Just thought this was an interesting take on the situation of North America:
http://www.thespec.com/article/579394
Quote:
June 08, 2009
JAY ROBB
The Hamilton Spectator
(Jun 8, 2009)
Why Your World Is About To Get A Whole Lot Smaller
By Jeff Rubin
Random House Canada
$29.95
Could some serious pain at the pump be Hamilton's best shot at a whole lot of new jobs?
Brace yourself for record-high gas prices. We're already paying almost a buck a litre as we reel through the worst recession since the Great Depression.
So just how fast and how high will prices soar when the recession ends and economic engines start firing again in China, India, North America and Europe?
We're not just going to get hit on the demand side. There are some big questions about supply. We're depleting oil reserves faster than we're finding new sources. All the easy oil's been had and we're going to pay far more to find and refine future reserves. And then we have oil producers cannibalizing more exports for their own internal consumption. In the Middle East, around a third of a million barrels of oil are burned to generate electricity. And more than a million barrels a day could soon be needed to run desalination plants as the region faces a peak water problem.
Welcome to the end of cheap oil and the return of a much smaller world, says author and former Canadian Imperial Bank of Commerce chief economist Jeff Rubin.
"Once the dust settles from the various crisis rocking financial markets, we are looking at the same basic demand-supply imbalance that we were looking at before the recession began," says Rubin.
"That imbalance took us to nearly $150 per barrel before the recession set in. In the next cycle, the same imbalance will probably take us to to $200 per barrel before another recession temporarily knocks back prices and demand."
While we're not about to run out of oil anytime soon, Rubin says we're nowhere near coming up with alternative energy sources that will allow us to carry on with business as usual in an oil-free world.
As triple digit oil prices become the new normal, Rubin says we'll say goodbye to dollar stores, drive-thrus and dining out, SUVs, two-car garages, road trips, regional airports and disposable incomes. Life looks especially grim in suburbia, where the lack of accessible public transit will turn McMansions into tenement slums before being salvaged for parts and plowed under for farmers' fields. And we'll be saying hello to inflation, slow economic growth, bus passes and well-worn walking shoes.
So what's the good news? There'll be no shortage of hometown jobs in manufacturing and agriculture. Everyone will be working. "Globalization comes with a lot of verbiage these days, but it's just a fancy word for a very simple process: moving your factory to the cheapest labour market in the world," says Rubin.
"Even better, getting out of the factory business altogether and just buying whatever your factory used to produce from someone else's factory at a fraction of the cost."
But globalization can only run on cheap oil. Without it, higher transport costs cancel out lower labour costs. When oil went from $30 US to $100 US per barrel, the average daily fuel bill for an ocean-going cargo ship shot up from $9,500 US to $32,000 US and manufacturers got stuck with the tab. Instead of paying higher and higher costs to ship raw materials and finished goods around the world, look for those manufacturers to bring back jobs, set up shop in industrial heartlands and serve regional markets.
"From industrial pump parts to lawn mower batteries to home furniture, shipping costs are driving production back to North America from cheap labour markets in China and elsewhere," says Rubin.
"With transport and logistics costs soon to become even more important, padlocks will be taken off mothballed factories, and machinery that hasn't run for years will be getting a new greasing."
Along with more factories, expect more and smaller farms where we sow and reap without the benefit of petroleum-based fertilizers. Soaring energy and transportation costs will clear grocery store shelves of Atlantic salmon from Norway, lamb from New Zealand and strawberries from California. Everyone will be on the 100-mile diet, eating locally grown organic food and looking for deals at weekend farmer's markets. Expect more back yard and community gardens.
So today's baristas at Starbucks and the greeters at Wal-Mart could eventually find themselves working on factory floors and plowing farmers' fields. Jobs will be about the only thing not in short supply in our small, small world, he predicts.
"This transition will not be a layup," says Rubin, who remains confident that we'll prove ourselves to be innovation rich in an energy poor world.
"The infrastructure, the technology, the training, even the work culture will have to undergo a massive overhaul ... Many people who have not seen a lunch box since middle school or who haven't had a callous on their hands ... may soon become reacquainted with both."
