The benefits of triple digit oil prices
The world isn’t running out of oil. It never will. There is something like 170 billion barrels of the stuff trapped in the Alberta tar sands and over 500 billion barrels immersed in the Orinoco tar sands in Venezuela.
But what the world has run out of is the oil that it can afford to burn. Because the very triple digit oil prices that we will turn these places into tomorrow’s Saudi Arabia will translate into the same gasoline prices that will take millions of drivers right off the road.
Even worse, it will threaten to throw our economies right back into a recession.
Unless of course our economy changes.
There is nothing we can do to prevent the imminent return of triple digit oil prices. That’s simply where the cost curve lies. If you doubt that look what happened in the tar patch when oil prices fell to $40 per barrel in the last recession.
You might like filling up at the pumps when oil is trading at $40 per barrel but don’t expect too much to be coming out of them at that price. The same oil companies that are ramping up spending today quickly cut over $50 billion of investment when suddenly oil prices couldn’t cover the cost of getting the tar out of the ground and refining it into something that you could burn.
But there are many ways in which we can change our economy so that triple digit oil prices don’t have to spell recessions. Peak oil doesn’t have to mean peak GDP.
Distance will suddenly cost money. So much so that it won’t make sense any more to get our steel, let alone our food, from cheap labour halfway around the world. What producers will save on wages, they will more than pay in exploding transport costs.
In the coming world of triple digit oil prices, a lot of long lost industries will suddenly be coming home, from farms to steel mills. And while much could go terribly wrong in this transition we might just find that the new smaller, more local world is a lot more sustainable than the big oily one we are about to leave behind.
-- by MSN Money guest blogger Jeff Rubin
Jeff Rubin is the author of Why Your World is About to Get a Whole Lot Smaller.
Posted by: Jack | Oct 8, 2021 10:19:06 PM
"The world isn’t running out of oil. It never will." That has to be the most ridiculous statement in the history of mankind. This planet is a finite object. I think Jeff has been snorting too much benzene over the years.
Posted by: Curtis | Oct 14, 2021 12:58:43 AM
Thank you Jack
Posted by: tenacious otter | Oct 15, 2021 10:45:42 AM
Okay so the comment about, never will, is somewhat ludicrous, but the statement of triple digit prices and the costs involved are not. I work in and around the industry, I believe he's right. The minute that the world economies get rolling again, supply and demand will dictate higher prices. I also believe that that will fundamentally change how the world economy works. Globalization is a catchy phrase, sounds so much like a planet working towards it's future. Is that a reality? Probably not, we can't seem to make a single country, unanimous in it's endeavors, never mind a planet. So I do believe that think global is okay as far as impact but local is going to become the focas due to the cost of energy.
Posted by: Martine | Oct 15, 2021 1:34:39 PM
I think that higher fuel prices are a needed correction to our self indulgent lifestyles. It will take something like a steep price hike, that effects people on a personal level, to cause them to pay attention to the larger issues and force them to rethink the way they live.
I find it highly offensive that many people commute for 30 minutes or more (ususally on the highway) and think that is their right to pollute as they please. Many of these commuters made a decision to live far from where they work, ususally for selfish reasons such as cheaper housing, rural lifestyle.
Where people chose to live and by what means they arrive at work will be a large part of the upheaval if fuel prices spike but it will also hit hard many sectors of our economy. It will highlight how vulnurable the practice of importing so much of our food is. How shortsighted the practice of creating housing where productive farms once stood. Question the edict of continual population growth for a healthy economy. Is that sustainable or even desirable?
The "business as usual mentality" is responsible for much of what is wrong with the world today. We all need to be active citizens and really think about what we do on a daily basis. We need to take part in govenment decision making to ensure that foresight and sound judgment are used so that we are prepared for the inevitable changes ahead.
If people don't take an interest in their collective future, then decisions will be made that satisfiy people today and to hell with people ten years from now, they can live with our mistakes.
I haven't yet read Jeff Rubin's book but fully intend to.