SUBHEAD: In a new book, Jeff Rubin argues that more expensive and less plentiful oil will spell the end of globalization.
By Jeff Rubin on 29 May 2009 in the Vancouver Sun
http://www.vancouversun.com/business/fp/Small+world/1637098/story.html
Image above: Example of a small planet. From http://www.worth1000.com/contest.asp?contest_id=20021
I have good news and bad news for you.
First the bad news.
With global oil supply dwindling and demand rising, you can expect scarcity. And scarcity means high prices. You can expect triple-digit oil prices in the near future. Yes, the price at the pump is going to go up. Count on it. In the United States, that should translate into as much as $7 per gallon of gasoline, and about $2 per litre in Canada. Europe is of course already paying those prices, so they should get ready for the equivalent of double-digit gas prices. But it will also hurt in a lot of ways you may not be thinking about.
Life as we've known it is up for grabs in a world of expensive fossil fuels. Expensive oil means a severe curb on the free-spending lifestyle that cheap energy has afforded us for some time now. It means you can say a long and wistful goodbye to the inexpensive products manufactured on the other side of the world. You may not love them, but they have been stretching our dollars for a while now and holding down inflation at the same time. You'll miss them when it starts to become clear that your paycheque just doesn't go as far as it used to.
Your food in particular is going to cost a lot more -- in fact, it is already getting more expensive all the time. The stuff you burn in your car is the same thing the farmer in Iowa needs to plant and harvest his corn (to say nothing of the natural gas needed to manufacture his fertilizer). It's the same stuff that powers all the trucks and planes and ships that move everything around, the same stuff that is used as a feedstock for the petrochemical industry that produces our plastics and pharmaceuticals. It's what the navy uses to fuel its ships, and what the local government needs to run its lawnmowers to keep the parks looking groomed. Someone is going to have to pay for all of this, and less oil means less money. Some difficult choices lie ahead.
Now the good news
Expensive oil may mean the end of life as we know it, but maybe that life wasn't particularly great to start with. Smog-congested cities, global warming, oil slicks and other forms of environmental degradation are all part of the legacy of cheap oil. If you want a hint of what the future will look like if oil-guzzling members of the OECD get it right, just look at Europe today. There, drivers are already paying the equivalent of $2 for a litre of gasoline, and in France and Germany life goes on.
European gasoline prices give a hint of what is down the road for North Americans, and it is not all doom and gloom. Sure, we will be facing higher prices (if you've ever bought a pint of beer in Frankfurt or a latte in London, you know just how much higher European prices can be than what North Americans pay). We will be living in denser communities, driving smaller cars, living more frugally and locally. When we travel, we may soon be boarding an electric-powered train rather than an oil-powered airplane. And with global climate change also bearing down on our energy consumption, we may soon be paying more attention to the cost not only of buying carbon-based fuel, but of burning it too, just as the Europeans are already doing.
But living in a clean, efficient, densely populated city is not exactly the end of the world. Where would you rather spend your vacation: Paris or Houston?
And while there are certainly going to be losers as the 18-wheeler of globalization is thrown into reverse, there are going to be winners too. In a world of triple-digit oil prices, distance suddenly costs money and lots of it. Many of those once high-paying manufacturing jobs that we thought we had lost forever to cheap labour markets overseas may be soon coming back home. With every dollar increase in the price of the bunker fuel that powers the container ships that ply the Pacific, China's wage advantage becomes less and less important and Western workers once again become competitive. Who would have dreamt that triple-digit oil prices would breathe new life into America's Rust Belt or the British steel industry?
Get ready for a smaller world. Soon, your food is going to come from a field much closer to home, and the things you buy will probably come from a factory down the road rather than one on the other side of the world. You will almost certainly drive less and walk more, and that means you will be shopping and working closer to home. Your neighbours and your neighbourhood are about to get a lot more important in the smaller world of the none-too-distant future.
Here's the question:Will we decide to reinvest in a global economy and an infrastructure that keeps us bound to oil consumption for every dollar or pound or yen of wealth we produce? If so, we are committing ourselves to a damaging cycle of recessions and recoveries that keeps repeating itself as the economy keeps banging its head on oil prices. If we go this route, peak oil will soon lead to peak GDP.
Or we can change. Not only must we decouple our economy from oil but we must re-engineer our lives to adapt to a world of growing energy scarcity. And that means learning to live using less energy. While much could go terribly wrong in this transition, don't be surprised if we find more than a few silver linings in the process, like a solution to carbon emissions, for example. And don't be surprised if the new smaller world that emerges isn't a lot more livable and enjoyable than the one we are about to leave behind.
