Customer Reviews

Why Your World Is About to Get a Whole Lot Smaller

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3 star:		(9)
2 star:		(2)
1 star:		(2)

 

 

I read Jeff Rubin's book because I invest in energy stocks and like to know the broad societal implications of energy issues. I was fascinated by his major premise that high energy costs will end the global marketplace. It is the opposite of Tom Friedman's World is Flat premise. Rubin's basic argument is that high energy prices will trump low labor costs of developing countries. That will mean we will re-industrialize and start making things again in America. That may make us look more like 1950's America. Most economists say globalization is irreversible but Rubin disagrees. Globalization is only possible when cheap energy allows shipping anything at low cost.

There are two other books that have the same end of cheap energy theme. One is Stephen Leeb's Game Over and the other is $20 a Gallon by Chris Steiner. Leeb's book is more of an investment survival guide while Steiner's $20 a Gallon is more of a sociological portrait of America in the age of prohibitive gas prices. Leeb is rather depressing in positing the end of cheap energy and commodities in general. Leeb sees global insecurity as countries fight for resources.

Steiner sees high energy as an opportunity to re-urbanize America with close in dense communities without cars. Steiner does a great job of predicting how escalating gas prices will change our lives. He says we may be happier living a simpler less consumption oriented lifestyle.

Rubin's book is the best all round book for it covers both economics and sociology. If you want to know how to make money from energy shortages, Leeb has some valuable and practical advice. Steiner will leave you hopeful for a simpler, more community minded America. I recommend all three books without hesitation as helpful guides to an America facing a dearth of resources in the next 20 years. They certainly reinforce the need for a national energy policy now while we may be able to extend resources.

Jeff Rubin gets right to it on page 1, declaring that the global financial meltdown of 2008 had as much to do with $150 oil as it did with bad mortgages. I was waiting for somebody to say what I suspected was true. And Rubin delivers, continuing, that we are at a turning point in modern society. In 2008, we passed over the peak of the age of cheap energy. From here on out, energy, especially oil is going to be harder to get out of the ground, and we may never produce much more than we did last year.

Furthermore, he warns that the world has two choices in the next few years. Either transition our society to less energy-intensive, more localized communities; or keep banging our collective heads against the wall of this rapidly depleting resource and face recession after recession each time supply fails to meet demand.

Two years ago, he was right in predicting when $100 oil would happen. And it appears this book may be right just weeks after being published, with the supposed "green shoots" of economic recovery triggering a doubling in the price of oil in the first half of 2009. The book predicts we'll soon be back in the triple digits. Maybe even $200 a barrel and $7/gallon.

I was very impressed with the book because:
A) An economist acknowledged what most economists don't; that resources are limited - and so is economic growth

B) He presents us with hope that a smaller (less energy-intensive) world may actually be a happier world

I'm eager to see what else Rubin may have to say about this in the coming years.

I am neither an economist, politician, oil company employee, nor geologist: I am the average citizen who gained information from this book about how the price and supply of oil could potentially affect my life. Although there are aspects of the book that I've been exposed to previously, Rubin provided me with more detail and with new information that will certainly be new to others also as evidenced by the lack of disussion of these topics by colleagues, neighbours etc. who are also average citizens. There is certainly a population of people who will benefit from reading this. Whether the world evolves as Rubin expects, and to what degree, is obviously unknown; however, the material between the covers is certainly food for thought and gives a better understanding of the intricacies of how the world currently operates and why it may indeed unfold as he suggests.

Rubin presents much diverse information yet manages to tie together all the pieces in cohesive, friendly prose that is not statistically boring and stuffy yet is backed with facts. There are 11 pages of source notes at the back should anyone question the validity or sources of his information or desire to read more. The book is thorough in that it gives good background, demonstrates relationships between various elements of our world and takes into account numerous countries and their roles in all of this. It's a good read if you don't want to live with your head in the sand.

I would give this book only 3 stars because it competes with better books in its league. Books like "Beyond Oil: The View from Hubbert's Peak" by Ken Deffyes, "Carbonomics" by Steven Stoft, and "The Color of Oil" by Ronald Oligney, et al. are packed with unique information, but much of the information in Rubin's book is recycled. While I applaud him for not daring to be a pretend expert in climate change or new technology, his real expertise is in economics and it would be good to see a bit more of that expertise in his narrative.

