Cheap Oil’s Gone; Now What?

Cheap Oil’s Gone; Now What?

What’s right about America is that although we have a mess of problems, we have great capacity — intellect and resources — to do some thing about them.

— Henry Ford

Oil is at an all-time high, and everything seems to be pointing to the price to keep going up. So what does that mean to you and I over the next few years?

Oil — Driving Economics & Politics

Oil for long has been called “Black Gold”, and which current prices, a full out gold rush is upon us, boom towns (i.e. Fort McMurray) and all. The value of these deposits will give economic power to the regions so endowed. Russia has been accused of using its oil and gas reserves for political purposes. Closer to home, Alberta has become an oil powerhouse, with Saskatchewan, Newfoundland, and Nova Scotia poised to join the club — and the combination has made Canada the largest foreign supplier of oil to the United States.

What’s Under the Hood?

As gas prices rise, alternate fuels start to look more and more attractive. Corn ethanol has been pushed in the States for some time, but is highly subsidized. Don’t be surprised to hear about ethanol from some “weird” sources in the future. The Holy Grail would be to find a way to use an industrial waste product like wood chips or waste paper. Other technologies to watch include plug-in cars, hybrids (battery technologies), fuels cells, hydrogen, and stuff coming out of left field that is unheard of today.

The increasing price point will also mean that those transporters who can benefit most from economies of scale, like railways, will become increasing competitive. Look for a rail yard expansion coming to a city near you.

Urban Renewal

As commuting gets more and more expensive, people are going to start reconsidering how far they want to go, and how they want to go the distance. Expect to see an increased interest in public transit, new and in-fill developments increasingly being built around public transportation systems, especially light rail, and an increased interest in condo living downtown.

I can take myself as an example of this: about a year ago I moved from a lovely place out of town to almost the center of town, a distance of about 40km. I enjoy being able to walk to most things, and everything else is a 10 minute drive. At today’s gas prices, I figure I save myself at least $250/month.


Whether this will get hidden in general inflation or not is yet to be seen, but since almost all consumer and industrial good are physically transported, and thus the consumer will facer higher prices for just about everything. Offshoring — placing production plants far from markets, typically overseas — has been economical because wages offshore and transportation have been cheap. As both rise, look for companies to consider moving production back closer to markets — typically North America and Europe.

The Northwest Passage

The Arctic for many is written off as a vast, cold, snow-covered wasteland, but it also contains the prize that brought Columbus and many others to the Americas — the Northwest Passage. While estimates vary, the consensus is the global warming will open up the currently ice-bound passage to ocean-going vessels. The big deal is that going through northern Canada is much shorter than going through the Panama Canal, shaving 4000 miles off the trip from Europe to Asia!

The Political Fallout

As the Northwest Passage opens up, the unresolved question of “Who control the Passage?” will come to a head — on one side, Canada claims the passage as internal waterways, while several other countries, including the United States, claim the waterway as international waters. I hope that a peaceful solution can be found before we have a human or ecological disaster in the High Arctic due to lack of, or disregarded, rules.

The future seems to be upon us, while few things seem certain, the fact that the future will be different that today and bring different challenges seems certain. My faith is that, like Henry Ford stated long ago, we have the capacity to overcome whatever challenges may face us.

To the future!

Other posts

Other posts under Social Commentary


Avatar for Jerry
Jerry on

Interesting thoughts Will. I’ve always wondered whether or not moving closer to the University would be a good idea and whether it would save me money. You run into the problem of rent by the U is typically higher than off campus and becomes a convenience vs. price battle. While the University is closer to the hub of things, I don’t live extremely further away either and so is harder for me to judge.

Although new technologies emerge, I think it will still be slow to market. Increasing demand for products such as hybrid vehicles and all electric vehicles will push these markets along, however I think it will still take a fairly long time. The demand on oil products are rapidly increasing with greater and greater force especially with places like India and China starting to develop rapidly especially in various rural areas in regions of those countries.

Add a Comment

You can use the Markdown syntax to format your comment.

or alternately, send me your thoughts at minchinweb [at]

Comment Atom Feed (for this post)