Goodbye, globalization

The friendliest place on the web for anyone that follows U2.
If you have answers, please help by responding to the unanswered posts.

AliEnvy

Refugee
Joined
Jan 9, 2001
Messages
2,320
Location
Toronto, Canada
Why Your World Is About to Get a Whole Lot Smaller: Oil and the End of Globalization

by Jeff Rubin

Book description
What do subprime mortgages, Atlantic salmon dinners, SUVs and globalization have in common?

They all depend on cheap oil. And in a world of dwindling oil supplies and steadily mounting demand around the world, there is no such thing as cheap oil. Oil might be less expensive in the middle of a recession, but it will never be cheap again.

Take away cheap oil, and the global economy is getting the shock of its life.

From the ageing oilfields of Saudi Arabia and the United States to the Canadian tar sands, from the shopping malls of Dubai to the shuttered auto plants of North America and Europe, from the made-in-China products on the shelves of the Wal-Mart down the road to the collapse of Wall Street giants, everything is connected to the price of oil.

Interest rates, carbon trading, inflation, farmers’ markets and the wave of trade protectionism washing up all over the world in the wake of various economic stimulus and bailout packages – they all hinge on the new realities of a world where demand for oil eventually outstrips supply.

According to maverick economist Jeff Rubin, there will be no energy bailout. The global economy has suffered oil crises in the past, but this time around the rules have changed. And that means the future is not going to be a continuation of the past. For generations we have built wealth by burning more and more oil. Our cars, our homes, our whole world has been getting bigger in the cheap-oil era. Now it is about to get smaller.

There will be winners as well as losers as the age of globalization comes to an end. The auto industry will never recover from this oil-induced recession, but other manufacturers will be opening up mothballed factories. Distance will soon cost money, and so will burning carbon – both will bring long-lost jobs back home. We may not see the kind of economic growth that globalization has brought, but local economies will be revitalized, as will our cities and neighborhoods.

Whether we like it or not, our world is about to get a whole lot smaller.

from The Globe and Mail

...the reference to playing table tennis on a moving train: The ball may appear to be bouncing back and forth, but in the grand scheme it's really moving only in one direction. That image describes beautifully what happens with oil prices – rising and falling from time to time, but really on an unstoppable upward trend.
 
Rubin keeps predicting the future and getting it wrong.

Like every other big finance investment banker...

It's interesting to me that he had to leave CIBC and a 20+ year career 2 months ago to publish this book.

So I gather from your comment that you don't believe in the end of cheap oil and after effects?
 
I largely agree with the article, but there are already other books out on the topic. James Howard Kunstler has had a couple of books out for a while- The Long Emergency and World Made by Hand.
 
Usually when it comes to far-reaching predictions like this, the truth usually ends up somewhere in the middle. In the immediate term, undoubtedly our fossil fuel-based economy will face challenges. But dire predictions almost always presume an inelastic response from the marketplace, which, frankly, just never happen. Rising oil prices demonstrably trigger private investment into alternative energy, and, ultimately, with sustained high prices, will lead into a "post-oil" economy. The U.S., in particular, will not tolerate sustained high oil prices over the long-term.

On the other hand, considering some of the lengthy distances that some things are shipped, it would probably make sense to see more production done locally. Do we really need that bottled water from Fiji after all? Other things, however, like electronics will probably remain being manufactured abroad, considering where existing investment and ownership is concentrated abroad.
 
Yeah I was just thinking, all this doomy we're-going-to-collapse-back-into-villages stuff really does ignore or wave away the existence of the Internet. Now granted, a lot of that infrastructure probably owes something to the age of oil and plastics (for instance), but its continued existence is another matter.

If I were in the business of predicting things, I'd sort of agree with Melon. I think the bumpy ride will continue for a long, long time, and if your view is that the Naughties have been really terrible, then yeah, get ready for more of the same. But at some point people will find that the world did not end. It just stumbled on to some other arrangement.
 
So I gather from your comment that you don't believe in the end of cheap oil and after effects?

I believe the high prices of the past were made by gambling futures investors and cartel economics. Technically there are lots of supplies. If the price gets too high people start using less. Globalization being ended is also crazy. Most politicians (including left-wingers) know lots of jobs would be shredded if countries went in that direction.

