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.