Councillors Clash Over Peak Oil
October 20, 2005

Energy prices and the future supply of oil generated sparks at this week's meeting of the city's strategic planning and budgets committee. The ignition point was a provincial government graph that predicts the price of oil will stay around $45-50 a barrel for the next 20 years.

Provincial government forecast for oil prices over the next 20 years.

Flamborough councillor Dave Braden said that forecast was irresponsible. "If you bet your pension on that, you're going to be broke," he declared "That's absolutely ludicrous. It's against everything science says."

That brought a quick response from mountain councillor Terry Whitehead who said he'd just read an article by an economist that "indicated clearly that there's more reserves [of oil] today than there was in the crisis of the early eighties." He expressed confidence that the Ontario government wouldn't be "trying to lead communities astray" and therefore he "certainly wouldn't be questioning the information that was provided."

The provincial predictions come from Toward 2025: Assessing Ontario's Long-Term Outlook, a budget document released earlier this month by the ministry of finance that describes it as the first-ever long-range assessment of Ontario's fiscal and economic environment produced by the provincial government. The report also predicts that interest rates will remain constant over the next twenty years and that the value of the Canadian dollar will stabilize in the mid 80 cents range.

Graphs of these predictions were displayed to the committee by Steve Robichaud, the coordinator of the city's 30-year planning process. "When you bring all these pieces together," noted Robichaud, "what it is presenting is a fairly positive picture for the Ontario economy on a go forward basis."

Mayor Di Ianni welcomed the information. "That is good news", he said. "I'm glad you showed that slide." But after the clash between Braden and Whitehead, the mayor suggested that there would be more opportunities to discuss the issue once the city receives a report on the implications of peak oil that was ordered in the wake of concerns about council's decision to focus economic growth around the airport.

The full provincial report is available at
http://www.fin.gov.on.ca/english/economy/ltr/2005/05_ltr.pdf. Its text notes that "A high oil price is a negative factor for Ontario's economy". It also admits that there are opposing views on the future availability of oil, but concludes:

"Past experience has shown that when there have been oil price spikes to very high levels, which have lasted a few years, this has been followed by much lower oil prices. The base-case projection adopts a conservative assumption of real oil prices: continuing at well above the historical average value. This allows for the price to drop slightly from the peak level reached in 2005 to about US$50 per barrel."

At the same time, the report notes that "predicting the future is risky business" and it offers a list of potential crises that could dramatically affect its predictions. "Surging world demand and slowing growth in the supply of oil could combine to significantly increase the relative price of energy. This could dramatically affect the competitiveness and wealth of jurisdictions such as Ontario, which are net importers of energy products."