Nearby oil futures months are now hovering around $58 a barrel.  It’s been a wild ride over the last month.  The year started out with oil fluttering around the $61 dollar range.  This was followed by a dip under $52 only to settle out at present levels.  What happens next?  Nobody knows.  With cold weather finally getting to eastern North America, it would seem oil has bottom out at least for the short term.

Of course a famous economist John Keynes once said, ” in the long term we’re all dead.”  So what’s the short term?  Its whatever you want it to be.  We shall see.  However, it is the long term I think we should be concerned with.  Forget Keynes for a moment.  Maybe there is something to this “greening of the political landscape.”  Maybe in the long term the demand for oil will go down putting everything we’ve come to accept as economic reality into the dustbin.

Some of you might say that is heresy to even think of.  With Canadian gas prices dancing around the $1.35/litre mark last spring nobody could even imagine that.  Demand for oil going down, preposterous.  However, the more I think about it, the more I think there is something to this.  Maybe in fact oil demand will go down in the long term, way down.

I’m thinking this way because simply economics dictates the “micro-demand” for oil.  Think of it this way.  How much incentive do you have to conserve energy if it’s cheap?  Would you curve your driving if gas was suddenly $2/litre?  Hmmmmmmm.  I think you know what I mean.  As the price goes up, eventually demand drops.  Even oil, as addicted to it as we are, has its limits.

That idea is simple.  It’s something, which is basic in any economics lesson.  Nonetheless, I think in 2007 there is much more to it. You can see it in the political headlines of the day.  There is “green” everywhere.  I wrote about it a couple of weeks ago.  It would seem everybody is tripping all over each other to “out-green” the other.  It’s true, just like I wrote a couple of weeks ago.  “Being green is whatever you want it to be.”  However, at the end of the day it most likely means less oil consumption translating into a long-term decline in the demand for oil.

Does that mean our Canadian government will “green the Alberta Tar Sands?”  That’s a tough one especially when Alberta is being looked upon as the new Saudi Arabia.  The problem is a barrel of tar sands oil emits 20 to 30% more carbon than conventional oil.  In today’s green world that makes them a pariah, even though they are an economic miracle and even though oil processors in the tar sands have cut emissions from past levels.  Then again, it still might not matter.  Numerous central Canadian politicians might find it politically palatable to “green-up” to their constituents by dumping on the Alberta tar sands.  That tussle is surely going on within the federal cabinet.

I’m not sure what will happen, but I think there is a common will in Canadian society to reduce energy consumption.  Simple economics of reducing costs will certainly weigh in as well.  The key however may be new technology.  Hybrid cars are one thing.  Squiggly light bulbs are another.  They all help.  But great grandpa didn’t know what an airplane or a gas station was.  Simply put we’re just like he was.  New technology to radically reduce present energy consumption is not yet here.  However, it will be and when it enlightens society with its presence, society will never be the same.  We just have to get there.

What will that be?  I don’t know.  However imagine a world where a green mythical fuel cell acts as a substitute for 85% of the energy we now use.  If you can’t get around on that, think of something else such as technology to convert solar energy to anything I may need.  Think of an energy source, which is green, sustainable, and renewable, and 90% less cost than what we have now.  It will come.  It is just a matter of time.

Think of it this way.  85 years ago a car arrived on my grandfather’s farm.  His father or my great grandfather paid for the car.  However, he deemed himself too old to drive it.  So my grandfather drove the car.  However, one day my great granddad decided since he paid for the car he should try driving it.  So he did.  The last thing my grandfather heard him say as he drove the car into the barn was a loud, whoa, as he crashed into the barn.

The point is great grandpa was used to horses.  A car was something at one point in this life he couldn’t imagine.  Fast-forward to 2007 and when it comes to oil consumption and being green most of us are just like great grandpa.  The technological solution to being green and reducing our energy consumption is just around the corner.  And when it gets here I’m sure some of us will yell whoa too.