Why Your World Is About To Get A Whole Lot Smaller (Jeff Rubin)

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Are you liking the new frugality trend? Get used to it. Frugality is “in” and here to stay – but not because the U.S. housing and credit markets collapsed and 30% of everyone’s savings have disappeared. According to Jeff Rubin, ex-senior economist at CIBC World Markets, the growing scarcity in the world’s fossil fuels supply is going to mandate that we begin to live our lives more locally, more frugally and more sustainably. We simply won’t have a choice.

This past weekend I read Jeff Rubin’s new, much-touted hardcover, just released in late May 2009 – Why Your World Is About To Get A Whole Lot Smaller. I first heard about it while watching an interview with Rubin on BNN’s SqueezePlay sometime in late 2008, I believe. Rubin is well-known as an energy expert, and is frequently consulted for his notoriously “bearish” rants on the case for the future of the world’s oil supply.

Although Rubin’s immediate argument is nothing that we haven’t heard before in some form or another, Rubin knows world energy like a wine connoisseur loves his wines, or the way a good tracker can spot the difference between 500 types of tracks. Oil is his baby. He’s not just writing this as part of one piece of journalism after another. Simply put, Rubin has gathered up everything he knows about world energy – mostly in the form of oil, since that’s the dominant driver of the world economy – and packaged it in a compelling read that has the pacing of a good suspense thriller. You’ll be amazed at how much smarter you feel just by page 40.

Peak Oil and the End of Globalization

According to Rubin, the world is about to get a whole lot “smaller” in the sense that the goods and services we have available to us will become increasingly localized. The more expensive oil gets — and it will get more and more expensive as we continue to deplete it — the more expensive travel becomes, but also commuting to work and importing fresh fruits and vegetables from other areas. Long gone will be the days when frozen Atlantic salmon will sit in supermarket icers in California. There will be less drivers on the road, too – those who can’t afford to keep up with the rising costs of gasoline will have to take public transit to work – that is, if there is any in their region (I now understand that GM, Ford, and Chrysler are the reasons why the U.S. hasn’t been able to learn any lessons from Europe on public transit).

“With supply dwindling and demand rising, you can expect scarcity. And scarcity means high prices. You can expect triple-digit oil prices in the near future… In the U.S., that should translate into as much as $7-per-gallon gasoline, and about $2 per litre in Canada. Europe is of course already paying those prices, so they should get ready for the equivalent of double-digit gas prices.”

Rubin gives an amazing analysis of oil supply and how oil pricing works, and more importantly, how it affects everything from gas prices in North America to the availability of water and food in Saudi Arabia. He also argues that most proposed “biofuel” alternatives to decreasing oil are not going to work and should be abandoned in favor of more effective uses of taxpayer dollars. Why? Because they cost almost as much energy to make as they provide for fuel. It takes fuel to turn food into fuel, so we’re right back where we started.

Some of the random things you’ll learn in Why Your World Is About To Get A Whole Lot Smaller:

GM’s been selling electric cars in Europe for a while under the Opel Astra model
the reason there are next to no more street cars, trolleys, etc. in the U.S. is that the carmakers lobbied for their removal
Saudi Arabia is running out of freshwater, so uses oil to turn seawater into drinkable water
ethanol production already gobbles up about one-third of America’s total corn crop
ethanol production depends on the availability and price of natural gas
“efficient energy” technologies haven’t kept us from wasting energy, but have encouraged us to use more of it for the same price
even if we all had electric cars, we might not have enough electricity to power them all

A More Frugal, Local, Sustainable Future

Despite the peak oil pronouncements, this is not a pessimistic book. Rubin is quite optimistic, actually, that the forced frugality that will result from the end of cheap oil can only mean good things for life going forward.

“Expensive oil may mean the end of life as we know it, but maybe that life wasn’t particularly great to start with. Smog-congested cities, global warming, oil slicks and other forms of environmental degradation are all part of the legacy of cheap oil.”

Non-judgmental. It’s important to point out, too, that Rubin is not making any value judgments about global vs. local trade. He’s not arguing that globalization is wrong. And he’s certainly not arguing that capitalism and outsourcing are flawed. He’s not even advocating local trade – just merely laying out the global consequences of a depleting oil supply.

Voluntary Frugality. If there’s any implicit argument behind declining oil reserves and the inadequacy of any possible alternatives for replacing it on a mass commercial scale, it’s that we might as well start living below our means now. All of us, including our nations and their economies as a whole. Growth does not have to be numeric, expansive, bigger, better – growth can take the form of added value, time and freedom.

Self-sufficiency. Another argument this book raises – although Rubin doesn’t say it himself – is that it’s also probably a good time for us to become more self-sufficient. If you know how to darn your old socks, you won’t care that you can’t buy any from Indonesia anymore. And so on.

Here are some random benefits that Rubin argues we’ll see – and have already started to see – as a result of triple-digit oil prices:

more jobs coming back to domestic markets, since transoceanic shipping costs cancel out any competitive wage gains on foreign soil
this process will gradually melt away U.S. trade deficits with China, for example
with less oil consumption, global carbons emissions rates will also naturally slow down

Although I am not *quite* at the end of this book, I think it’s safe to say this is the best account of the world’s energy situation that I’ve ever read. One small downside is that at points Rubin feels a bit repetitive in the way he keeps emphasizing the coming “shrinking” of the world in the first half of the book without expanding much on it yet – but that’s the book’s selling point, after all. And it’s not empty rhetoric, so I don’t mind.

**Who Should Buy Why Your World Is About To Get A Whole Lot Smaller?**

If you’ve ever been confused upon hearing the terms “OPEC” and “light sweet crude” in the news, or if the thought of how much a barrel of oil is trading for makes your eyes glaze over while you then turn around and wonder why gas prices fluctuate so incomprehensibly at points – you should take a look at this book. If you do any form of basic social science research – in anthropology, or history — you should take a look at this book. Even if you can name the top 10 largest producing oil fields by area in the world, well, you might not need this book, but I think it’s possible you’d still learn something new from Rubin’s particular perspective. If you studied economics at university, or geology or other earth sciences, it’s possible you know some of what this book has to offer, but Rubin goes beyond mere facts about oil – and looks at its intersection with local politics, food and water needs, as well as historical questions about the development of alternative energy sources. One downside is that it’s still apparently only available in hardcover (and in Kindle). I would have preferred to get a cheaper paperback version, but I got impatient.

What makes the book unique, in my opinion, is the lack of “extremist” tone or the lack of any sense that Rubin has any particular agenda in writing this. Not that I think that’s inherently bad. But I know it annoys some people. It’s just very clear that world energy is a topic Rubin’s very intellectually passionate about, and he wants to share his conclusions with as many people as possible. Sure, he has an opinion beneath it all. But the book does not have a “doomsday” tone to it. He’s convinced about the end of oil, but equally convinced that that means we’re going to see better (cleaner, brighter, fresher) days ahead. How’s that for a change? The book is thus “motivational” in an indirect sort of sense. It might prompt you to pay more attention to this basic layer of the economy. It has definitely opened my eyes further to the fragility of the world’s bustling economy — and we all know how much that can impact our personal finances and prospects for individual wealth and retirement.

I think the book has so much to offer, in fact, that it’s inspired me to do a whole series of related posts (below) this week which will look more closely at topics raised by Rubin’s book: facts about the depletion of the world’s oil supply, the subsidization of oil by OPEC (Organization of Petroleum Exporting Countries, where the U.S. gets it oil, and more.