Peak Oil is You
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Page added on May 14, 2012
How high priced oil is changing our lives
Fewer cars and commuters, but also lower emissions
Only rich people will be able to afford cars. Everyone else will be taking public transit.
Commuters will move into Toronto and other urban centres, leaving the suburbs to revert to their former status as farmland.
The only provinces creating jobs will be those with oil. The poorest regions may resort to job-sharing.
Such is the controversial/bleak/contrarian view in Jeff Rubin’s latest book The End of Growth, published by Random House Canada.
The former chief economist at CIBC World Markets is once again rattling the cages with his take on the impact of high-cost oil.
“We’re going to see people get off the road. We’re going to see people all of a sudden drive different types of vehicles. We’re going to see people relocate and we’re going to see tremendous public pressure for spending on public transit,” Rubin predicted.
Rubin’s thesis is that oil — not interest rates or government spending is the key driver of economic growth. And when conventional low-cost sources of oil dry up, the world will be left with oil from places like the Alberta tarsands that are much more expensive to produce.
“When most people think about peak oil, they think about what’s in the ground. Peak oil is not about how much you can drill. It’s about how much you can afford to burn,” he says.
This isn’t the first time Rubin, 57, has taken an unconventional — some might argue unpopular — view on global growth.
And he’s not always right.
Before parting ways with his employer in 2008 over his previous book Why your World is About to Get a Whole lot Smaller, Rubin predicted oil would reach $200 US a barrel by 2012.
It has yet to hit that target. The U.S. price for Brent crude peaked at $145.66 in July 2008. And prices at the gas pump so far this year are well below his forecast of $2.25 a litre. The global recession in 2008-09 and ongoing debt crisis in Europe have had a dampening effect.
Still, prices at the pump are among the highest they’ve been in recent memory, providing Rubin with fertile ground for his latest even more heretical theory: Higher oil means the end of economic growth as we know it.
And no amount of fiscal stimulus — the usual solution to an economic downturn — is going to change that. In fact, cutting interest rates and boosting government spending is making things worse as countries in the European Union have discovered, he says.
The only way out of the mess is to cut our dependence on energy, he says, a behavioural change that will come about naturally when oil inevitably resumes its upward trajectory.
“I don’t think people are going to be commuting on the 404 from Newmarket to Front and Bay streets (in Toronto) when gas prices are $2 a litre. I think real estate prices are going to fall in places like Newmarket. I think inner-city neighbourhoods are going to be much more attractive. I’ll even argue those far-flung suburbs will return to the land use that was there 30 years ago because it’s just not going to make sense to import things from China.”
Within Canada, the country’s economic prosperity will split along regional lines.
Provinces such as Ontario, a net importer of oil, will fall further behind its oil-rich neighbours such as Alberta and Newfoundland, he predicts.
It’s already happening, he notes. Ontario is running a $17-billion budget deficit and just approved a 2 per cent surtax on the rich. Meanwhile, oil-rich Alberta can afford to cut its provincial income taxes, he said. “And if that happens, how long do you think those bank towers would remain in Toronto?”
For Ontario, high oil is a double whammy as it boosts the value of the dollar, making the manufacturing heartland’s exports less competitive.
When economies slow down, they create fewer jobs, he says.
Rubin suggests like the Germans we adopt “zarbeit” or job-sharing. Instead of layoffs, three people will share four jobs and each take home 75 per cent of their former pay.
But if all of this sounds too depressing, Rubin’s vision also comes with several silver linings.
If the world burns less oil, it produces fewer carbon emissions. If it becomes too expensive to import products from other countries, it helps restore the local economy. Even manufacturing jobs could come back to North America from China.
Indeed, it’s the poorest countries that have the most to lose from an end to economic growth “because it means the difference between two meals a day and one.”
10 Comments on "How high priced oil is changing our lives"
Kenz300 on Mon, 14th May 2012 5:24 pm
Higher oil prices will certainly have an impact on the global economy. The global economy was built on cheap oil. It may not make sense to ship fruit, vegetables, and products around the world as oil prices increase.
