under a layer of tight sedimentary rock, primarily shale or limestone depending on the environment. This is called the source rock. Once put in this pressure cooker the biomass degenerates into an intermediate stage known as kerogen, a waxy substance that is found in oil shales, discussed in greater detail below.
Once liquid oil has formed it will move through the porous sedimentary rock in which it was formed because of pressure or gravity. If the correct geological conditions exist the oil will hit an impenetrable layer of rock, usually shale or limestone. The oil is then trapped and pools below the barrier rock for millions of years until oil fields are formed.
When this viscous mixture is extracted from the ground it is known as crude oil, and it is found in many different states, which can vary hugely in terms of density and sulphur-content.
The density of oil is measured by the API (American Petroleum Institute) gravity. If the API gravity is higher than 31.1˚ the oil is considered "light". A range between 31.1˚ and 22.3˚ is considered "medium" and anything less than 22.3˚ is "heavy." Extra heavy is anything less than 10˚ and will not float on water. Light crudes flow easily at room temperature and are easier to extract and process than heavier oils, making them cheaper and more economically viable.
The second measure for comparing crude oils is the percentage of sulphur impurities. The higher the percentage of sulphur in the oil, the more refining is required and therefore the higher the cost. For this reason oils with sulphur levels that are less than 0.5% are known as "sweet", while those that have levels higher than 1.0% are known as "sour".
Oil from every field has its own particular characteristics, or grade, ranging from Abu Bukhoosh to Zuata Sweet, with hundreds in between. Three grades of oil in particular are used as benchmarks, for the entire oil market: West Texas Intermediate (a very light and sweet oil), North Sea Brent Crude (light and sweet, though not as much as WTI), and UAE Dubai Crude (light and sour). These specific crudes are used as the basis for pricing in international oil markets.
As one may have noticed from these benchmark grades of oil, the most highly valued grades of crude oil are the lightest and sweetest, and these oils constitute a large majority of the oil that is extracted today. Heavy oils, though posing their own set of technical, economic and environmental challenges, are coming to constitute a quickly growing share of the world's oil market.
The most important of the extra heavy oils are the oil sands. Oil sands in their unrefined state they more closely resemble tar than the oil pumped in Saudi Arabia or Texas, hence the common name tar sands. This extremely viscous petroleum is formed when oil deposits migrate close to the earth's surface and micro-organisms enter the source rock and consume the lighter hydrocarbon compounds through a process called biodegeneration. Left behind are the heavier, more viscous hydrocarbon compounds—
The world's reserves of oil sands are vast, with the largest reserves located in Alberta and Venezuela. The Alberta Government estimates the province holds 315 billion barrels of ultimately recoverable oil sands, though the numbers vary hugely depending on who you ask, what the price of oil is and what the future state of technology will be.
While the remainder of this article will largely deal with the role of conventional oil in our society, we will be adding a supplementary article on the Alberta oil sands in the near future.
"Wells-to-Wheels" is a term used to encompass the complex process of getting oil from the ground and to the end user. This is an industry that has seen sustained scientific and technological advancement over the past century: Oil fields that were once thought impossible to tap, or not even though to exist, are now within reach of 21st Century technology. These advances are extending the life of the world's existing oil fields and prolonging industrial civilization's oil age. This is what geologist Wallace Pratt meant when he said "Oil is found in the minds of men."
It begins with finding the oil: hydrocarbon exploration, a term that also encompasses natural gas as gas and oil are often found together. A century ago, when the first large oil fields of the industrial age were being discovered in Pennsylvania and Texas, the only technique prospectors had at their disposal was to look for obvious signs of oil on the earth's surface, such as naturally occurring oil seeps and outcrops of oil-bearing sedimentary rocks.
