Reviews and Views

These are a few excerpts from the book by Jeff Rubin entitled, “Why Your World is About to Get a Whole Lot Smaller”.

The cost of everything is about to go up because the price of energy is about to go up.  And the price of energy is going up not because of demand, but because of supply and the higher cost to extract the crude.

Either our living arrangements or our transportation options are going to have to change or both and probably a lot of change will be required.

The reason the price of a barrel of oil hits record highs is that there is a deeply rooted imbalance between supply and demand.  This doesn’t mean speculators don’t help push prices higher as well. Of course they do.  But you have to ask why speculators got attracted to oil prices in the first place.

The Coming Oil Crisis by Dr. Colin Campbell is a good resource on the subject.

The Hubbert curve – by 2002, the rate of discovery was falling steadily and the rate of field depletion was rising just as inexorably (not to be persuaded, moved, or stopped).

Campbell wasn’t saying that the world was going to literally run out of oil.  It never will, at least not in a time frame that matters to anyone reading this book.  But daily world production, which had been down linearly until then, would soon peak, plateau and then begin its irreversible decline.

Right now, we are pumping 3 times more barrels of crude than we are finding through exploration.

One thing I’ve learned from years, it is pretty much impossible to convince anyone of something they just don’t want to believe.  But I am still taken aback at how long people cling to past misconceptions.

World oil production has hardly grown at all since 2005.

In fact, increasingly wild and destructive movement in prices is exactly what you would expect in an environment of global scarcity.  Oil demand will drop in a recession, and so will the price of oil.  In the 2008 recession, the ascent of oil prices to record triple-digit levels played a far more major role in derailing growth in North American and European economies.

We can cut back as much as we like, yet as long as the Saudis and Venezuelans, the Chinese and Indians keep their feet on the gas, it is not going to matter.

In the next (up) cycle, the same imbalance will probably take us to $200 per barrel before another recession temporarily knocks back prices and demand.

A global recession will do absolutely nothing about the unavoidable fact that oil production is nearing a plateau while oil consumption around the world is still rising.

You can expect scarcity.  And scarcity means high prices.  You can expect triple-digit oil prices in the near future.  Yes, the price at the pump is going to go up.  Count on it.  In the US, that should translate into as much as $7 per gallon gasoline.  It means you can say a long and wistful goodbye to the inexpensive products manufactured on the other side of the world.  Your food is about to get a lot more expensive.

Some difficult decisions lie ahead for all of us.

We will be living in denser communities, driving smaller cars, living more frugally and locally.  The Europeans are already doing this.

So Goes Food

With every dollar increase in the price of the bunker fuel that powers the container ships that ply the Pacific, China’s wage advantage becomes less and less important and Western workers once again become competitive.

Get ready for a smaller world.

I hope this summary has been helpful.

Bill