Is there life after serving as one of Canada's most well-known and controversial bank economists? Jeff Rubin is going to find out.
The former CIBC World Markets guru made quite a name for himself over the years with his wild predictions and out-on-a-limb forecasts; some of them actually proved accurate. And now he's spinning that notoriety into a new career in the book-and-speaker-tour industry. Already highly in demand as a conference speaker, Rubin is about to get a whole lot busier (and burning a lot more jet fuel in the process).
His new book, Why Your World is About to Get a Whole Lot Smaller: Oil and the End of Globalization , presents a compelling argument that our entire global economy has been propped up by seemingly endless supplies of cheap oil. But take heed: The day of reckoning is nigh! Rubin sets up the book with some blushing accolades for his forecasting prowess, mentions of his appearances on CNN and in The Wall Street Journal, and stories of how he told an audience of skeptical Calgary oilmen in 2000 that oil was going to burst through $100 a barrel.
But once you get past the bit of self-congratulating in the introduction, the book is a great read, and one that should be required for anyone with a long-term interest in Canadian energy, transportation, manufacturing or agriculture.
The book is clearly written for the U.S. market (notable through words such as "check" instead of "cheque" and pricing gasoline in dollars per gallon). Yet other countries, such as Australia, Britain, New Zealand and yes, Canada, too, are featured prominently in his examples. And while Rubin may be fishing for U.S. sales and speaking engagements, he mercifully doesn't masquerade as an American. Dozens of times, he mentions examples and statistics from Ontario, and clearly refers to Toronto as his home.
For an economist, Rubin has an unusually engaging writing style. The book is chock full of numbers and statistics, but he has woven them into very readable prose. He also uses imagery and allegory to good effect, such as 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.
The case is made that the global economy, which has been propelled over the 20th century by cheap oil, is about to get a nasty slap in the face. The day of cheap oil is over. We are drilling through thousands of metres of sea water and bedrock to get at the stuff, and boiling it out of the frozen, mucky sand of northern Alberta. The effort has signs of desperation written all over it.
And without cheap oil, globalization doesn't work.
Ah, but what about technology? We can find better ways to burn oil, invent more efficient vehicles and develop less costly ways to heat our homes. Technology will save us, won't it? Not according to Rubin, who argues that all of the impressive gains in efficiency over the past 50 years have done nothing to reduce overall consumption. All they have done is to reduce the cost to consumers, thus encouraging even larger homes and vehicles.
Yet Rubin's talk of peak oil and depleting supply isn't really new. In some ways, most of this book has been written dozens of times already. No serious economist would deny the premise of "peak oil" or, at the very least, that "plateau oil" is upon us, save for the vested interests in the energy patch with share prices to protect.
The book's more valuable contribution is in the description of how the depletion of cheap energy will make our world smaller. (Actually, I think he's got the analogy wrong; rather than getting smaller, our world is about to get much, much bigger. China will seem much further away. Grapes imported all the way from Chile will be an extravagance. If globalization made the world smaller, costly oil is about to make it bigger once again. But this is a quibble.)
It's unfortunate that Rubin reserves only the last 56 pages for a discussion of how the local economy is about to make a big comeback, since this is the more interesting and unique part of the book. Is there hope for North American manufacturing after all? Will local agricultural production reverse its downward trend? He argues that a locally based economy could be revived in an era of ever-rising energy prices, but it's too bad he doesn't play up a bit more the potential benefits of local versus global.
For example, while North American consumers have enjoyed lower prices on goods from China over the past few decades, are we really better off? Children's toys are a good example. Anyone with children, nieces or nephews can attest to the fact that we've absolutely buried our kids in an avalanche of cheap toys. Most of us baby boomers or Gen Xers are still shackled with the mentality that more is better. But heaping more cheap (sometimes poisonous) toys on kids than they could possibly play with in one childhood is definitely not better.
Rubin is spot-on with his conclusion that we had better brace ourselves for some changes in the way we eat, the way we travel and the way we take for granted the ever-increasing abundance of inexpensive consumer goods. Using less energy will simply not be an option. And one gets the impression he actually believes that our society will be better off for it. But it would have been nice to hear that case made more forcefully and optimistically from this not-so-dismal economist.
Todd Hirsch is the senior economist for ATB Financial, a full-service Alberta-based financial institution, a writer for the Calgary Herald and The Globe and Mail, and teaches economics at the University of Calgary.