Reginald Fessenden, a Canadian inventor who helped develop
A number of other techniques have been developed and improved in the past several decades as oil companies have sought oil in even more remote places, using technologies like
Finding the oil is one thing, extracting it is quite another. First a drilling rig must be brought to the drilling-site and set to work drilling a well. Drilling is enabled by pumping a viscous mixture known as drilling mud down the bore-hole. The mud lubricates and cools the drill-bit as it pulverizes rock. As the mud flows back up the well bore, it floats the rock cuttings back to the surface. Concrete casings are lowered down to line the drill-hole and prevent fluids of different layers mixing and contaminating aquifers. Sensors are lowered into the drill-hole and core samples may be pulled up to analyze the type of rock, detect the presence of hyrdocarbons, and determine the characteristics of the reservoir rock.
The rig is removed and a pump placed at the well head which pulls oil up from the reservoir and is transported to a refinery. Some oil fields are dotted with thousands of wells. In Alberta alone, an estimated 100 new wells are drilled every day.
While these basic drilling principles have been used all around the world, new technologies such as deep-water drilling and horizontal drilling have allowed for the drilling for oil underneath at previously unthinkable depths of water, as well as improved recovery from the existing reservoirs, since it is never possible to recover all the oil in a field. None of this is cheap however. Drilling rig rates can be as high as $453,000 a day for some offshore rigs, quickly adding up to around $100 million for a single well which might very well turn up dry. Costs are considerably cheaper for on-shore rigs.
To learn more about off-shore drilling technology follow this link.
Several different transport technologies allow oil to be transported to service stations, factories, airports, heating tanks or any of the millions of locations where it is consumed. Massive oil tankers transport the oil from one continent to another (intercontinental), pipelines typically move oil within a continent (transcontinental), and tanker trucks take the oil from a distribution centre and finally bring it to where it is needed by individual consumers (local).
Intercontinental oil traffic is dominated by tankers. The more oil the ship can carry, the cheaper that oil will be. This bigger is better mentality has spawned a whole new class of ships: the supertanker--any tanker that weighs more than 250,000 tons. The largest ships in the world today are the four supertankers of the TI Class, which can carry an astonishing three million barrels of oil in a single load and would stand taller than the Eiffel Tower and Empire State Building if laid on end.
Thanks to these huge oil tankers, the cost of transporting oil between continents is relatively low, giving oil a considerable economic advantage over all other forms of energy.
Oil leaks from tankers occur somewhat frequently: there has been an estimated 9,351 tanker spills since 1974, according to the International Tanker Owners Pollution Federation.
Though the average person is not likely to be hugely aware of it, oil pipelines crisscross the world's continents, Canada and even British Columbia. Made of steel, or more recently plastic, they are buried one or two metres underground, and are usually only about a metre in diameter. Oil is kept flowing through by pump stations positioned at standard intervals along the line. They keep the oil flowing anywhere from one to six metres per second.
Pipelines are used to transport oil shorter distances than tankers, usually within a continent. North America is a good example of a highly integrated oil market that relies upon pipelines to meet its energy demands. The oil is produced primarily in the Gulf of Mexico and the American Southwest, and from the shallow sedimentary basins beneath Alberta and North Dakota. From there it is piped to refineries. It is not too important in the process itself where the refineries are placed (though the politics are another matter) and most of North America's oil refining capacity is split between producing and consuming regions: Alberta and Texas have a number of refineries, as do the American Eastern Seaboard and Ontario. Once refined the oil can be put back into a pipeline and sent to where it is needed.
Once it reaches the city or industrial region of its destination, the oil can be piped directly to where it is needed or put on trucks and driven there.
Crude oil has few practical applications and must be refined before it can be used. The main refining process is simple distillation: the oil is heated and various hydrocarbons in the crude oil are boiled off at different temperatures. At each gradient of temperature a different molecule of hydrocarbon, called a fraction, is produced. The lower the temperature, the fewer carbon atoms per molecule, starting at four with gasoline, the lowest, and rising to 80 atoms in residual oil distillates, the highest. Each of these molecules, or fractions, has its own specific uses.