His conversational style is an easy read and the main point of the book is a good one: he justifies that when energy gets expensive, economies contract and look inward for their own resources. Positive benefits could be a shift toward local farming because transportation costs are too high for international shipping of produce, local harvesting of materials like lumber and paper, and the relocation of previously outsourced manufacturing back to US shores. Negative consequences could be lack of access to some things we take for granted, like coffee in some areas, "fresh" fish that came from who-knows-where, and other things that rely on land, sea, or air to get from point A to point B.

This book was recommended to me by a friend who was rather impressed with it, mostly because he hadn't paid any attention to books like these previously. So it got him thinking about this kind of stuff which is good, so I suppose the book has served its function.

In the meantime, one general criticism I have of the book is that it is a bit fear mongering, as Rubin is essentially telling us that any day now oil prices will soar past $140 up to $200/barrel, the wells will be dry really soon, and we're all going to revert back to an economy like 1926. He paints pictures of suburbs turning into ghost towns when people relocate to cities because they can't afford transportation costs, especially in cities that lack the public transportation infrastructure to feed the suburbs. He predicts the demise of air travel.

This fear mongering is a bit unjustified because it would seem that Rubin ignores the creativity of the human spirit when forced to face a new set of challenges. Since the $140 oil shock is still in recent memory the argument for expensive oil is totally plausible, but it seems naive to assert that people would just simply abandon their houses in the suburbs unless there was something really catastrophic going on. Rubin's picture looks like a scene out of Steinbeck's Grapes of Wrath. He is talking about Depression Era changes in economics. The dark predictions don't seem plausible unless there were some other severe factors at play besides inflation and expensive energy. Given the instability of the economy today there is certainly something to be said about the havoc that expensive energy can cause, but he just doesn't connect enough dots to show why all of this doom-and-gloom is justified. It seems that he recognizes the symptoms, but is still unsure about the exact cause.

What I find unrealistic is the prediction of huge steps backward and the assertion that large subgroups of humans will simply forget about progress made in some areas and abandon that progress when it gets too expensive. He basically says we'll just give up. History would imply otherwise.

Rubin acknowledges this and spends many pages pointing out that supply and demand "laws" in economics are irrelevant when demand is high but supply just doesn't exist, as he argues is the case for oil. The economics of oil are the same as the economics for commodity goods, and the justification has been previously that when oil is expensive we will always find more because it will be economical to get it from more expensive places like shale or tar sands or deep offshore. But Rubin is saying that when no more oil exists, the price can be whatever it wants but the supply just won't be there. But then his argument kind of fades away because it isn't clear if he is saying supply will be the end of oil, or high prices will be the end of oil. He isn't committing to either and therefore fails to conclude his arugment. He just says things are going to change and gives many examples without providing sufficient justification for those examples. Like Ken Deffyes and Steven Stoft, Rubin predicts the oil price seesaw that we have confirmed with our own eyes multiple times in the past 4 decades: the price spikes until the market can't bear it, demand drops, the price collapses, and then the cheap oil enables economic growth and slowly climbs again until it repeats the cycle. It was $140 in 2008, then it was $40 in December, and now it is near $70 in January of 2010. Rubin implies that we can't break this cycle, but I wouldn't rule out the fickle nature of humanity. TV shows rise in popularity and then die quietly. At some point it is feasible that mankind will simply tire of the oil drama and turn attention elsewhere, especially if it locks into a ridiculous spike-collapse pattern with a period less than a few years. Oil price growth has been slow enough to span generations in the past. If it spikes and collapses several times in one generation, the collective memory is less likely to forget and alternatives are more likely to materialize, simply because its right there challenging us to do so.

Expensive energy, expensive food, and expensive transportation might hurt at first until we find new ways to adapt. Rubin is saying this too, but it gets lost in the fearful predictions that he makes in some parts of the book.

