A maverick's message on oil

Jeff Rubin says prices are going nowhere but up, and life as we know it will change forever

…Nearly everything we do, purchase and eat is “inextricably bound” to oil, and as the price of black gold increases, so too does the cost of growing, manufacturing, processing, packaging and transporting the goods we consume

“The world’s oil wells are running out of the stuff that keeps the whole system going,” he writes, adding that the only supply available to replace it is dirty, hard to find, and for that reason increasingly expensive. The oil sands are a case in point. “We are getting closer to the bottom of the barrel.”

Eventually, he says, the transportation costs of importing products from far-off countries will erase other advantages, such as low-cost labour. It will become, he argues, “the largest barrier to global trade.”

This will lead to more dense communities, less driving, and a reliance on what we produce locally. World trade will revert back to the patterns we saw in the 1970s, when tariffs slowed the global movement of goods and trading was more regional. Economic growth will come to a crawl and inflation will rise.

Look no further than the current recession for proof, he says. In chapter 7, Rubin lays out in detail how high oil prices, which peaked near $150 in July 2008, led to inflation and rising interest rates that triggered the U.S. mortgage crisis and sent the economic dominoes, including global trade, falling.

“You can liberalize trade all you like, but it won’t make a difference if no one can afford to ship the things you want to sell,” he writes.

Toronto Star