Why Your World Is About to Get a Whole Lot Smaller: Oil and the End of Globalization
By Jeff Rubin
286 pp., hardcover. Random House – May 2009. $26.00.
It is a well-known tenet of the peak oil discourse that economists, at large, just don’t get peak oil. According to classical economic theory, oil scarcity should cause prices to increase, thus stimulating exploration, replenishing reserves and bringing prices back down. The reason why this cycle hasn’t played itself out fully in recent years, of course, is that we’ve passed the all-time peak in world oil production. After this, production can no longer grow, period, regardless of how high prices go or how earnest oil companies are in their intentions of finding more oil. In short, it seems that classical economic theory no longer applies in a world of hard ecological limits, no matter how tightly economists may cling to their antiquated notions.
Jeff Rubin, former chief economist at Canadian investment bank CIBC World Markets, is not your typical economist. He gets peak oil. As far back as 2000, when public awareness of the issue was essentially nil, he was among the first economists to accurately predict the surge in crude prices that would ensue several years later. And now, in his bestselling book Why Your World Is About to Get a Whole Lot Smaller, he argues that oil prices, temporarily dampened by the deepest post-war recession on record, will soon be vaulted to new highs as the economy begins to recover, which in turn will thrust the world into yet another recession right on the heels of this one. Rubin believes that peak oil, not subprime mortgages, caused the current economic slump. And he forecasts that crude oil will reach $200 per barrel, and gasoline $7 per gallon, within the next few years, spelling death for the global economy and forcing people across the developed world to dramatically reengineer their lives in adjusting to the new reality of scarce energy. Views like these are common among peak oil advocates, but a refreshing departure for an economist.
It may come as a surprise, then, that I can’t wholeheartedly recommend Rubin’s book. I wish I could. But the truth is that it contains little in the way of new information for peak oil followers—and for those uninitiated into peak oil, it hardly provides the best primer on the subject. Rubin spends in excess of the book’s first half explaining why oil is peaking, why industrial economies require an ever-increasing supply of it in order to keep growing, why oil shocks have always caused recessions, how oil underlies every aspect of our modern lives and why alternatives won’t save us. The trouble is, a who’s who of peak oil thinkers and writers (including Richard Heinberg, James Howard Kunstler, Dale Allen Pfeiffer and others) has done a better job of this already; and those new to peak oil would be better off reading one of their books.
Rubin’s writing is filled with trite statements like “you will soon be spending much more time talking to your neighbor and much less time flying around the world” and “[m]any of us may finally come to understand how a toaster works” (both with regard to what he thinks daily life will resemble in our oil-scarce future). He also steps on the toes of peak oil icons by paraphrasing their words without attribution. For example, he superficially changes Matt Simmons’ catchphrase “super straws” to “one big straw” (in reference to technological advancements that only deplete wells more quickly) without crediting Simmons at all. And he goes off on long-winded tangents (nearly five pages on the increasing frequency of severe storms in the Gulf of Mexico, where much of our oil infrastructure is precariously located) as though looking for enough fill to stretch the book out to 300 pages.
The one edge that Rubin’s account has over his predecessors’ is that it was written with the benefit of more up-to-date information. Rubin explores a number of emerging trends on the oil scene that were not yet readily apparent at the time that those earlier books were written. For example, he explains how oil exports from OPEC nations are declining not just because of depletion, but also as a result soaring domestic consumption within those countries, as their citizens take advantage of cheap, government-subsidized gasoline in trying to emulate Western lifestyles. He also reports that world oil production—as of the book’s writing, last year—was declining at a rate of 6.7 percent annually. He obtained this information from the International Energy Agency (IEA)’s 2008 World Energy Outlook, a document that obviously wasn’t available to authors who were writing about oil depletion four or five years ago, when the several-year peak oil “plateau” was just beginning.
For serious peak oil followers, the book begins to get interesting only after around page 160, where Rubin starts to describe what he believes the new economic landscape will look like in the wake of peak oil, and to propose some economic policies that he believes would help humanity to curtail both its fossil fuel usage and its greenhouse gas emissions. Chief among these economic policies would be a tariff on carbon emissions. Rubin points out that the world’s developing nations, which have been responsible for the lion’s share of total increases in carbon emissions over the past decade, are exempted under Kyoto from paying any economic price for their carbon emissions. And as long as oil has remained cheap and carbon emissions free, the only variable dictating where to move manufacturing jobs has been the cost of labor—hence the exodus of manufacturing from advanced nations to China, India and other low-wage countries. But if the developed nations charged carbon tariffs on goods that they imported from these developing countries, they would regain comparative economic advantage, and emissions would also increasingly shift from countries that are inefficient at managing them to those that can manage them the most efficiently. In short, the dirty emissions from factories in the developing world would be so expensive that it would no longer be profitable to have manufacturing jobs in those countries.
Rubin argues that the implementation of a carbon tariff, together with the inevitable rise in the cost of bunker fuel needed to transport goods across the globe—which in itself would effectively constitute a tariff on transport fuel, or a “bunker tariff”—could revive the manufacturing industries that were once so important to the economies of America and other industrialized nations. “Who would have dreamt,” he beams, “that triple-digit oil prices would breathe new life into America’s rust belt or the British steel industry?”
The book unfortunately slips right back into the realm of cliché following this seemingly promising discussion of tariffs and the return of long-lost manufacturing jobs. Like every other peak oiler, Rubin predicts that industrialized nations will of necessity start to “downsize the role of oil” in their economies, so that economic growth is no longer dependent on ever-increasing levels of oil consumption. Also in keeping with conventional peak oil wisdom, he believes that this process will be achieved by way of “micro” decisions made daily by ordinary people and households, rather than by way of “macro” monetary or fiscal policy decisions. Our lives, Rubin says, will become profoundly local, meaning that our food and goods will come from close to where we live; farming will replace the service sector as the dominant part of the economy, and will supplant the crass suburban developments that were built en masse under the illusion of a perpetual supply of cheap oil; and overall there will be a lot fewer people on the roads and more people passing their days with honest, hard physical labor—there’s not one original prediction in the list.
In sum, this book consists mostly of an up-to-date, but ponderous and thoroughly shopworn, outline of the peak oil predicament. The brief section detailing Rubin’s notion of a carbon tariff and what the economic climate of a de-globalizing world will look like could doubtless generate some productive discussions about the future shape of economics in a post-peak-oil age, but aside from that the book has little new to contribute to the peak oil debate. Nevertheless, one surely must take heart whenever any book carries the peak oil message onto bookstores’ bestseller shelves, where it at least has some chance of swaying public opinion.