Either way, your world is about to get a lot smaller.
- Excerpted from "Why Your World Is About to Get a Whole Lot Smaller" by Jeff Rubin.
Image above: Example of a small planet. From http://www.worth1000.com/contest.asp?contest_id=20021
I have good news and bad news for you.
First the bad news.
With global oil supply dwindling and demand rising, you can expect scarcity. And scarcity means high prices. You can expect triple-digit oil prices in the near future. Yes, the price at the pump is going to go up. Count on it. In the United States, that should translate into as much as $7 per gallon of gasoline, and about $2 per litre in Canada. Europe is of course already paying those prices, so they should get ready for the equivalent of double-digit gas prices. But it will also hurt in a lot of ways you may not be thinking about.
Life as we've known it is up for grabs in a world of expensive fossil fuels. Expensive oil means a severe curb on the free-spending lifestyle that cheap energy has afforded us for some time now. It means you can say a long and wistful goodbye to the inexpensive products manufactured on the other side of the world. You may not love them, but they have been stretching our dollars for a while now and holding down inflation at the same time. You'll miss them when it starts to become clear that your paycheque just doesn't go as far as it used to.
Your food in particular is going to cost a lot more -- in fact, it is already getting more expensive all the time. The stuff you burn in your car is the same thing the farmer in Iowa needs to plant and harvest his corn (to say nothing of the natural gas needed to manufacture his fertilizer). It's the same stuff that powers all the trucks and planes and ships that move everything around, the same stuff that is used as a feedstock for the petrochemical industry that produces our plastics and pharmaceuticals. It's what the navy uses to fuel its ships, and what the local government needs to run its lawnmowers to keep the parks looking groomed. Someone is going to have to pay for all of this, and less oil means less money. Some difficult choices lie ahead.
Now the good news
Expensive oil may mean the end of life as we know it, but maybe that life wasn't particularly great to start with. Smog-congested cities, global warming, oil slicks and other forms of environmental degradation are all part of the legacy of cheap oil. If you want a hint of what the future will look like if oil-guzzling members of the OECD get it right, just look at Europe today. There, drivers are already paying the equivalent of $2 for a litre of gasoline, and in France and Germany life goes on.
European gasoline prices give a hint of what is down the road for North Americans, and it is not all doom and gloom. Sure, we will be facing higher prices (if you've ever bought a pint of beer in Frankfurt or a latte in London, you know just how much higher European prices can be than what North Americans pay). We will be living in denser communities, driving smaller cars, living more frugally and locally. When we travel, we may soon be boarding an electric-powered train rather than an oil-powered airplane. And with global climate change also bearing down on our energy consumption, we may soon be paying more attention to the cost not only of buying carbon-based fuel, but of burning it too, just as the Europeans are already doing.
But living in a clean, efficient, densely populated city is not exactly the end of the world. Where would you rather spend your vacation: Paris or Houston?
And while there are certainly going to be losers as the 18-wheeler of globalization is thrown into reverse, there are going to be winners too. In a world of triple-digit oil prices, distance suddenly costs money and lots of it. Many of those once high-paying manufacturing jobs that we thought we had lost forever to cheap labour markets overseas may be soon coming back home. With every dollar increase in the price of the bunker fuel that powers the container ships that ply the Pacific, China's wage advantage becomes less and less important and Western workers once again become competitive. Who would have dreamt that triple-digit oil prices would breathe new life into America's Rust Belt or the British steel industry?
Get ready for a smaller world. Soon, your food is going to come from a field much closer to home, and the things you buy will probably come from a factory down the road rather than one on the other side of the world. You will almost certainly drive less and walk more, and that means you will be shopping and working closer to home. Your neighbours and your neighbourhood are about to get a lot more important in the smaller world of the none-too-distant future.
Here's the question:Will we decide to reinvest in a global economy and an infrastructure that keeps us bound to oil consumption for every dollar or pound or yen of wealth we produce? If so, we are committing ourselves to a damaging cycle of recessions and recoveries that keeps repeating itself as the economy keeps banging its head on oil prices. If we go this route, peak oil will soon lead to peak GDP.
Or we can change. Not only must we decouple our economy from oil but we must re-engineer our lives to adapt to a world of growing energy scarcity. And that means learning to live using less energy. While much could go terribly wrong in this transition, don't be surprised if we find more than a few silver linings in the process, like a solution to carbon emissions, for example. And don't be surprised if the new smaller world that emerges isn't a lot more livable and enjoyable than the one we are about to leave behind.
Either way, your world is about to get a lot smaller.
- Excerpted from "Why Your World Is About to Get a Whole Lot Smaller" by Jeff Rubin.
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