A whole spectrum of useful distillates can be collected when crude oil is boiled, as seen in the image at right. This starts with gaseous hydrocarbons, butane for instance, which is used as lighter fluid. Naptha is next produced, the lightest liquid form of petroleum. and used as a chemical cleaning agent in industrial processes or feedstock for high octane gasoline, along with many others. Next comes gasoline, used in most vehicles. As the temperature continues to rise, kerosene is the next to be produced. That hydrocarbon is used for heating, lighting or as jet fuel. Continuing up the ladder, a diesel distillate is recovered, used as heating fuel or in diesel engines. At 300˚C heavy lubricating oil is recovered. Fuel oil comes next at 370˚C, heavy, viscous oil used as a fuel in industrial processes or in ship's boilers. Finally when the boiler reaches 600˚C, the remaining residues can be removed and refined into a number of useful products like tar, asphalt and coke for making steel.
Further refining processes serve a number of purposes: they can remove impurities from distillation products, such as hydrotreating, a process that removes sulphur. Higher octanes can be achieved, improving energy efficiency, through running gasoline through a reforming unit.
Most importantly, further refining can increase the proportion of the most valuable light gasoline products that come from crude oil. The simple distillation process is inefficient at this. Distilling light Arab crude oil, for instance, creates roughly 20% of the most useful light gasoline products while a remaining 50% would be heavy residual fuels, which, though useful, is not in high demand. Using a catalytic cracker and other advanced conversion refining technologies refineries can boost that to 60% gasoline and 5% heavy residual oil. This is much more in keeping with actual market demand.
Far from merely powering our cars, trains, and planes, refined oil has innumerable other useful applications. Petrochemicals derived from oil are used as a feedstock for many different chemicals used in the production of plastics, lubricants, fertilizers and pesticides, to name a few. Given oil's dominance of the global transportation market and its many chemical derivatives, it is hard to imagine anything we associate with our modern lifestyles that has not been touched by oil at some point.
Oil has been collected and used by humanity since Antiquity, but it was not until the latter part of the 19th Century that the internal combustion engine was developed. It was humans reliance on the internal combustion engine that firmly thrust oil, and its derivative gasoline, to the heart of every modern economy.
Even though the modern two-stroke and four-stroke internal combustion engines were invented in 1876 and 1885 respectively, it still took decades for gasoline to become the fuel of choice for transportation.
Several developments doomed the electric car however. The first was the discovery of massive oil deposits in Texas, California and Oklahoma which made gasoline far more affordable to the average consumer (it is easy to forget that for most of the 20th Century the United States was far and away the biggest oil producer, as well as consumer). The construction of highways between cities in the United States also encouraged people to rapidly travel long distances between cities. Electric cars couldn't keep up: they had a maximum speed of around 30 km/hr and a range of perhaps 60 kilometres on a single charge.
In the following decades, asides from some niche markets, electric cars were virtually wiped from the auto scene.
Trains, the other main form of land-based transportation, largely run on diesel. Diesel, like gasoline, is another derivative of oil. Diesel locomotives supplanted coal-powered ones in the 1950s because of their greater efficiency and ease of maintenance.
The internal combustion engine has also succeeded in dominating human transport at sea and in the air. The switch from using coal to oil for ship propulsion was spearheaded by the Royal Navy in the lead-up to the First World War. They saw a number of advantages in switching to oil: Oil-powered ships were faster; they used fuel more efficiently; oil was easy to store and transport; and, most importantly, oil-powered ships did not require a small army of stokers to keep the engines running.
By the end of the Second World War these advantages led oil to complete domination of global shipping. Today virtually every ship, from small pleasure-craft to frigates and super tankers use some form of refined oil for propulsion. Most sailing ships even have small back-up internal combustion engines in case the winds prove unfavourable. There is one big exception, however: the United States' nuclear-powered navy. This navy has operated successfully without a single major nuclear accident for half a century, and some experimental nuclear-powered merchant ships have been built. But there remain many political, economic and technical hurdles for nuclear power to overcome before it can make any serious dent in oil's monopoly of marine propulsion.
