Do Skyrocketing Prices Signal The End Of An Age?

I hate to say I told you so. I really do. In this instance, I would have much preferred to be wrong.

The price of oil continues to skyrocket and gas prices are rising in step. The price of a barrel of crude sits at $65.45 USD and the average price at the pumps in Ontario is approximately 20 cents higher than at this time last summer.

How long can this upard trend possibly last? "The general view is that anything like this would be temporary," says John Hamilton, a spokesperson for Petro-Canada. "But we've got to watch to see where the commodities market goes." Of course, if you've read my previous post on peak oil, you'll know that it's my opinion that there will be no permanent price relief. Globally, the easily accessible crude has already been tapped and there is little or no surplus refining capacity. As oil investors come to terms with this new reality, they are growing increasingly sensitive to any sign of regional instability and other factors that threaten to even temporarily disrupt production. The price of crude is being driven up accordingly. The market will become even more sensitive as supply stagnates and eventually begins to dwindle. I hesitate to offer the following prediction, as I’m far from an industry analyst, but it seems to be a safe bet that gas prices in Ontario will hit $1.20 CAD by the end of the summer and then either level off or climb in small spurts throughout the winter months. Even if the market does temporarily equilibrate, those expecting a return to the days of the three digit gas station sign will be disappointed.

Up until now, demand has been fairly elastic. People are loath to acknowledge the beginning of the end of the age of oil. After all, in addition to keeping us on the move, petroleum keeps our bellies full, our bodies healthy and our credit cards constantly maxed out. Still, consumers are starting to feel and react to the impact of ever-increasing fuel costs. Airlines have increased their fares and, in some areas, year-over-year gasoline consumption has been showing a decline. The reality is that consumers can expect an increasing burden from rising fuel costs, not only at the pump, but the shopping mall and grocery store too.

Since this spike isn’t being driven by an artificial constriction of supply, as it was in 1973, the only solution to rising energy costs is to fully develop a range of alternative energy sources. Though nuclear may enjoy a resurgence, such plants are expensive and take a long time to build. Not to mention that no one has yet to figure out what to do with spent fuel rods. The future lies in renewable energy, especially solar and wind. Unfortunately, humanity has so far chosen to sleepwalk into the future rather than acknowledge the looming energy shortage. Even if we were to simultaneously awaken from our collective slumber, no alternative energy program, no matter how vigorously pursued, would allow us to avoid the major and possibly catastrophic consequences of the end of an age.