Leading Canadian economist, Jeff Rubin, sets out the premise of his book “Why your World is about to get a whole lot smaller” in this 45 minute video from 2009′s The Business of Climate Change Conference.
We aren’t running out of oil. But the supply of oil we can afford – the $30 a barrel Saudi crude we’ve been lifting for the last 100 years – went into permanent decline around 2007. Its replacement – deep water, arctic, sub salt and most particularly tar sand – is two or three times the cost.
That matters. It doesn’t just run our cars (60% of all consumption is transportation). We eat it, wear it, see by it, keep warm by it and prop the financial system Ponzi scheme up with it. As its cost rises, the cost of everything rises. We saw that in 2008 – oil shock cost inflation drove the bottom economic segment into default on the repayments of their toxic mortgages, triggering the wider collapse of the exotic derivatives market.
At the same time, demand is rising in the non-OECD countries. They have no price memory, the new $2,500 Tata nano adds a few hundred million straws in the global oil supply. Worse, price doesn’t ration demand in the key OPEC suppliers because of fuel subsidies.
So prices are set to rise – “triple digit oil price”, and within 12-18 months, depending on the pace of the artificial recovery currently underway. The US economy crashes whenever the oil price exceeds $80 a barrel (it’s $79.99 as I write this). So we are heading for another, probably permanent recession.
Globalism is dead – it implicitly assumes that transportation is free, and now it isn’t. So the massive supply chains that supply our food and materials are about to fail.
It can’t be prevented, but we can do something to insulate our economy. Primarily, we need to relocalise. We need to make stuff where it is used, grow food where it is eaten, make power where it is consumed, live where we work.
Then we need to price carbon, to ration demand. Since not everyone will do it, we need to impose import tariffs to deny economic advantage to those who won’t.
Who knows if you can decouple peak oil from peak GDP – I think it is highly unlikely. You certainly can’t avoid the massive costs implied by rebuilding the local supply chains recently dismantled by gloablisation. Rubin thinks there are some benefits from the different way of life this necessitates. I agree.