July 2, 2012
QUEBEC CITY, QC, Jul 2, 2012/ Troy Media/ – I really want to dislike Jeff Rubin.
Perhaps it’s his casual recounting of economic disasters (‘regime change never helps oil production’), or that he warns North Americans to prepare for years of lower standards of living in almost the same breath that he recounts a jet-setting lifestyle dining on corporate money, complete with vintage Bordeaux.
But the reason I can’t bring myself to dislike Jeff Rubin is because he is sincere. The former Chief Economist for CIBC World Markets left his position in order to publish his first book, [amazon_link id=”0307357511″ target=”_blank” container=”” container_class=”” ]Why Your World is About to Get a Whole Lot Smaller[/amazon_link]. The crux of his argument in that book, the same one he pursues in [amazon_link id=”030736089X” target=”_blank” container=”” container_class=”” ]The End of Growth[/amazon_link], is that oil prices will continue to rise, with profound consequences for the world economy.
Thus far in 2012 oil prices have averaged around $100/barrel. Economic trouble can bring that number down, but that is only one part of the story. Industrialized Western nations came of age in an era of $20/barrel oil, making cheap oil a fundamental assumption for economic development. At the same time, emerging economies will soon be competing for oil on an unprecedented scale, since their growth will depend on the same basic energy sources.
As Rubin points out, Peak Oil is about demand, not supply. There is only a certain amount of capacity for the production of oil, which is becoming more and more difficult to extract. This means that the oil supply, and by extension economic growth itself, is becoming a zero-sum game. Furthermore, as emerging economies develop, their thirst for oil (as well as its price) increases.
The critical Catch-22 for Western industrialized nations thus emerges: Western industrialized nations will be unable to grow their economies since any gains made in production will be swallowed up by added energy costs. This, he argues, will result in the end of economic growth.
This situation becomes a whole lot more complicated when Rubin factors in the changing global monetary system, including the current Eurozone crisis. He even goes as far as to account for the possibility of a collapse of the American dollar, which he points out could easily be accomplished by the Chinese Central Bank sitting out a couple of Treasury offerings. This scenario could take place for the purposes of appreciating the value of the Chinese yuan in order to maximise its buying power on an international scale, such as when competing for oil imports with Americans.
Rubin concludes on a desolate note – that a reduction in energy consumption will not result from intelligent government action or innovative technology, but will instead come as a consequence of protracted economic downturn.
Although Rubin suggests that the End of Growth might ultimately be a good thing, he offers precious few examples for how this could be the case. His perspective on the future seems almost condescendingly confident – ‘You kids will figure something out,’ he seems to say, ‘I’m going golfing now!’
As a society, we already know that our economic foundations are dreadfully unsound, and Rubin does a good job of explaining exactly how and why that is. Which leaves the question: if there are people in the financial and governmental sector like him, who realise the extent to which these issues infest our future, then why have they not done anything about it? The last thing the world needs is another book written.
We live in a time of mock awareness that translates into apathetic fatalism. If The End of Growth is notable for anything, it will be that years from now, as we are muddling through a decade of the issues that Rubin has predicted, we will be able to look back and say that yes, some saw it coming, and no, we did nothing about it.
Nelson Peters is a law student at Universite Laval in Quebec City.
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