We may walk a little more, drive a little less, take mass transit a little more, ride a bicycle a little more and make energy use a bigger part of our buying decisions. Energy consumption will become a bigger factor in that home buying decision, auto purchase, appliance purchase, furnace or A/C decision and even the decisions we make about light bulbs.
Our lives will be impacted by the rising cost of energy in many ways. Individuals, business leaders and politicians need to develop plans to deal with the high price of oil and its economic and national security impact.
DC on Mon, 14th May 2012 7:44 pm
Alberta can afford to cut its peronsal income tax rate? I dont think Tor Star,,
http://www.cbc.ca/news/canada/edmonton/story/2011/02/24/edmonton-alberta-budget.html
If your wondering what a ‘sustainability fund’ is, so was I!
http://thealbertaaltruist.blogspot.ca/2009/08/sustainability-fund-reality-of-it.html
Fact is, alberta is not even collecting enough royalties from the tar-sands to balance its own year to year budget, much less set anything aside. Nothing, not one penney will be there to pay for it, when the tar-sands ponds breach, there allready leaking now. Nor is anything being set aside to undo the damage the tar-sands are doing, an impossible task in any event, there are some things money just cant fix. The wealth ablberta thinks it has, is an illusion, if it were real, Alta would be running a suprlus, not a deficit. Taxpayers, and albertans are subsidizing this mess, so amerikan Oilcos can enjoy artifical ‘profits’ even in a permanent recession. Albertans refuse to admit not only are the tar-sands are an epic mistake, they are a money loseing epic-mistake on top of it. Alberta govt refuses to collect royalties on amerikan oilcos that are busying destroying the northern part of the province.
Yay NAFTA….
MrEnergyCzar on Mon, 14th May 2012 8:03 pm
Stock up on stuff you know you’ll need for the rest of your life that’s made from far away…. you might not be able to get it at an affordable price…
MrEnergyCzar
Rick on Mon, 14th May 2012 9:10 pm
“This isn’t the first time Rubin, 57, has taken an unconventional — some might argue unpopular — view on global growth.”
Sorry, but he’s right. People don’t like to hear the truth.
@MrEnergyCzar
Unfortunately, there are very few things you can stock pile, since most things won’t keep for more than two – five years. Especially if you require medicine to live.
Plantagenet on Mon, 14th May 2012 11:03 pm
Its too bad Obama is so clueless about peak oil that he blocked construction of a pipeline that would bring 1 million barrels a day from Canada to US.
DC on Tue, 15th May 2012 12:20 am
Canada is not interested in being an energy colony of United States of War. Sure the govt and the amerikan oil companies masquereding as ‘Canadian’ do. If it were put to a vote tommorow, the oil industry would be nationalized and the free-ride amerika has gotten on the backs of Canada would be over.
Think about that, it may yet come to pass. The current govt is incredibly corrupt and a pupplet of amerika. Can amerikans count on that to last? Hard to say…..
BillT on Tue, 15th May 2012 1:38 am
Planet…those barrels would just pass through the Us on their way to Asia. Even the Canadian articles I read say that. Oil goes to the highest bidder, not the highest beggar.
poaecdotcom on Tue, 15th May 2012 3:51 am
I think the pipeline will just being WTI in line with the global price (brent) and there then will be no incentive to ship it off to Asia
BillT on Tue, 15th May 2012 1:26 pm
po…the highest bidder gets the oil. It has nothing to do with WTI or Brent. It has to do with the highest bidder for every barrel no matter where it comes from. It will not bring down gas prices in the Us. It may actually increase it for the Midwest.
Kenz300 on Tue, 15th May 2012 3:22 pm
Quote — ” Rubin’s thesis is that oil — not interest rates or government spending is the key driver of economic growth.”
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The global economy was built on cheap oil. That is coming to an end. Individuals, business and politicians need to develop plans to deal with higher prices and limited supplies of oil. Economic security and national security will depend on it.