Whether Canadians like it or not, their dollar has become a petro-currency. Currently trading near parity against the greenback, it wasn’t that long ago that the Canadian dollar was trading as low as 61 cents against its bigger cousin. But of course back then oil was trading at close to $20 per barrel, and at that price Alberta’s tar sands were a marginal energy resource.

At $80 per barrel, the oil industry is pumping one and a half million barrels per day, and the once-marginal Canadian resource has suddenly become second only to Saudi Arabia in proven reserves. At triple-digit prices, the tar sands will produce three to four million barrels per day. In turn, the tandem of soaring oil prices and soaring oil production will propel the Canadian dollar to heights it’s never seen.

A soaring currency may bring long-lost NHL franchises back to Winnipeg, Quebec City and maybe even Hamilton from Dixie and the desert, but that’s about all the Canadian economy can expect from its major trading partner. Other than Canadian bitumen exports, American consumers won’t be buying much from their northern neighbor.

That won’t pose much of a problem for Alberta, whose exports are almost all energy-based. Unfortunately the same can’t be said for the rest of the Canadian economy: shipments to the US market account for three quarters of the country’s total exports. Or at least they do—for now.

How long can Ontario remain the single largest producer of motor vehicles in North America if the Canadian dollar is trading at a double-digit premium to the greenback? For that matter, what segments of the Canadian manufacturing sector are likely to survive that exchange rate in the first place?

Will the morphing of the Canadian dollar into a petro-currency be Alberta’s revenge for the still-loathed National Energy Program? Back in the early 1980’s, Ottawa transferred billions of dollars of petro-wealth from Alberta to subsidize manufacturing in Ontario and Quebec by forcing domestic oil prices below world levels. Are the tables about to turn?

Will the price for more mega-projects in the tar sands spell the end of the manufacturing sector in Ontario and Quebec? If so, what will the political feedback be from a region of the country that still controls the majority of seats in Canada’s Parliament?

As more and more Canadian auto and steel plants are closed in the wake of a soaring currency, America may have to look elsewhere for its future oil supply.

Of course the world will never run out of oil in the literal sense. There are some 170 billion barrels of the stuff trapped in the Alberta tar sands, and over 500 billion barrels more in the Orinoco tar sands in Venezuela. And if we suck them dry, there are billions more barrels of oil in shale, just as there is natural gas.

But what the global economy has already run out of is the oil it can afford to burn. Depletion isn’t just a geological concept; it’s also an economic one. From a purely geological standpoint, you can always boost production—or at least offset depletion—by accessing increasingly costly and environmentally problematic sources of new supply (such as the tar sands). But as we saw from the recent recession, the global economy can’t afford to run on the prices needed to pull that oil out.

For some people, the fact that oil prices fell to around $40 per barrel during the depths of the recession was proof enough that it had no business being in triple-digit range in the first place. But what those folks forget is that world oil demand fell during the recession for the first time since 1983. Peak oil is not a problem if the economy it’s supposed to power is shrinking—it’s only a problem if we actually want our economies to grow.

The first thing you notice about an economic recovery, even an anemic one, is that the world economy starts consuming more oil. The next thing you notice is that the price of oil starts heading up.

We all might have liked the pump prices that came with $40-per-barrel oil during the recession, but we shouldn’t expect much to be flowing out of the gas pumps at that price. Even deep-water oil, like at BP’s ruptured Macondo well in the Gulf of Mexico, doesn’t work at that price, to say nothing of mining bitumen in Alberta and processing it into synthetic crude.

If you doubt that, just look at what happened in the Alberta tar patch when world oil prices plunged during the recession. Some $50 billion of planned investment was cancelled literally overnight.

No, the world’s not running out of oil. It’s just running out of the oil we can afford to burn.

Despite repeated government assurances to the contrary, the global oil supply doesn’t seem to be growing much anymore. In fact, the Bundeswehr Centre study says that oil production may peak this year.

Most people judge peak oil concerns by the prevailing oil price. That prices have plunged from their triple-digit perch is proof enough to them that we need not worry about any imminent peak.

What they forget is where we’re coming from. The deepest global recession in the entire post-war period can cut oil prices lots of slack while demand is contracting; peak oil isn’t a problem if the economy it powers is shrinking. For the first time since 1983, world oil demand fell last year, bringing oil prices tumbling down. But recessions, even the deepest, only last so long.

The first thing you notice about a recovering economy is that it starts burning more fuel. The second is that oil prices are suddenly rising again.

Those prices are already twice as high as their lows during the recession and already at levels that, three years ago, would have been all-time highs. And that’s with the economies of the traditionally large oil-consuming countries in the world, like the 19-million-barrel-a-day US economy, still miles below their pre-recession peaks.

