‘We’ve got a real problem’: Why the world is worried about rising CO2 levels
Oil prices are surging, but some experts are saying the world’s energy woes could be much worse than they seem.
The oil price boom has left the world with an extra $4 trillion in debt, and rising CO 2 levels are pushing prices up further, according to the Bank of Canada’s latest report on global energy markets.
The Bank has also raised its long-term interest rate forecast for oil, to 0.75 per cent from 1 per cent.
“This is really the start of a much longer cycle,” says Robert Pollack, a professor of economics at the University of Toronto.
“The longer you wait, the longer you get exposed to this cycle, and the worse the cycle gets.”
Pollack has been researching the effects of CO 2 on oil prices for nearly a decade, studying the economic effects of global warming and CO 2 emissions.
“There’s not much we can do now about the effects,” Pollack says.
“We’re really starting to see the effects.”
The biggest threat, according, is a rise in the price of oil.
The price of crude has increased since the late 1990s as a result of a boom in US oil production, thanks to fracking, horizontal drilling and new technologies such as fracking and hydraulic fracturing.
This boom has led to a glut of oil in the US market, which can only be broken by further extraction of oil and gas.
But the rise in oil prices has also brought a drop in production.
“I think that’s what’s going to get us into trouble,” Pollacks says.
The global economy is now a “deeply troubled state,” Pollak says, because the US and Europe are experiencing a prolonged economic downturn.
Pollack estimates that US oil output has fallen by around 5 per cent since 2010, and that a similar rate of decline has been going on in Europe.
“When you have a drop of 5 per per cent in oil production over a three-year period, that’s a big, big deal,” he says.
Pollacks point out that global energy prices have risen to $40 per barrel, which is about $100 above the price that OPEC was paying back in 2015.
“They’re now at a price that’s about $200 per barrel,” Pollans says.
But that doesn’t mean that the price will stay at that level.
“It’s possible to buy oil and not buy gas, and there’s still a price on the table,” Polls says.
In other words, a rise of $100 or $200 in oil and $200 or $400 in gas is still worth buying.
Polls believes the global economy will likely remain in a deep state of recession for the foreseeable future, with oil prices around $50 a barrel by 2025.
He predicts the global oil price will continue to rise until 2030 or 2030, depending on what happens with global CO 2 concentrations.
“And if you look at the world as a whole, the world still will continue on a downward trajectory in terms of CO2,” he explains.
“So the question is, how long will we be stuck there?”
Polls is pessimistic about the outlook for the world economy.
“If oil prices don’t go down, the global debt problem is going to continue to increase, and we will see the rise of the extreme debt class, and then that will get much worse.”
Polls warns that we’re heading into a period of a “ticking time bomb” that could “devastate” the world.
Polling says it’s possible that a rise to $100 a barrel could eventually result in a world debt crisis that would put the global economic system “on the verge of collapse.”
Pollers prediction comes as a report from the Bank for International Settlements has found that the world may need to “bail out” the financial system.
The report, released on Tuesday, predicts that if oil prices keep rising, the debt-to-GDP ratio will reach 100 per cent by the end of the decade, a level that would “expose the financial sector to greater stress.”
If the situation worsens, the report warns, a bank bailout could become necessary.