On today’s show we are talking about what is coming in the world of energy. So why am I telling you this? This is, after all a real estate show. Well, wherever there is low cost energy, there is economic growth. Wherever there is economic growth, there will be population migration. All of this affects real estate.
It’s going to get a lot worse before it gets better. But the good news is that it will get better.
We have a global energy shortage. We think that energy is expensive at $1.50 per litre in Canada, or 1.70Euro per litre. That comes to about $7 per gallon in USD, and compares with $90 cents per litre in the US or about $3.60 per gallon. Naturally that price varies across the country.
Energy is what enables us to live our modern lifestyle. The amount of energy contained in a single litre of gasoline is equivalent to about 110 person hours of work if done by human labour. At a minimum wage of $7.25 per hour, that same output would cost about 1,000 times if performed by human labor.
The industrial revolution and the shift from bio-mass to coal, and from coal to oil is what has enabled our modern lifestyle. The fact that you can spend your evening watching a movie on Netflix is testament to the fact that energy has enabled our lifestyle.
We will see a drop in demand for energy during this current recession. It happens in every recession. There is a direct correlation between a unit of economic output and the consumption of an equivalent unit of energy somewhere in the world. These two are inextricably linked.
But once this recession shifts into recovery, we can expect to feel the full force of the energy shortage. We are past peak oil in the US. Can the US continue to produce oil for years to come? Yes, but the cost of extracting that oil will continue to rise. There will be increasing amounts of energy consumed in order to get at the oil which thereby reduces the efficiency with which we can produce energy.
Even with the most aggressive forecasts for penetration of solar, wind and hydroelectric, we will not produce enough energy to displace the decline in oil and coal output.
Host: Victor Menasce