As for powered flight, oil was the only answer from the outset. When the Wright Brothers first built their flyer in 1903 the choice of propulsion was easy. Coal would have been absurdly bulky to carry on the small plane, while electric batteries failed to provide enough power to ensure lift. After more than a century, this state of affairs has hardly changed. With few exceptions, aircraft are still powered by oil. Though some electric-powered aircraft have been attempted, such as NASA's Helios unmanned aerial vehicle, they are still only experimental.
On land, sea and in the air, technologies that can begin to seriously out-compete oil are still some ways off. The only sector with any realistic chance of denting oil's control in a reasonable time frame is the auto sector where virtually all the major car companies are planning to launch electric cars in the coming years or have already done so.
Oil, like the other fossil fuels, can be used for electricity generation. The process is the same as coal or natural gas power plants: the fuel is burned, heats water that turns into steam and spins a turbine. Oil has become too expensive for this to see widespread use today in the developed world, and it's usually only employed to provide a small proportion of peak load in either dedicated plants or in thermal coal plants when coal is unavailable. Canada's Atlantic Provinces, for instance, got almost 15% of their electricity from heavy fuel oil in 2005. Quebec and Ontario also occasionally burned oil for electricity, though less than 1% of the total.
Some homes and businesses today use a heavy petroleum distillate similar to diesel as heating oil. Heating oil is particularly common in rural areas that have not been connected to the natural gas pipeline and where the price of propane may be too high.
One of the main draws of heating oil is that as a liquid it is easy to transport and store. Typically homes using heating oil have it delivered by truck and pumped into a storage tank for later use. Heating oil is provided in British Columbia by companies such as Columbia Fuels and Island Pacific Oil.
Oil derivatives, known as petrochemicals, are key components in many manufacturing processes, from fertilizers and plastics, to cosmetics, paints and fabrics. Because this vast industry does not deal directly with energy usage, we will not discuss it further here. However, to learn more about petrochemicals visit this external site.
In this section we will briefly look at the oil economy on a global scale and examine the forces affecting supply and demand.
The world pumps an extraordinary amount of oil out of the ground. In 2011 roughly 87.5 million barrels of oil were extracted every day.
Which countries can afford to boost production, and which will likely have production decline in the years ahead, is dependent on their oil reserves and level of technological development. Before we delve into this topic it is important to flesh out the different terminologies to do with the amount of oil in a reservoir.
All of the oil in a given reservoir is called the
Though geologists have made huge strides in their ability to find oil fields, it is still very difficult to determine how much oil a field will turn out to contain. Because of this uncertainty, geologists make distinctions between reserves they are sure are there, and those they are less sure of. Reserves that a geologist believes there is a reasonable certainty of being present, (90% certainty), are called
A further type of reserve is the
The world's oil reserves, including unconventional sources such as Canada's oil sands, are enormous. Compiling the estimated reserves of the top 17 holders of reserves, who account for the vast majority of the world's oil, brings a total of over 1.3 trillion barrels.
Currently demand is highest in the developed world, and America alone accounts for 20% of the world's oil consumption.
As already noted, oil supplies from the top producers could last our civilization 64 years at current rates of production and technology. This of course omits the fact that oil demand is not staying stable. Though demand has been rising at a fairly anemic rate in the developed world, demand for oil from emerging economies such as China and India is soaring. Largely because of these emerging economies, the International Energy Agency predicts that world oil consumption will climb to 112 million barrels per day by 2035, up from 2010's 87 million barrels per day.
The IEA projects that the increases in demand will be met largely by unconventional resources, such as American and Brazilian biofuels, Venezuelan ultra-heavy oil and of course the Canadian oil sands.