I'm just tired of books that predict the future badly. It's just like the environmental doom-sayers and religious end of times people. You get the sense that they want it to happen as opposed to a real prediction based on solid evidence. Of course book sales would be timid if the prediction is: "World not going to end. Some paradigm shifts will happen but the population will continue to grow and wealth will increase overall." Who wants to buy that book? :wink:
 
Um, my impression is that is exactly what Rubin's book is - I find it odd people here have assumed it's a doom and gloomer. :huh:
 
Of course book sales would be timid if the prediction is: "World not going to end. Some paradigm shifts will happen but the population will continue to grow and wealth will increase overall." Who wants to buy that book? :wink:

Here's another one for that category - we'll see if it sells.

The Age of the Unthinkable: Why the New World Disorder Constantly Surprises Us and What We Can Do About It

by Joshua Cooper Ramo

Book description
Today the very ideas that made America great imperil its future. Our plans go awry and policies fail. History's grandest war against terrorism creates more terrorists. Global capitalism, intended to improve lives, increases the gap between rich and poor. Decisions made to stem a financial crisis guarantee its worsening. Environmental strategies to protect species lead to their extinction.

The traditional physics of power has been replaced by something radically different. In The Age of the Unthinkable, Joshua Cooper Ramo puts forth a revelatory new model for understanding our dangerously unpredictable world. Drawing upon history, economics, complexity theory, psychology, immunology, and the science of networks, he describes a new landscape of inherent unpredictability--and remarkable, wonderful possibility.

This is one I'm going to read.
 
Globalization is never going to disappear. There will be other ways to keep bridging distances, oil sources aren't infinite, that's something we could (and did) see coming decades ago. And like Salome said, the internet and other new media around it have made the world oh so much smaller than it ever was before. McLuhan predicted it already in the sixties with his ideas about the global village.
 
Globalization is never going to disappear. There will be other ways to keep bridging distances, oil sources aren't infinite, that's something we could (and did) see coming decades ago. And like Salome said, the internet and other new media around it have made the world oh so much smaller than it ever was before. McLuhan predicted it already in the sixties with his ideas about the global village.

Although the internet has made the world smaller in some ways, the underlying infrastructure to deliver the goods is still largely oil-dependent. I don't think globalization will go away either, but it can (and has) shrunk with the economic crisis. China has shuttered thousands of factories, and the Baltic Dry index plunged. Stimulus packages are starting to emphasize and require the purchase of domestically produced goods. As melon alluded to, the "low-hanging fruit" such as agriculture may be the first to go trade-wise. Highly specialized goods and services will continue to thrive.
 
Although the internet has made the world smaller in some ways, the underlying infrastructure to deliver the goods is still largely oil-dependent. I don't think globalization will go away either, but it can (and has) shrunk with the economic crisis. China has shuttered thousands of factories, and the Baltic Dry index plunged. Stimulus packages are starting to emphasize and require the purchase of domestically produced goods. As melon alluded to, the "low-hanging fruit" such as agriculture may be the first to go trade-wise. Highly specialized goods and services will continue to thrive.

Of course a lot of areas are mainly oil-dependent still. But, like other sources in the past which are almost not available (or technologically/economically winnable) anymore, there will be new sources. Some areas will continue to shrink with increasing oil prices and fewer capacities. But there will be solutions again, I'm sure.
 
But there will be solutions again, I'm sure.

Absolutely - it's just a matter of how wild the ride to getting there will be.

Now that we've seen how succeptible our just-in-time global systems are to oil price shocks we can start to build in protections and resilience. I think it will happen in fits and starts with more price shocks to come which will force local sustainability in stages as front-line protection while building a more resilient global system on new, affordable, clean energy.
 
Of course a lot of areas are mainly oil-dependent still. But, like other sources in the past which are almost not available (or technologically/economically winnable) anymore, there will be new sources. Some areas will continue to shrink with increasing oil prices and fewer capacities. But there will be solutions again, I'm sure.

New sources/discoveries of oil? According to an energy forum I read where a lot of geologists and scientists post, all of the "easy" oil has been discovered and/or mostly used. The newer oil fields are being discovered at a slower rate and are smaller (e.g. deepwater) and harder to develop. The consensus on oil replacements/alternatives is that they can't scale up to replace oil's BTUs and lack the efficiency of oil when used for individual vehicles. The vehicle fleet is still almost entirely oil-dependent, which is another constraint. I think someone on the other forum posted that it takes 17 years for the vehicle fleet to be "turned over". I'd love to see the US develop a more energy efficient transportation infrastructure (mass transit, electrified rail, etc).
 
