Like it or not, your world is about to get a whole lot smaller.
According to Jeff Rubin, former chief economist of CIBC World Markets, when the price of a barrel of oil soars into triple digits, everything from travel to food to cars will be much more expensive leaving cities no choice but to start producing locally.
Much of the world had a little taste of that last summer, when oil prices spiked to more than $140 a barrel and gasoline shot past $1.30 a litre. The pain it caused drivers, airlines and importers was just a sample of what is predicted to come just few years from now, and soon there will be no choice but to change our ways, Rubin argues in his new book, “Why Your World Is About To Get A Whole Lot Smaller”.
“The market will tell people, ‘See that big honkin’ SUV? Ditch it. See that bike? Buy it,’ ” he says in a boardroom near Toronto’s financial district. “No one will have to tell them. They’ll figure it out all by themselves, and I think that world is just around the corner.”
Rubin’s recently published book explains that as the supply of easily accessible oil depletes, the price of oil will continue to rise to the point where high transportation costs will make it too expensive to import manufactured goods from overseas – or even from another province – forcing cities to start producing goods locally.
It also means North Americans will no longer be able to afford to operate SUVs, or travel to Europe, or get reasonably priced running shoes that were made in China. Instead, people will take public transit, travel abroad less frequently and grow food locally.
“It’s going back to when the world was bigger and we were smaller,” Rubin says.
As oil rises through the triple digits, transportation costs will rise too, he continues. “If we’re bringing something back from China, believe me, it’s going to cost more money. That flat-screen TV or whatever, it’s going to cost twice as much.”
“[And] in a world of triple-digit oil prices, moving your factory from North America to China, for example, is penny-wise pound-foolish, because what you’re going to save on the wage costs you’ll more than lose on the fuel bill.”
But not only is the world of “cheaply produced mass consumer goods” going to come to an end in North America, Rubin also predicts the auto industry is “doomed to abandonment by triple-digit oil prices.”
So when countries like China stop exporting to North America and people start to get off the roads, jobs in the auto industry will certainly be lost. However, according to Rubin, they will easily be replaced by the industries that will start to manufacture locally, such as steel plants and agriculture. “In short, Archie Bunker is gonna get in bed with Al Gore,” he says.
“For the first time, instead of telling the Archie Bunkers ‘too bad you’ve lost your job,’ it will be ‘Archie, come on back, you got the job because you can produce this thing, and emit less carbon than they can over in China.’ ”
Although the time is soon coming when the world is a place where people can no longer afford to own a car and buying a TV will cost substantially more than it once did, Rubin sees a silver lining to what some might see as a dark cloud.
“I don’t think it’s as apocalyptic as some people do,” he says. “Sure we won’t have the same sense of material satisfaction, but maybe we’ll find a lot of other aspects of our life a lot more enjoyable.”
And in the future, Rubin feels that cities and communities will, in a sense, be moving back in time.
“In a lot of respects, it’ll be a better world,” he says. “I mean, we’re certainly going to reconnect with who we are. We’ll probably get to know our neighbourhoods a lot better. We’ll probably not worry so much about the world’s problems but worry about our own neighbourhood’s problems, which will probably make our neighbourhoods a lot better places to live.”
And according to Rubin, not only will people have a larger sense of community, but because the price of oil will be so high, less energy will be used and less carbon will be emitted.
“Triple-digit oil prices will do a lot more for the environment than a thousand Kyotos.”
In the end, it doesn’t matter whether the people are ready to live in the new ‘smaller’ world, Rubin says nothing can be done and the process is inevitable.
“I don’t think that we can prevent oil from getting back to triple-digit prices,” he says. “We’re going back to small, local economies whether we’re touchy-feely green people or we’re investment bankers.”