Whether it will be possible to meet this rising demand is a hotly debated question, and many oil companies, government agencies and energy forecasters predict an imminent peak in oil production followed by a decline. If this were to occur before proper preparations were made to switching to a post-oil transportation system, it would wreak havoc on the global economy. We discuss the probability of peak oil further in our peak oil article here.
Canada plays an important role in the global oil economy. It is currently the sixth largest producer of oil and possesses, perhaps, the world's third largest proven remaining oil reserves.
Let's begin by examining Canada's oil production and industry, and then we shall look at the ways Canadians use oil.
While Canada's oil businesses has centered on the Western Canada Sedimentary Basin in the past, this region has been thoroughly explored making it a mature basin. Companies are now looking for oil in more challenging locations. The Canadian Government believes that a third of Canada's remaining conventional oil potential is in the northern territories. Fields in the Mackenzie Valley have been exporting oil to Alberta since 1985. The Mackenzie Delta and Beaufort Sea are expected to hold further untapped potential.
Offshore oil exploration paid dividends for Newfoundland and Labrador, and the three large fields off their coast, Hibernia, Terra Nova and White Rose, have exceptionally high output and productivity.
The third frontier for future Canadian oil exploration is off the coast of British Columbia in the Queen Charlotte Basin. We will discuss this further below. Today Canada's production is still dominated by the Western Canada Sedimentary Basin. Focus on this area is made easier by the fact that the biggest market for oil in the world, the United States, is directly to the south and serviced through existing infrastructure pipelines and referines. Since the end of the Second World War the Prairie Provinces have closely integrated their oil infrastructure with the United States, as one can see from this pipeline map created by the Canadian Energy Pipeline Association.
Much of Canada's oil is refined at one of Canada's 22 refineries.
The companies that have developed Canada's oil reserves have become international leaders, spearheading the development of oil extraction technology and techniques and resources all over the world. While the list of Canadian energy firms is too long to cover them all, let's take a look at a few of the major players.
Suncor: Suncor was begun in Montreal in 1919. It has oil and gas drilling operations in Western Canada and Colorado, and also owns offshore drilling platforms in Newfoundland and Labrador. The company also drills for oil and gas in the North Sea, Trinidad and Tobago and Libya. Operations in Syria were halted following the uprising against Bashar al-Assad's rule in 2011-2014.
Canadian Natural Resources Ltd: A company that grew from nine employees in Calgary in 1989, CNRL now employs 5,000, primarily in Alberta and B.C. Though the second largest natural gas producer in Canada, the company' oil component is largely focused on the Horizon Oil Sands development which they are working to expand to 500,000 barrels a day at full capacity. This company operates a number of conventional natural gas, oil and natural gas liquids developments across the Western Canadian Sedimentary Basin. The company is also developing three offshore oil fields in West Africa and four in the North Sea.
Imperial Oil: Controlled by ExxonMobil, Imperial Oil is today best recognized by most Canadians for their Esso service stations. The company is invested in the oil sands, owning a quarter of Syncrude, the current top oil sands producer.
Transcanada: Specializing in oil and gas pipelines, Calgary's Transcanada owns or partially owns over 59,000 km of pipelines in North America. The company also owns a diverse array of power plants across North America including coal, gas, wind, and nuclear power. The company employs 4,200 people.
Enbridge: Enbridge is another energy pipeline company based in Calgary. They have assets of $29 billion and employs 6,000 who oversee its pipeline system, the longest in the world. The company has invested in over 1,000 MW of wind generating power, and owns around a tenth of Canada's wind capacity. Recently Enbridge has invested in solar and geothermal power as well.
The huge variety of ventures these companies are involved with shows the multi-faceted nature of
Canadian companies are of course not the only ones to invest in Canadian oil. Companies like America's ExxonMobil, Chevron and ConocoPhillips, China's Sinopec, France's Total, Britain's BP, Norway's Statoil and Dutch Shell, are all invested in Canadian oil projects.