^Germans love their cars to death, too, yet our public transit is a million years of that of even the main cities in the States.

It's one of the things where the market is not working, whereas it is by marketing cars and cheap petrol. But with the tax phobic it's impossible for cities, much less municipalities, to afford a useful public transit system.
 
But with the tax phobic it's impossible for cities, much less municipalities, to afford a useful public transit system.

I agree, that's why I don't think it will happen until most people can't afford to drive ...at a point where there's no other choice but to suck up higher taxes or whatever is necessary to enable public transit.
 
New sources/discoveries of oil? According to an energy forum I read where a lot of geologists and scientists post, all of the "easy" oil has been discovered and/or mostly used. The newer oil fields are being discovered at a slower rate and are smaller (e.g. deepwater) and harder to develop. The consensus on oil replacements/alternatives is that they can't scale up to replace oil's BTUs and lack the efficiency of oil when used for individual vehicles. The vehicle fleet is still almost entirely oil-dependent, which is another constraint. I think someone on the other forum posted that it takes 17 years for the vehicle fleet to be "turned over". I'd love to see the US develop a more energy efficient transportation infrastructure (mass transit, electrified rail, etc).

No, I mean substitutes, as in different forms of energy. Which will take a long time to adapt to, like you said. Right now the capacities of alternative resources aren't big enough to substitute for oil, and that's why areas like the vehicle fleet will first have to take a big hit before things will be in balance again. So I agree with you on that. The development on more efficient ways of transportation should be sped up and be given more attention.

It's one of the things where the market is not working, whereas it is by marketing cars and cheap petrol. But with the tax phobic it's impossible for cities, much less municipalities, to afford a useful public transit system.

And that is where it goes wrong. Not many people use the public transit systems in a lot of countries, because it doesn't work well and if it works, the prices are way too high or get even higher. So what do people do? Use their cars. I have to say I use the public transit system right now because I have this student-card, but when it gets summer and I can't use the card for a few months I will use the car again too most of the time.
 
:up:

People love their cars though so it won't happen before most people can't afford to drive.

I don't think those days are too far off. Obama's economic stimulus bill fortunately includes funding for mass transportation projects, but more may be needed.

Back to the original article, I think globalization may be further curbed by an increase in protectionist policies. As politicians come under increasing pressure to save jobs or create jobs, tarriffs may increase. We may be seeing some of that with recent American and Chinese economic stimulus acts, which favor the purchase of domestic goods and services.
 
I agree, that's why I don't think it will happen until most people can't afford to drive ...at a point where there's no other choice but to suck up higher taxes or whatever is necessary to enable public transit.

Well, you could raise taxes on gas and use the extra income it generates to improve your public transport. But there is a considerable gap between raising taxes and the first sensible improvements in the transportation systems. Hence the governments would be reluctant to do so. An alternative would be to build up a system that works on credit and then driving up taxes. But not really feasible as well. You would need other forms of incentives.
This development should have been set in motion much earlier. The longer you wait, the more costly it will be.

And that is where it goes wrong. Not many people use the public transit systems in a lot of countries, because it doesn't work well and if it works, the prices are way too high or get even higher. So what do people do? Use their cars. I have to say I use the public transit system right now because I have this student-card, but when it gets summer and I can't use the card for a few months I will use the car again too most of the time.

True, in rural areas public transit sucks most often. Or people are too convenient to take the bus. Like, there is schedules, busses go only every x minutes, they stop everywhere and you have to sit next to a stranger, or worse, stand.
In cities like here in Berlin still a lot of cars are on the streets. But the public transit is being used greatly as well, by people of all ages and walks of life. I dread the time once I'm out of university and have to pay the full price for the ticket. Right now I pay €159 once a semester and can take any means of transportation for half a year. So there is no gap, even during semester break I have the discounted ticket. Once I'm out I would pay at least €680 annually and that just for the AB area. Still cheaper than a car, but facing these prices people show that the assumption of the rational homo oeconomicus is bollocks.
If I were still living where I grew up I would be much more dependent on a car. In Berlin, I probably still would try to avoid having a car.
 
Back
Top Bottom