Jeff Rubin spent 20 years as chief economist for CIBC World Markets. After resigning in 2009, he went on to become the best-selling author of Why Your World Is About To Get a Whole Lot Smaller, a book about the rising price of oil. Spacing sat down with Jeff to discuss the implications of “peak oil” for cities.
Spacing: What is Peak Oil?
Rubin: For me, it doesn’t mean the world is running out of oil in some absolute geological sense. For example, there’s over 170 billion barrels of the stuff in the Alberta Tar Sands. The real question is can we afford to burn it? We’ve exhausted our supply of easy-access, conventional oil and now we’re turning to unconventional sources in shale, tar sands, and deep water. It’s unconventional sources of oil and the prices required to facilitate extraction that are problematic for us. Therefore, to me, “Peak Oil” means the cost of extracting oil is gradually becoming greater than what our economies can tolerate. It’s going to take $150-200 per barrel oil prices to turn the Oil Sands into a 4-5 million barrel per day producer that would meet our needs. Those are simultaneously the kinds prices that when translated into pump prices take millions of people off the road.
Spacing: What are the implications of Peak Oil for commuter travel?
Rubin: If we want to know what our future roadways will look like, we should look at Europe over the last decade where, as a result of taxes, they have been paying gasoline prices equivalent to peak oil. Even Britain, which is somewhat similar to Canada, they drive smaller cars and drive less. The problem is that if we apply European rates of car ownership to Canada, it implies that one in every five drivers is about to take the exit lane. My concern is that if one in five Toronto drivers decided to take the TTC tomorrow, I very much doubt we could accommodate them. My belief is that instead of having given $10 billion to General Motors to stay in business while the automobile industry is in massive decline, we should have invested in public transit for cities.
Spacing: What does it mean for urban planning and city-building?
Rubin: We’re going to have to accommodate a very significant migration of people from the suburbs into the inner cities over the next 20 years. People may want to live in suburbs now because in Richmond Hill you can buy a 3,000 sq. ft home on a huge lot for the same price of a semi-detached in Riverdale. In the future, however, the suburbs aren’t going to be affordable unless you happen to also work where you live. You’re going to spend too much money moving yourself back and forth. The economic foundation of the suburban mentality is predicated on cheap transport fuel. We won’t have that anymore. Public transit in suburbs will also prove ineffective given the lower population densities of the suburbs. Whether we like it or not, we’re going back to the cities.
Spacing: How does cycling fit in within the whole dynamic?
Rubin: In Copenhagen, every major street has bike lanes. But why do people in Copenhagen ride bikes? I originally thought it was because they are physically active or environmentally conscious people. I then inquired about how much it costs to buy a car. It turns out that in Denmark you pay a surcharge which, depending on horsepower, can be anywhere from 50% to 150% of a car’s sticker price. It’s a government-levied tax on car ownership. In Copenhagen, you can pay upwards of three times the amount for a car as in Toronto. If you want to see more bikes on Toronto roads then wait until oil prices make it that much more expensive to own a car.
It’s the same with wind power. Denmark reduced its carbon emissions to less than its 1990 levels. We always hear about the 20% power generation from renewables. What we’re unaware of is that the remaining 80% comes from coal. So then how did Denmark reduce emissions while relying on coal for 80% of its power? The answer is the price of power. On average it’s 30¢ kw/h or three times what Ontarians pay. Denmark reducing its emissions has everything to do with people using less power because of prices.
Spacing: Based on your analysis, is the GTA ready to adapt to peak oil?
Rubin: I don’t know if it’s ready, but it will adapt because that future is staring us in the face. By the end of the year we’re looking at $1.50 gasoline. The way Toronto will run with those prices will be very different from today. We’re going to start having to make some changes. First we need to give up the foolish perception that we have a natural birthright to consume as much energy as we can.
As an economist, I believe people respond in rational ways to prices. Triple-digit oil prices will show us how to respond and hopefully our politicians get it. The fact is that, in the future, more people will be taking public transit and less people will be driving. That change won’t be a result of any alleged “War on the Car.” The biggest war on the car is coming from $2/litre fuel.
Why Your World Is About To Get A Whole Lot Smaller is now available in paperback in bookstores across Canada.
photo by NWF Blogs