As was pointed out, Canadians use a lot of oil. In fact we are some of the heaviest oil users in the world. The only countries that exceed Canada's per capita oil use are Singapore, Greenland, Saudi Arabia, some small island states, and several oil kingdoms in the Persian Gulf. Canada leads all other major economies, developed or otherwise.
So why do Canadians use so much oil?
According to Natural Resources Canada, the country's transportation sector uses the majority of it: an average of 1.13 million barrels of oil a day in 2009, 52% of the total.
The remainder of Canada's oil use goes to a number of sectors: "for thermal-electric power generation, for heating boilers and furnaces in some manufacturing industries, notably the pulp and paper industry and petroleum refining industry. It is also used to power large commercial marine vessels and to heat some large, usually older commercial, institutional and multiple residential buildings."
You can find out a more detailed breakdown of Canada's oil use here.
The vast gently-rolling hills of the Western Sedimentary Basin, so auspicious to the formation of oil underneath Alberta, stretch through the north-east corner of mountainous British Columbia. It did not take long for oil prospectors to pick up on this and begin the search for oil in this province. Ten years after that epoch-making oil strike at Leduc, Alberta, a successful oil well was drilled at Clarke Lake near Fort Saint John.
Without a means to transport the oil to markets it was virtually worthless and so a Canadian pipeline building boom followed. They were some of the largest industrial projects Canada had seen up to that time. A pipeline ran east to Sarnia, completed in 1953, and another ran across the Rockies from Edmonton to the Burnaby oil refinery. This pipeline, completed in 1957, traversed the Jasper National Park and some extremely challenging mountainous terrain.
British Columbia's production of 30,000 barrels of oil per day is dwarfed by Alberta, and also falls behind Newfoundland & Labrador, Saskatchewan and Manitoba. Oil, along with gas, play a comparatively small role in the B.C. economy, accounting directly for 1.5% of the province's jobs. That is, around 2,200 direct jobs in the province, though around 10,000 more are employed in support industries for this sector as well as mining (many government statistics calculate oil, gas and mining together). Nevertheless oil and gas business is highly profitable: those few workers brought in revenues of around $7 billion in 2007 (though only a billion came from oil, the rest came from natural gas). That is a three-fold increase from 1990, while the sector only experienced a 57% rise in employment in the same period, a reflection of the increasing capabilities of technology to replace workers and the rising prices of hydrocarbons.
B.C. continues to solely pump oil from the Western Canada Sedimentary Basin, and after over a half century of drilling these fields are late in maturity. Now most of the oil production relies upon secondary recovery schemes, which means injecting oil or gas into the well to increase pressure after the well's natural pressure has been exhausted. In 2005 almost half of the province's oil was extracted this way.
B.C.'s other sedimentary basins do have oil potential, though exploration has so far been limited. The basins between the Rocky Mountains and the Coastal Mountains have seen some exploratory drilling that demonstrated some potential for conventional oil extraction. The supplies are however not yet thought commercially lucrative enough, given the region's challenging mountain terrain, to justify the cost of development.
Offshore has greater potential.
More can be learned about British Columbia's oil consumption in the How It's Used section.
Oil's essential importance to national economies is an extremely complex subject. Access to oil has been deemed by every industrialized nation as an essential aspect of the national interest. The United States has publically said it would go to war before let its access to world oil supplies be threatened. Many wars have been fought for oil, not just in the Middle East. Disruptions to oil supplies have caused major political backlash and groups such as the Organization of Petroleum Exporting Countries (OPEC) use their oil wealth as political leverage. The discovery of oil in a country is usually greeted alternatively as a blessing or a curse. The historical record shows that the latter is more often the case as oil distorts the development of national economies, causing inequality, political instability and environmental problems.
Key to understanding the economics of oil is to understand that oil is an internationally traded commodity whose price is set by global supply and demand. If there was to be an oil
The second key aspect of oil economics is that "oil demand is highly price-inelastic in the short run."