So while oil production may not have peaked in a geological sense, it may already have done so in a more important economic sense. Geologically, production can be boosted by accessing ever more costly and environmentally problematic sources of non-conventional supply, like tar sands. But as we have seen from the last recession, the global economy can’t run on the prices needed to bring that oil out of the ground.

The German study paints a bleak picture of the post-peak world: political power quickly shifts from major oil-consuming economies to major oil-producing economies. Less and less oil is traded on the open market, while more and more is traded between nation states, with national oil companies entering into long-term supply agreements that are tied to broader political and military considerations. And military alliances coalesce around the security of energy supply, rather than between countries with shared political or economic principles.

Perhaps these are the contours of the post-peak world. But military strategists shouldn’t underestimate the power of triple-digit oil prices to change the nature of our economies and, hence, our dependence on the fuel.

Nevertheless, it’s reassuring to know that at least some of our governments are thinking about peak oil, despite the fact that they still feel they must hide their concerns from their voters.

The notion of exporting water is still a taboo subject in Canadian policy circles; the country took great pains to keep water out of the North American Free Trade Agreement. But, like most things, acceptance may be a matter of price. And the price of water is rising steadily, making Canada’s freshwater bounty more valuable every day.

As with tar sands oil, the natural market for Canadian water is the United States. While places like Buffalo and Cleveland have access to just as much water as any place in Canada, that’s not where folks have been moving to lately. Increasingly, states like California and Florida are turning to desalination to meet their freshwater needs. At around 65 cents per cubic meter, the going rate of desalinated water in the US provides a very attractive pricing point for potential Canadian water exports.

At those prices, one study calculated that the province of Quebec, home to roughly one third of Canada’s renewable sources of fresh water, could reap something in the neighborhood of a $6.5 billion annual tariff by selling as little as 10 per cent of its one trillion cubic meters of fresh water every year. That’s a multiple of the dividend Hydro-Québec pays the province from selling hydro-electric power. And those kinds of revenues could even convince Canadians that it’s even better to be an aqua-power than a petro-power. It certainly leaves a much smaller carbon trail.

Of course, pricing water, let alone exporting it, remains anathema to the majority of Canadians. But, at the same time, the enormous water usage involved in the country’s largest energy project, the Alberta tar sands, has made it painfully clear that a free-water policy is a recipe for waste and environmental degradation.

Would 250,000-plus-barrels-a-day producers like Suncor and Syncrude be so eager to pollute four barrels of fresh water in the production a single barrel of oil if they had to pay the same price that many Americans already pay for desalinated water? My guess is that if tar sand producers had to absorb those kinds of water costs, it wouldn’t take long before shareholders got management focused on finding ways to use a whole lot less water.

Americans are increasingly paying their northern neighbor to fill their gas tanks. In time, they may pay them even more to fill their taps.

The Enbridge leak in Michigan is a poignant reminder of the thousands of miles of pipeline that crisscross North America. The Kalamazoo spill is not the first pipeline to burst on the continent, nor will it be the last; spills are a fact of life in the business. But this one may have broad implications for the future of tar sands production.

The company’s grandiose plan to build the Northern Gateway, a 900,000-barrel-a-day pipeline from the Alberta tar sands to the BC coast for transoceanic shipment to China, is now in jeopardy. Watching cleanup crews scrambling to contain the spill in Michigan probably doesn’t endear Enbridge to British Columbia residents, who are being asked to accept the proposed pipeline in their own backyards. Enbridge’s only consolation is that its spill is likely to be equally damaging to the chances of its competitor TransCanada’s getting approval from US regulators to build its contentious Keystone XL pipeline, which would bring tar sands crude to US markets.

With oil spilling all over the place these days, natural gas should never have looked more appealing. But, as Josh Fox’s recent documentary, Gasland, vividly illustrates, the environmental challenges are no less daunting in that industry. Just as depletion has forced oil companies to take on greater and greater environmental risks, so has it affected North American gas producers. Shale gas, heralded by Boone Pickens and others as the answer to America’s future energy needs, leaves just as heavy an environmental footprint.

Not only does fracturing shale rock require an enormous amount of water (similar in that respect to tar sands), but it uses a toxic cocktail of chemicals to do the job. And those chemicals (as much as 80,000 pounds of them to fracture a well) have a nasty habit of turning up in the local groundwater. As much of 70 per cent of the chemical solution that is injected for shale fracturing stays in the ground.

But, fortunately for shale gas companies, producers can contaminate groundwater with impunity. Hydraulic fracturing, the process of tapping shale gas, was exempted from the Safe Drinking Water Act in 2005 in the interests of promoting American energy independence. Thanks to that exemption, and the environmental practices that it engendered, residents who live on top of the Marcellus Shale formation, for example, can actually light their tap water on fire.

The ability of new technology to unlock previously inaccessible hydrocarbon deposits in deep water, tar sands, or shale rock is beyond dispute. But so, too, is the staggering environmental cost that comes with our ever-increasing dependence on them.