Oil and gas production won’t keep pace with demand, leaving fuel and food prices high and shortages likely, says a policy expert..Richard Masson Executive Fellow with the University of Calgary’s School of Public Policy says the current large profits for the energy sector haven’t led to enough new development..“There is so much money being earned right now and flowing through the companies through the head offices,” Masson said in an interview..“Shareholders have been very loathe to have companies invest. A lot of them are focused on ESG [environmental, social, and governance] and climate change, and they don't want money reinvested in growth or new projects.”.Masson says many people don’t see a long-term future for oil, and in the short-term, it’s hard for companies to lay hold of potential opportunities. .“There's just not enough supplies or workers to actually get things going. You just can't drill wells, because you don't have a casing to complete them. And there's many, many supply chain shortages like that.”.ARC Energy Research Institute expects oil and gas companies to earn a record $242.1 billion in revenue in 2022. General and administrative costs including royalties and taxes still leaves $146.8 billion cash flow. With capital expenditures expected to be $42.2 billion, the industry will still make more than $100 billion this calendar year..Masson says the regulatory environment under the Trudeau Liberal government has added more uncertainty to an already onerous process for projects and pipelines, deflating enthusiasm for energy development even further..“We're probably pretty close to completely full [capacity] on the pipelines. And people are worried that if they actually did invest in new production, would they be able to get it to market? Now Trans Mountain should come online sometime in the next 18 months, but it's not there yet, and things can still go wrong.”.Global factors, including the push for net zero emissions, have led to oil development not keeping up with demand. However, technologies to replace oil are not yet available, leaving consumers caught in the gap..“We are stuck already. And I think it's going to hurt us at least for the next three or four years globally. We have been under-investing for many years,” Masson said..“The spare capacity that the world has had has been declining steadily for years. And that's why prices were in the $80–$90 range before Russia invaded Ukraine.”.Western sanctions have cut off Russia’s bountiful supplies of potash, ammonia, urea, and other soil nutrients, not to mention millions of barrels a day of oil and gas..“We're just in a real pickle. There's no good way to increase supply anywhere in the globe, which means the price has to be high enough to force some people to drive less, or use less diesel for goods or services or industrial activity,” Masson said..“Even more problematic is natural gas. For the last bunch of years in North America, that was $2–$3. Now it's $8, and it's on its way up. In Europe, gas was $60 per 1000 cubic feet. You use natural gas for things like making fertilizer, and a bunch of these kinds of industrial processes had to shut down. It was just so expensive, they couldn't see a way to sell a product.”.The result, Masson says is a perfect storm that threatens people and governments..“Suddenly, we're not only short of gasoline and diesel, but we're short on fertilizer, which is going to lead to a big food shortage, probably. The most vulnerable in society, both in the West and in developing countries, are going to face huge problems over the next couple of years because of a physical lack of food and very expensive food, if you can get it, or very expensive fuel, if you can get it. And that's not going to bode well for a lot of governments,” Masson said..“The dialogue is really about what the security supply looks like as we transition to lower the CO2 intensity of energy systems, and that transition is going to take 30 years, at least. It's complicated and scary, really."