The 1970s provide a textbook example of what can happen to the global economy when oil supply is disrupted and these economic factors come into play. Angry with American support for Israel in the Yom Kippur War of 1973, OPEC boycotted oil supplies to the United States, Canada, Japan and several European countries. This immediately reduced global oil supplies by about 7%. Before the boycott oil cost around $3.50 a barrel, but within six months this had risen to $12.74, plunging the global economy into recession. The Iranian Islamic Revolution, and the subsequent Iran-Iraq War caused an even bigger supply disruption and a resulting price of $35.00 a barrel by 1981, a ten-fold increase in a decade.
Even though Western Europe and Japan were far more reliant upon Middle Eastern oil than Canada and the United States, North America was bitten by the rising global price and suffered economically for it. The oil-driven recessions of the 1970s had a deep psychological impact and kick-started the development of alternative energy sources such as wind, solar, and geothermal energy, and led to a brief, but rapid, expansion of nuclear power. Higher mileage standards for cars and the imposition of simple conservation measures such as national speed limits were also long-term responses to the problem of oil's inelasticity.
After this panic the price of oil collapsed in the 1980s and 1990s.
At the onset of the 1973 oil crisis, global oil demand was around 55 mbpd (million barrels per day). Spurred on by the development of oil fields around the world, today is it 87 mbpd and rising. The price has also risen dramatically since a series of supply disruptions in 2008, and has remained stubbornly high, around $100 per barrel. The IEA foresees no improvement and forecasts $115-118 barrel oil for the next several years.
The oil supply situation is so tight it "has left the oil market very vulnerable to temporary supply disruptions, such as the war in Libya." The war in Libya amounted to a supply disruption of just over 1% of global production but still managed to push up the price of oil substantially.
Though new sources of oil are coming online, in the years ahead they will have difficulty offsetting depleting conventional resources, especially as these new unconventional sources require more energy to extract per barrel of oil. That is, they have a less favourable
Oil exercises a perilous power over the global economy. When peak oil does occur the short-term inelasticity of oil will cause high prices that will wreak havoc on an unprepared global economy. While the effects of this can be mitigated in the long term, concerted action has to be taken immediately if they are to have hope of success. Delay may ultimately mean that panicked reactions, poor crisis-handling and the inertia of an oil-based transport infrastructure will severely exacerbate the crisis. Some energy analysts believe this "long emergency" of peak oil, from which our economies may never fully recover, has already begun.
Oil is a toxic substance and it has numerous negative impacts upon the health and well-being of the people, animals and ecosystems exposed to it. The environmental impacts extend beyond exposure to crude oil, to effects that stem from the burning of it (smog), drilling for it (development of fragile ecosystems), and of course, climate change which is in part caused by it. Let us address each of these issues in turn.
Fossil fuel combustion is always incomplete, and as a result a large number of VOCs (Volatile Organic Compounds) are released into the air as a by-product of combustion. These include carbon monoxide, dioxide, sulphur dioxide, benzene, formaldehyde, polycyclic hydrocarbons, lead and particulate matter. Since British Columbia does not operate any coal-fired power plants, most people's exposure to these emissions comes from car tailpipe emissions and fire smoke.
Many of these toxic chemicals such as oxides and hydrocarbons will react with ultra-violet rays and form smog. Low-level ozone, also produced in high temperature combustion such as in a car's engine, can cause serious respiratory problems in the short term, especially for those already suffering from bronchitis and asthma. An 18-year study by the University of California analyzing 450,000 Americans found that those living in areas with high ozone levels "have a more than 30% greater annual risk of dying from lung disease."
Individually each of the compounds has been shown to cause a unique set of health concerns. Carbon monoxide latches onto hemoglobin in the bloodstream, taking the place of oxygen and binding in a stronger way, which can cause a person to suffocate. Benzene damages bone marrow regeneration and red blood cell development. It can also cause leukaemia. Lead can damage red blood cells in such a manner that they die more rapidly, eventually leading to a red blood cell shortage: anaemia. Polycyclic hydrocarbons are thought to cause many kinds of cancer, especially lung cancer.