Rubin does try to point out the opportunity in localized economies, but not enough. He should do it more in this book, and downplay the "oh my god we're doomed" language that is pointless and doesn't help solve the problems at hand. I don't think it is realistic to assume that people will just put down their tools and shrug when things get too expensive. As long as key parts of economy and infrastructure are still intact, the energy and economic future can be creative and adaptive, and not a series of discrete, catastrophic, and sudden shifts like Rubin asserts.

Unlike the many books published on how oil will run out and how we need to stop emitting carbon now, this book takes the approach of "it is happening so what is the impact of it". I like books that help me see the future (regardless of how good or bad that may be). They inspire thought.

When the price of oil rises sharply (which the book suggests it will), we will become less global since the cost to travel and transport products will make it prohibitive to do global business. The high price of oil will create an "oil tax".

Economics is the main driver of purchasing behavior. Some people will pay more to feel good but most will only change if the price is lower. So when oil prices rise, it will be cheaper to buy local products, vacation locally, drive less etc. So in a sense, we go back to the old days. We may even see a resurgence of manufacturing in North America.

I agree with the thesis of the book but would have preferred more data and facts. EG how much more will it cost for an apple from Argentina etc. How much more will what products cost?

My brother, Lyle Estill, wrote a book "Small is Possible" that touts the benefits of the live local lifestyle. The two books mesh nicely in that Lyle says it is the way to go to feels good and be more sustainable and Ruben says economics will force us to act that way.

So this sort of says we might get back to the good old days and there will be a resurgence of local economies. What we do need to realize is that comes with a cost - we will pay more for goods. The reason the world went global was because it was cheaper and the reason it will return to local is for the same reason. Economics drive behavior.

Jeff Rubin approaches the issue of peak oil and its implications for the future of modern civilisation from an interesting perspective - that of an oil expert economist, who predicted the soaring oil prices back in 2000. He sees the oil price spike in 2008 as a cause, rather than an effect, of the global financial crisis and recession. The credit bubble needed low inflation, which relied on cheap energy.

He also looks beyond the doom and gloom of oil depletion, to encourage the reader to grasp the opportunities for localisation (going local) and downsizing our bloated materialistic existence - transforming to a small new world. I enjoyed his story that before the world ran on oil, it ran on coffee!

My interest in reading his study of oil depletion in all its ramifications is a PhD in adapting cities and suburbs to an oil constrained future. Having read a lot of peak oil literature, I regard Rubin's insights in 2009 as valuable as James Kunstler's ground breaking, sobering view of the converging catastrophes back in 2005The Long Emergency: Surviving the End of Oil, Climate Change, and Other Converging Catastrophes of the Twenty-First Century. Rubin shares Kunstler's view that the future look a lot like the past, in relying on more farmers and local food production. He would also be sympathetic to the Transition Towns movement The Transition Handbook: From Oil Dependency to Local Resilience (Transition Guides).

His expertise in evaluating the economic perspective is a counterbalance to the alternative fuel optimists. He contends "Peak oil could mean peak GDP. But it doesn't have to if we can de-link economic growth from oil." Hence Plan 'B' is not optional and even that is only a step to the "small new world" of Lester Brown's Plan 'C' Plan C: Community Survival Strategies for Peak Oil and Climate Change.

Rubin's book is highly recommended.

At something called the "Petroleum Club", in Calgary in 2000, Jeff Rubin told his audience of oil executives that they were seeing just the beginning of a sharp increase in the price of oil, driven by growing demand for a shrinking supply of a finite resource. They didn't believe him then, just as they didn't believe Hubbert's prediction in 1956 that American oil production would peak in 1970. It turns out that both Hubbert and Rubin were correct.

Today Rubin is predicting growing demand for oil worldwide, even as Americans are increasingly priced out of the Market. According to Rubin, we all better prepare for $7-per-gallon gasoline(p 21). Rising fuel prices are going to mean significant lifestyle changes and a much higher cost of living. Those blueberries shipped in from South America and that salad from California are going to cost a lot more. All of that plastic stuff in Wal-Mart shipped from China is going to go up in price. Cheap labor and a devalued Chinese currency aren't going to be able to compensate for the rising price of fuel for the container ship crossing the pacific ocean. How far is your commute to work? How many miles per gallon does your car/suv get? Seven dollar a gallon gas is going to have us all looking for the nearest bus stop. Unfortunately public transportation has been long neglected and in some cases bought up and dismantled by the American auto industry. In the 1940s, General Motors, Firestone Tire and Rubber, and Standard Oil, joined forces and created American City Lines whose purpose was to buy up and dismantle rail service(p 118). Americans will soon rediscover the value of electric powered trains and living closer to where they work. Growing demand for fuel from places like China and India will continue to drive the price of fuel upwards while Americans continue to spend an increasing percentage of their disposable income on rising fuel, food, and shipping costs.

