That may come as a shock to those who thought the bloated oil inventories that came in the wake of the last recession would provide a buffer against future oil price spikes. Suddenly that buffer has literally gone up in smoke.

Refined oil stocks held by China’s two largest oil companies have fallen for eight consecutive months, while diesel stocks in the country fell 14 per cent in October. And the tightening oil market won’t just be felt in China. The 140 million barrels of international oil inventory sloshing around in floating storage on the high seas is also all but gone.

With oil prices within striking distance of triple-digit levels, don’t look for any price relief at the upcoming OPEC meeting in Ecuador. Venezuelan energy and oil minister Rafael Ramirez was recently quoted as saying that $100 per barrel was a fair price for both consumers and producers. (But not for cab drivers in Caracas, who will continue to be able to purchase their fuel at 20 cents per  gallon, the equivalent of a little over $8 per barrel). Meanwhile, King Abdullah of Saudi Arabia has already served notice that, without triple-digit prices, there is little incentive for new oil exploration in his kingdom.

In other words, without the return of the kinds of oil prices that put the world economy into the deepest ever post-war recession, we shouldn’t expect major oil producing countries to find and develop new supply. Yet according to the recently released World Energy Outlook from the International Energy Agency (IEA), world oil demand has never been more dependent on finding new supply.

How the goal posts have moved when it comes to oil prices and supply forecasts. Just as the IEA has finally recognized the reality of peak oil—at least insofar as affordable conventional oil is concerned—triple-digit oil prices have become the new normal in OPEC’s price expectations.

When both OPEC, an organization representing 40 per cent of world oil production, and the IEA, representing countries that consume roughly 50 per cent of the world’s oil, both now acknowledge the imminent return of triple-digit oil prices, perhaps it’s time our policy-makers should as well.

Our last encounter with those prices was brief but decisive. Oil demand collapsed, and, since oil powers our economy, so did GDP. What steps we have taken to ensure the same thing doesn’t happen again is far from clear.

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.

The acquisition of a nine per cent share of the Athabasca tar sands’ marquee Syncrude operation by Sinopec (which is owned by the Chinese government) signals a new willingness on China’s part to sink billions into the future development of high-cost oil from tar sands. It coincides with the granting of a $20 billion soft loan by China to the Chávez regime in Venezuela, which will at least in part be repaid in oil from that country’s Orinoco tar sands.

Unlike Canada, however, Venezuela is not too fussed about whether they will export raw bitumen or processed synthetic oil to their Chinese customers. In Canada, of course, final approval of the Sinopec deal by the country’s Foreign Investment Review Agency hinges at least in part on compliance with Stephen Harper’s pledge not to export raw bitumen to countries with laxer carbon standards than North America’s.

Might I remind Prime Minister Harper that the price for carbon emissions in China today is exactly the same as the price for carbon emissions in both Canada and the United States? When that changes, as it ultimately must, it’s nothing a carbon tariff couldn’t readily handle.

Carbon issues aside, common economic sense dictates that Alberta tar sands producers should start thinking a whole lot more about supplying China either bitumen or processed synthetic oil through a pipeline to the Pacific, and a whole lot less about supplying their traditional market in the United States.

Ninety per cent of every new barrel of oil produced in the world gets burned as transport fuel. If you compare China’s auto sales with America’s sales, it’s not hard to predict where tomorrow’s oil supply will be headed. China’s oil consumption has grown from just over two million barrels per day in the early 1980s to an estimated nine million barrels per day this year. And at the rate that its vehicle market is growing, the country could double its oil consumption over the next decade or so.

By comparison, take a look at where US oil consumption is going. While Chinese car sales are growing explosively, this year there were four million fewer vehicles on the road in America than there were the year before. With triple-digit oil prices just around the corner, you can expect to see another 40 to 50 million American vehicles taking the exit lane over the next decade.

So if you are a tar sands producer, Sinopec or otherwise, which market do you think you should be pursuing? One in which demand has already peaked and now faces irreversible decline, or one where oil consumption per capita is only a tenth of North America’s, but where vehicle sales are growing by 50 per cent a year?