The immune system is thought to be easily thrown out of balance by these pollutants. Exposed people can suffer from overly reactive immune responses or, on the other end of the spectrum, immunosuppression. Eventually this can lead to heart disease and high blood pressure. These pollutants can also cause mental problems ranging from changes in behavior to learning disabilities and memory loss.
The threat posed by atmospheric pollution from cars only became apparent in the years after the Second World War. Waves of smog in Los Angeles County were traced back to cars in the late 1940s and quickly linked to the "'smog complex'--irritated eyes and respiratory tract, chest pains, cough, nausea and headache."
The B.C. Lung Association issues annual reports on the state of air pollution in British Columbia with information compiled from a set of monitoring sites across the province. Their 2011 study began by measuring fine particulate matter greater than 2.5 microns across (PM2.5), the minimum size considered a serious health threat by doctors. It was found that most of the province's cities have fine particulate matter concentrations below the provincial objectives. The exception was Prince George and the Central Interior region which has been badly scarred by forest fires—a key particulate contributor—over the past decade.
B.C.'s ground-level ozone has held relatively steady over the past 15 years, ranging between 43 and 65 parts per billion. A slight upwards trend may be due to rising global levels of ozone. The highest levels were recorded in the Fraser Valley, the region of British Columbia most prone to smog waves. The American EPA sets safe ozone levels at 75 ppb (parts per billion), though studies have shown 70 ppb may cause respiratory problems.
The province has had success in curbing sulphur dioxide levels through the imposition of stricter motor vehicle emissions standards and enforcing them with AirCare, since automobiles are the primary source of sulphur dioxide. Metro Vancouver and the Fraser Valley's NO2 levels have declined by a third since 1998. Victoria and Kelowna levels have stayed consistent at the lower end of the spectrum. Sulphur dioxide levels have remained far below the province's goal of 9.5 ppm: around 3.8 ppm in Prince George, 1.9 ppm in Metro Vancouver and a rise in Taylor from 0.95 to 1.9 ppm. The one exception was Trail, which fluctuated between 5.7 ppm and 13.4 ppm, the result of the monitoring site's proximity to a large industrial source of SO2.
In sum British Columbia scores fairly well in its air quality. The province's lack of many large point sources of air pollution (such as coal thermal power plants) means that the majority of air pollution comes from automobiles and forest fires. Generally these emissions do not exceed the provincial or national health safety guidelines, though there are exceptions such as Trail's sulphur dioxide emissions, and Prince George's particulate concentrations.
There was one more emission from oil combustion that has not been mentioned yet: carbon dioxide. While carbon monoxide and the other air pollutants previously mentioned are the result of inefficient engine combustion, in a theoretically "perfect" engine (100% efficiency) carbon dioxide, water and nitrogen are the only products.
But through the course of the 20th Century it became increasingly evident to scientists that the earth's climate could change over decades instead of millennia, and the amount of carbon dioxide in the atmosphere played an essential role in it. You can read a synopsis of the history of climate change science by the geophysicist Spencer Weart here.
Though individually, each fossil fuel-powered vehicle only emits a small amount of carbon dioxide, taken together the transportation sector accounts for 13.5% of all greenhouse gas emissions globally (9.9% for cars and trucks, 1.6% for air transport and 2.3% for ships, rail and other sources of transport).
Since virtually the entire transportation sector is powered by oil derivatives, the Canadian Government has identified petroleum powered transport as being of paramount importance in curbing Canada's greenhouse gas emissions.
As oil-powered transportation is such a central aspect of our future energy problems, different aspects of this problem are dealt with in different sections of the site. We have more detailed discussions of the climate change impact of fossil fuels in our liquid fuels section here. You can learn about the alternative transportation economies being widely proposed in our batteries section here, and our hydrogen power section here.
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