The past 12 months have been a roller-coaster ride for European politicians and consumers of oil and gas alike. Russia has reshaped the political landscape by temporarily cutting the supply of oil and gas to its neighbours to the west. Whether this order came from political or corporate head offices, the message has been crystal clear: Europe's energy security is at the mercy of only a few Russian oil and gas companies, whether public or private.
This realization has had a psychological impact on the European Union, especially Germany, and on EU-Russian political relations unseen since the fall of the wall in 1989.
Starting on Jan. 1, 2006, gas supplies to the Ukraine were severely reduced in order to settle a dispute between Russia and Ukraine over natural gas prices. Russia claimed that it was only asking for global market prices, but that was of little help to the ailing Ukrainian economy and society, depending so heavily as it does on Russian gas imports. The dispute was settled within several days, to what is generally considered Russia's advantage. However, it had far-reaching implications for natural gas consumers in Germany since pressure drops within the pipeline system added to the supply concerns.
This time around-Jan. 8, 2007-Russia completely shut off the oil flow through a major pipeline that runs through Belarus and Poland into Germany. It has one of the world's largest capacities, supplying about 20% of Germany's oil, so its shutdown caused immediate and unusually harsh reactions from Berlin, even though Germany's oil reserves will last at least 120 days in case of such dramatic supply cuts.
The root cause of this drastic measure was a dispute between Russia and Belarus, which had demanded a transit fee for conveying Russian oil into the European market. All signs indicate that Russia has prevailed again, there being little choice when a monopoly dominates the market.
Within a few days of the latest development, German and EU politicians began talking again about a revival of nuclear power, taking control of the electrical utility grids, increasing the share of renewables, and reducing CO2 emissions to 20% below 1990 levels. While most of these measures are undoubtedly linked to Europe's warmest fall and winter in hundreds of years-i.e., climate change-some of the initiatives have been given a boost by the current dispute with their large neighbour to the east.
This is unfortunate because such a development was foreseeable. German governments have promoted a switch from oil to natural gas furnaces for at least 15 years now. It is considered a more sustainable way of heating, and the preferred choice over oil. In reality, however, the reliance on one hydrocarbon resource has been replaced by another.
This switch occurred while oil and gas production in the North Sea was still increasing. But the North Sea has passed its oil production peak (1999 in the UK, 2001 in Norway), and the natural gas peak does not seem to be far off. The consequences of such a regional oil and gas peak are now becoming clear as international frictions over diminishing natural resources are already rising. A main problem is that a transition to other sources of energy or to greater energy efficiency will take years to accomplish. The average lifetime of a country's vehicle fleet is about 15 years, and modernization of space heating and hot water generation requires large capital funding. The situation is bleak and will get bleaker unless Russia proves to be a reliable supplier of oil and gas after all.
There are lessons to be learned for Canada. The NAFTA countries might already be at their natural gas peak (BP World Statistical Review 2005) and, despite the tar sands, the same might be true for oil. Mexico seems to have peaked in oil production, and U.S. and Canadian conventional oil outputs are also dropping quickly.
This natural gas peak is troubling since most of Canada's home heating relies on natural gas, competing at the same time with U.S. customers and with the tar sands oil production. A supply shortfall of gas will be difficult to offset. Natural gas can only be brought to North America via LNG tankers, a costly and complex form of transport. Considering the challenge of LNG supply and unconventional natural gas production, as well as the increasing demand, there is very little room for error regarding Canada's natural gas security.
The same holds true for oil, given that a global oil peak might be imminent. A Canadian energy strategy is urgently needed.
History might reveal that Russia, aware of the rising value of its oil and gas reserves, is only acting in its own national interest. These reserves will only increase in value, so it would seem foolish for Russia to sell them short at this time. On the other hand, who knows how long Russia will be able to sustain such high production rates?
[Sidebar]
"The lesson for Canada from the recent oil and gas crisis in Europe and the imminent global oil and gas peaks is that this country urgently needs a Canadian energy strategy."
[Sidebar]
Europe passes tough chemical law
The European Parliament has approved the world's most stringent law aimed at protecting people and the environment from thousands of toxic chemicals-legislation that will have a far-reaching effect on industries and products worldwide, including in Canada and the United States.
The new law, which regulates about 30,000 toxic substances, is far more restrictive than U.S. and Canadian regulations. The most hazardous chemicals-an estimated 1,500-could be greatly restricted or even banned. Included on that list are some compounds used in electronics, furniture, toys, cosmetics, and other everyday items.
[Author Affiliation]
(Dr. Peter Berg is Assistant Professor of Physics in the Faculty of Science at the University of Ontario Institute of Technology in Oshawa.)
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