The book is written in an entertaining and easy to understand style. Begin by following the route of a salmon from a fishing net in the ocean to your dinner table, through the eyes of an economist. Fish labeled fresh in your local grocery store usually means recently thawed. Learn how the economics of inexpensive fuel has given us the global economy we have today, and how the inevitable rise in fuel prices is going to make global shipping rates cost prohibitive - forcing all of us to look for local sources of food and everything else.

Read this book. If you are thinking of buying a McMansion in the suburbs, reconsider.

It is interesting to read the other reviews of this book as they seem to fall into two camps: the environmentalist-climate change-we already have to much stuff group lets simplify and get back to nature and the other group that lives by the credo that if it is there than I have as much right to take it and use it for whatever I want group, to heck with this planet. (Well there is an in-between group that probably makes up the biggest group.) Regardless, I will identify myself as more of the former and definitely not the latter group listed above. As a scientist and chemical engineer, now retired, I saw firsthand what take it, meaning resources, at any cost because there is plenty there, does. I was always amazed that people did not understand that natural resources are not infinite. If anything they become more and more finite the harder they are to get out of the ground due to rapidly escalating cost. None of this, however, addresses the book under discussion, well not "none" of it.

Peak oil is a geological fact. Cheap oil piggy backs on these diminishing returns and the only outcome can be more costly oil which the world prefers to use as the prime energy source for just about everything from industry, manufacturing, to lighting our houses and especially driving our cars. Rather than take Rubin as a prognosticator of our future, I choose to read the book to follow his story line about yet another possible not necessarily probable outcome. The reason I can see his point of view is based on the fact that we have too many people on this planet, we have limited natural resources, limited planet to live on for that matter, and the fundamental right of emerging markets to develop their middle class and use all the natural resources they can get their hands on, much like American has done for decades. The fact is that if China and India do develop a middle class based loosely on the American model, the global impact over the next few decades could be major just due to the sheer number of people in these countries.

Accepting the premise that the effect of peak oil will occur within the next 20-30 years, is it not wise for us to think about a different way of living than we do now? Already we have seen the destruction of wealth of the last 2 years has greatly impacted the way the middle class and somewhat the poor have been forced to change some of their consumption patterns and one would hope their relationship to the planet that keeps giving us the means to have our wants and needs or cake and eat it too. I say somewhat the poor as they have probably been driven even deeper into poverty, with the hopes of a higher standard of living nearly gone for perhaps a whole generation.

Although Rubin's new brave new world lacks an Orwellian tone, he does have us heading back to a more simple life with the view that the global world is near collapse or at least will become a shadow of its former self. With an open mind it is easy to see that having built our economy on cheap oil we have sprawled out all over America tearing down trees, building monster houses, driving monster cars, eating supersized meals, and living larger than life or at least our income. Why would his suggestion that we reverse course and take a different path be so threatening to so many people. Buying local helps a local economy, especially if it is a food source. Reindustrializing America to put people to work making things instead of buying things can lead to entrepreneurship, a sense of pride in producing desirable products to be sold here and abroad, living closer to services that would help the aging population and also reduce cost, why is all of this so backward looking and a romantic folly? Most people that follow the news or have a basic idea of how the global economy works would be wise to insist that our leaders take a more aggressive role in planning for potential outcomes. Using alternative energy is feasible but the truth is that conservation of natural resources and energy utilization will go a lot farther than alternative energy due to the vastness of our country, having the solar or wind power in places where it is least needed having to be transported to places where it is most needed. I do not advocate the simple solution of changing out all of your light bulbs, well actually I do, but this is a feel good solution and not a sea change in attitude about how to live on a planet that is not necessarily getting smaller geological but is definitely past the point of overcrowding and diminishing resources.