Jay Robb writes at jayrobb.typepad.com
http://www.thespec.com/article/579394
Quote:
June 08, 2009
JAY ROBB
The Hamilton Spectator
(Jun 8, 2009)
Why Your World Is About To Get A Whole Lot Smaller
By Jeff Rubin
Random House Canada
$29.95
Could some serious pain at the pump be Hamilton's best shot at a whole lot of new jobs?
Brace yourself for record-high gas prices. We're already paying almost a buck a litre as we reel through the worst recession since the Great Depression.
So just how fast and how high will prices soar when the recession ends and economic engines start firing again in China, India, North America and Europe?
We're not just going to get hit on the demand side. There are some big questions about supply. We're depleting oil reserves faster than we're finding new sources. All the easy oil's been had and we're going to pay far more to find and refine future reserves. And then we have oil producers cannibalizing more exports for their own internal consumption. In the Middle East, around a third of a million barrels of oil are burned to generate electricity. And more than a million barrels a day could soon be needed to run desalination plants as the region faces a peak water problem.
Welcome to the end of cheap oil and the return of a much smaller world, says author and former Canadian Imperial Bank of Commerce chief economist Jeff Rubin.
"Once the dust settles from the various crisis rocking financial markets, we are looking at the same basic demand-supply imbalance that we were looking at before the recession began," says Rubin.
"That imbalance took us to nearly $150 per barrel before the recession set in. In the next cycle, the same imbalance will probably take us to to $200 per barrel before another recession temporarily knocks back prices and demand."
While we're not about to run out of oil anytime soon, Rubin says we're nowhere near coming up with alternative energy sources that will allow us to carry on with business as usual in an oil-free world.
As triple digit oil prices become the new normal, Rubin says we'll say goodbye to dollar stores, drive-thrus and dining out, SUVs, two-car garages, road trips, regional airports and disposable incomes. Life looks especially grim in suburbia, where the lack of accessible public transit will turn McMansions into tenement slums before being salvaged for parts and plowed under for farmers' fields. And we'll be saying hello to inflation, slow economic growth, bus passes and well-worn walking shoes.
So what's the good news? There'll be no shortage of hometown jobs in manufacturing and agriculture. Everyone will be working. "Globalization comes with a lot of verbiage these days, but it's just a fancy word for a very simple process: moving your factory to the cheapest labour market in the world," says Rubin.
"Even better, getting out of the factory business altogether and just buying whatever your factory used to produce from someone else's factory at a fraction of the cost."
But globalization can only run on cheap oil. Without it, higher transport costs cancel out lower labour costs. When oil went from $30 US to $100 US per barrel, the average daily fuel bill for an ocean-going cargo ship shot up from $9,500 US to $32,000 US and manufacturers got stuck with the tab. Instead of paying higher and higher costs to ship raw materials and finished goods around the world, look for those manufacturers to bring back jobs, set up shop in industrial heartlands and serve regional markets.
"From industrial pump parts to lawn mower batteries to home furniture, shipping costs are driving production back to North America from cheap labour markets in China and elsewhere," says Rubin.
"With transport and logistics costs soon to become even more important, padlocks will be taken off mothballed factories, and machinery that hasn't run for years will be getting a new greasing."
Along with more factories, expect more and smaller farms where we sow and reap without the benefit of petroleum-based fertilizers. Soaring energy and transportation costs will clear grocery store shelves of Atlantic salmon from Norway, lamb from New Zealand and strawberries from California. Everyone will be on the 100-mile diet, eating locally grown organic food and looking for deals at weekend farmer's markets. Expect more back yard and community gardens.
So today's baristas at Starbucks and the greeters at Wal-Mart could eventually find themselves working on factory floors and plowing farmers' fields. Jobs will be about the only thing not in short supply in our small, small world, he predicts.
"This transition will not be a layup," says Rubin, who remains confident that we'll prove ourselves to be innovation rich in an energy poor world.
"The infrastructure, the technology, the training, even the work culture will have to undergo a massive overhaul ... Many people who have not seen a lunch box since middle school or who haven't had a callous on their hands ... may soon become reacquainted with both."
Jay Robb writes at jayrobb.typepad.com
