An increasing number of geologists and gas analysts, however, believe that a fact does not cease to exist just because it is ignored. One of Canada's most serious examiners of energy trends and forecasts is Dave Hughes, a calm, deep-voiced Calgary-based geologist with Natural Resources Canada. Over the past two years, Hughes has put together (in his spare time, no less) an exhaustive open file on oil and gas supplies. His detailed presentation has surprised, alarmed and rankled bureaucrats, professional oilmen and CEOs alike. The facts not only question the country's pervasive energy myths; they warn that Canadian business will face crippling bills and shortages if the country takes a business-as-usual approach to energy supplies. "We are facing an energy crunch," says Hughes. "We can smoothly manage the transition to a more sustainable energy future, or the transition will manage us."

Hughes and many other analysts don't think we will be able to manage anything well until we reject the reigning assumptions and accept some disturbing realities.

The world has lots of oil

The world may have lots of oil, but it is running out of cheap conventional crude. Since 1965, demand for oil has increased by 150% worldwide, and rapid economic growth is now driving the biggest yearly increase in world demand in more than 20 years. Given that remaining oil supplies largely lie in "volatile terrain (the Middle East, Russia and West Africa), the distribution of oil has become a massive geopolitical headache. China and India's humming economies have added to the strain.

The resource is also in a persistent, undeniable state of decline. As Hughes notes, production has exceeded discoveries since 1983. In 2004, the BP Statistical Review of World Energy, the gold standard for real numbers on oil and gas, looked at 54 producing countries and outlined the disturbing face of oil depletion. Twenty-two nations, representing a third of the world's oil production, are in decline. Another 14 countries, accounting for 42% of the world's output, are producing on average 22% below their peak. Only 18 nations, accounting for a quarter of the world's production, have yet to experience a peak--but they will soon. Iran peaked in 1974 and Nigeria in 1979. The United Kingdom's North Sea bonanza peaked in 1999, and actually declined 9% over 2003.

Between 2008 and 2010, Hughes estimates world oil production will climb to 87 million barrels a day and then falter. Supplies will tighten and prices will continue their steady ascent. This collective peaking in deliverability simply means oil production can no longer grow to meet future demand (or even to offset depletion). As Hughes notes, the oil left "will be the hardest and most costly to extract." And much of it will require transportation through hazardous political geography.

With the world's oil production machine now fully deployed--production is at 99% of global capacity--energy security is now walking a tightrope. A snap cold spell or a hurricane in the Gulf of Mexico (not to mention bombs in Iraq) have already sent prices flying northward and will do so again. Energy vulnerability (what the media has dubbed "the fear factor") has arrived in our living rooms for a long stay.

Canada's oilsands can make up for declines in world conventional oil production

No way. Like most big energy projects, Alberta's oilsands will deliver more hyperbole than oil. The Alberta government claims the prolific sands hold as much as 311 billion barrels of recoverable oil--a prize greater than all of Saudi Arabia's oil wealth. True or not, this figure conveniently masks some key limitations--namely, says Hughes, "at what rate this oil can be produced and what the capital, energy and other limits to production growth are." After the Alberta Energy and Utilities Board and the Houston-based Oil & Gas Journal reported that 175 billion barrels of the tarry goo were proven reserves in 2002, the New York Times challenged the numbers as wishful thinking. In contrast to Alberta's figures, the ever-prudent BP Statistical Review lists only 16.9 billion barrels as recoverable and under active development. As Hughes notes, the 311 billion and 175 billion barrel figures just don't reflect economic, environmental and engineering constraints.