Financial Planning for Peak Oil and Global Climate Change

The economic effects of climate change and oil shortages present a unique challenge for planners.

We’ve gotten used to paying $3 for a gallon of gasoline and come around to the idea that global warming is a real phenomenon. Helped by United Nations reports backed by thousands of scientists, and our own ability to observe reality, Americans are accepting the idea that global climate change is real. What consequences should we be preparing for? And as financial planners, what specific steps can we recommend to clients?


In the October 2005 issue of this magazine, I wrote about the concept of Peak Oil–the idea that sometime soon, possibly even in this decade, the world will not be able to continue increasing its production of petroleum, regardless of demand or price. Substitutes for oil such as biofuels (including ethanol), tar sands and coal derivatives may eventually come on line, but they are unlikely to appear quickly and plentifully enough to replace the declining production of gasoline, diesel and jet fuel. The impact of Peak Oil will be to make transportation and production much more expensive and difficult, affecting many aspects of material life that we have come to take for granted, such as plastics and other synthetic materials, and plentiful year-round fresh produce. Natural gas faces a similar shortage, especially in North America where peak production has already been reached.

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