Sunday, July 12, 2009

Spectre of peak oil prices loom

canada.comBy Barbara YaffeOil at $200 a barrel is not far off and with it a new world order that will see the demise of globalization.That prediction is put forward in a new book by well-known Canadian economist Jeff Rubin: Why Your World Is About To Get A Whole Lot Smaller.Money, of course, makes the world go round and when transportation costs become punishing people start looking to buy local.The author reasons that the price advantage currently held by low-wage countries will simply disappear.And Rubin cites a second factor that substantiates his theory -- the introduction of carbon pricing.The U.S. -- and Canada and presumably other developed countries -- soon will mandate a cap-and-trade scheme that would impose tariffs on goods deriving from nations that don't similarly restrict carbon emissions.What this would mean is extra duties, or a pollution tax, on imports coming from places like China. Such tariffs again would negate the cost advantage of imports from low-wage countries.All of which explains why North American labour unions are starting to find common cause with environmentalists, one example being the Blue Green Alliance, bringing together the Sierra Club and the United Steelworkers of America.Here's the sort of calculation that's not lost on the three-year-old alliance: Higher transport costs flowing from $200-a-barrel oil would impose the equivalent of a 25 per cent tariff on Chinese imports, while a carbon tariff would be about 17 per cent. Presto -- a 42 per cent duty on Chinese goods.The result? The potential revitalization of industrial sectors in Western countries that in recent years have bled jobs to foreign lands. Don't write off the American Rust Belt quite yet."At the same time as North American and European markets return to local sourcing," writes Rubin, "they will sever their trade links with the developing world and force that world to find another way to grow."As our world becomes smaller, their world becomes poorer."This will cause economic havoc in the developing world, a situation that, predicts Rubin, will be further aggravated by the shutting off of a critical safety valve, migration.Higher oil prices, after all, will mean more unemployment and fewer job openings in the developed world.These predictions may seem a bit fanciful with oil at $60 a barrel, as it is now.But Rubin, and most others, believe recent low oil prices are directly related to the ongoing recession and will surge again once economies start bouncing back.The book, besides predicting a return of robust manufacturing and agricultural sectors in the developed world, is not a bearer of much good news.The economist believes we are in for an era of repeated recessions, caused by ballooning oil prices that are inevitable given that oil reserves are in decline.The only way to avoid such a fate is to wean ourselves off our debilitating addiction to petroleum.Rubin's is one of a raft of books published in recent years warning of crisis and devastation if we fail to adapt to the fact that the aggressive burning of fossil fuels no longer is viable.In view of all these dire warnings, citizens would be correct to wonder what exactly is on the reading lists of their politicians, who in their legislative priorities seem all but oblivious to the pending

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