Oil is already trading at around $80 per barrel, and we are in the very early stages of a global economic recovery. Surely time is on Alberta’s side, and on that of the royalties the province commands from the billions of barrels of oil trapped in its tar sands. Those royalties are already larger than the ones from natural gas, historically the province’s fiscal staple.

What Albertans don’t seem to realize is that they might just be in a position to take a bigger slice of bitumen’s growing royalty pie—particularly when their competitor as the primary source of tomorrow’s oil supply happens to be Venezuela’s Orinoco tar sands.

The latest estimate by the US Geological Survey claims there are 513 billion barrels of heavy oil beneath the steaming jungles of Amazonia, roughly three times the deposits in Alberta. But there is an even bigger difference between the two resources, and it’s not what lies underground.

Venezuela, like most places in the world today, believes that its vast oil reserves belong to its state oil company, Petróleos de Venezuela. In Canada, by contrast, not only is there no state oil company (Petrocan, long privatized, was recently swallowed by Suncor) but there are virtually no foreign ownership restrictions on oil reserves. In a world of rampant resource nationalism, that makes Alberta a very special place.

With the enormous deposits in the Orinoco now off limits, Alberta’s tar sands represent almost three quarters of the oil reserves in the world that are open to private investment and ownership—and by that I mean where good corporate citizens like ExxonMobil can stick a huge straw in them and siphon off the resulting petrodollars to their head offices.

In Venezuela, the company had to walk away from one such straw, a multi-billion-dollar one that it built for the Orinoco tar sands (the 120,000 barrel-per-day Cerro Negro heavy crude upgrader), when President Hugo Chàvez decided to reroute that outward-bound flow of petrodollars. Next thing you know, Exxon (and its Canadian subsidiary, Imperial Oil) is pouring billions of dollars into its Kearl Lake, Alberta, operation, a project that was previously deemed too expensive.

The longer the Orinoco river basin remains a place to fish for peacock bass instead of extracting millions of barrels of heavy oil, the stronger Alberta taxpayers’ position is.

So forget about taking a new political direction with the upstart Wildrose Alliance Party. Facing a $4.5 billion deficit, maybe it’s time Albertans took a page out of Hugo’s playbook, and started getting a bigger share back from their biggest resource.

Like it or not, synthetic oil from Alberta’s tar sands is going to figure ever larger at American fuel pumps in the future (provided that it isn’t siphoned off to China by a pipeline to the west coast first).

American oil demand may be diminishing as more and more drivers take the exit lane, but available supply is shrinking even faster. Domestic production, formerly 10 million barrels per day, is already down by half. The longer the U.S. economy has run on oil, the more dependent it has become on energy imports. Only finding those imports is becoming more challenging all the time.

Sources of oil from Mexico are already collapsing, and in a few years’ time that country will cease exporting it at all. The flow of oil at its once-huge Cantarell field, representing almost half the country’s oil production, will soon slow to a fifth of its former peak rate.

And I hope Governor Schwarzenegger isn’t counting on Venezuela, the western hemisphere’s other major oil producer, to fill that gap. The only additional production that country will have to offer is from its Orinoco tar sands, the same stuff he says is too dirty to take from Canada. Moreover, fueling carbon-conscious gringos in California as they cruise down their sprawling freeways probably doesn’t rank high on President Hugo Chávez’s to-do list.

As for the Middle East, it’s not political risk that California’s motorists have to fear. It’s more Ski Dubai and the 7-cents-a-gallon bunker fuel burned to generate electrical power, along with 40-cents-a-gallon pump prices, that they should worry about. OPEC member states already consume almost ten million barrels a day of their own production, and with every rise in oil prices they can afford to consume even more, and in the process export less.

None of this is to suggest that synthetic oil made from Canadian tar sands couldn’t get a lot cleaner. Put a $50 to $60 per ton price on carbon emissions and all of a sudden shareholders of companies like Suncor and ExxonMobil (or its Canadian guise, Imperial Oil) will demand that management find a way of emitting less—the same way putting a price on the millions of gallons of fresh water those companies pollute will suddenly make water conservationists of them as well.

But Schwarzenegger and his fellow governors should realize one thing before they ban dirty fuels. The reason the United States will be so dependent on Canadian tar sands is that there ain’t a whole lot else left.