Jan 192010
 

Editors Choice

Jeff Rubin, former Chief Economist of CIBC World Markets and the author of Why Your World Is About To Get A Whole Lot Smaller
January 19, 2010

Triple Digiit Oil and Economic Change

Triple digit oil and the economic change that it would bring is something that intrigues, and will have a cascading impact on the real economy and globalization.

It is not that we will be running out of oil. Rather, we will be running out of cheap oil, light sweet Arabian crude, to be replaced eventually by synthetic oil rendered from tar sands and shale. The implication is $200 per barrel oil and $7.00 per gallon gasoline.

Demand for oil is peaking in developed nations like the US and Canada, and may never exceed the levels of the past few years. But demand growth in the developing nations is increasing, and perhaps dramatically.

World gasoline production has not grown in the past four years.

The oil shock may hit the economy within 12 to 15 months according to Jeff Rubin.

There are several things with which I do not necessarily agree, but his talk his interesting and thought-provoking. We do need to start thinking about how to make sure that peak oil does not translate into peak Gross Domestic Product (GDP).

This may require a shift from a global economy to more local economies. It is coming. The only question is when.

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