In conclusion, I would like to get on my soap box for a moment for those of you who don't think this whole review is from a soap box and say that more than peak oil our bigger and immediate concern is our diminishing amount of fresh water. In time our aquifers will be depleted to the point that wells will run dry, rivers are already running at lower levels due to population growth, and the pollution from run off as well as from sewage treatment is heading us towards a less certain future about something we need more than oil and cannot live without, fresh water.

This book is a well-argued and plausible analysis of what our future may look like. I am not an economist, but it is difficult to believe that oil will not again rise to 2008 highs and beyond. What we saw in the summer of 2008 is just the beginning. And once such levels are surpassed, the world will change, perhaps not unlike what Rubin describes in this book. Some of Rubin's predictions are frightening if only because I have become comfortable in a world of cheap oil and cheap goods. But such days cannot and will not continue. We are using more oil than ever before and the consequences will be felt in my lifetime.

Overall, I found it difficult to disagree with the author's arguments. As such, I was a bit scared as I stared down the tunnel at the inevitable coming closer each day. But I appreciated Rubin's optimism at the end of the book. We are smart, problem-solving people when we need to be. Civilization will go on, but the world will likely look very different in the coming decades. It's odd to think that my daughters may have a much more local and less global life than I ever did thanks to the rising price and scarcity of oil. But that just may be the direction we're headed. Don't say you were not warned.

There's nothing new in Rubin's book; worse yet, it lacks important quantification.

Rubin contends that the amount of goods we get from abroad will be curtailed, with no estimate of how much. Obviously, it depends on fuel costs as a proportion of total costs, but no data are given. Similarly, "long-distance driving will be curtailed" - with no assessment of how much or the potential impact of electric cars. Then, its "international travel will become rare" - seemingly a bit of hyperbole given that current jets average about 30 passenger-miles/gallon, and Boeing's Dreamliners will get about 20% more. He then goes on to attribute the current world-wide recession to the formerly much-higher fuel prices - a claim I've not heard anywhere else.

It is worthy, however, to remind us of how supply and demand are working to our disadvantage. Discovery of new oil peaked in 1966 and has been falling since. We're now pumping about 4X what we're finding, and some of what we're finding is very expensive to process (eg. tarlike ooze from sands in northern Canada). Contrary to economic theory (and his claim that high prices caused the recession), global oil demand grew faster during the price run-up than it did a decade earlier when prices were 80% lower.

Rubin also points out that at $60-90/barrel, many of the world's largest energy projects won't go ahead. If $60/barrel is the price in a severe recession, what happens when the economy picks up - Rubin suspects $200.

The International Energy Agency estimated for years that oil fields were depleting at a rate of 3.7%; in 2008 this was revised to 6.7%.

Wells in the Gulf of Mexico are the only source of U.S. oil growth in the last 15 - 20 years. However, severe storms have reduced production since Katrina.

Eighty percent of Canadian sands oil is over 230 feet deep, requiring it be pumped out after injected steam makes it more liquid. Quite costly, but Rubin doesn't offer a clear estimate, just "$90/barrel" - without making clear whether that is for surface oil or pumped. Regardless, oil-sand production pollutes 250 gallons of water and emits 220 lbs. of CO2 per barrel - impressive, but there's no hint of how easily the water is reclaimed.

ANWR is no magic bullet - best estimates are for 800,000 barrels/day by 2018, vs. current U.S. use of 19 million barrels.

Future demand has nowhere to go but up - Asians and South Americans will want low-cost Tata cars, and the Middle East faces growing electricity and desalination needs with no coal alternative.

Rubin is impressed that a dollar of today's GNP takes half the energy it did in 1975. However, he doesn't tell us whether the calculation adjusts for inflation. I checked, and fortunately, Rubin's conclusion holds.

On ethanol, Rubin's material just doesn't seem credible, so I'm left uncertain. (A chemistry expert friend, however, says it just isn't a good approach to our energy shortage.)

Bottom Line: Rubin's book contributes nothing new, but does remind us that the problem hasn't gone away.