How Crude!!

I wrote in July about how I feel the environmental agenda has been hijacked by debate over climate change, and would like to weigh in again on that topic.  Specifically, I want to explore in some depth the economic implications of resource scarcity.

Here is the issue:  It is near impossible to determine what the true effects of peak oil will be.  Peak oil doesn't just mean paying $2.00/litre at the pump.  The globalized economy we live in is saturated with cheap oil.  In fact, it cannot survive without it.  Former CIBC Chief Economist Jeff Rubin discusses this issue in his book "Why Your World is About to Get a Whole Lot Smaller".  Expensive oil means it will no longer be profitable to use cheap labour abroad, as the cost of transportation will outweigh the savings.  Just Imagine Wal-Mart without products from China.

There is an interesting historical comparison that arises if you are reading Malcolm Gladwell's "Outliers" along with Rubin.  Gladwell discusses early on how some of the wealthiest people in history were Americans in the late 19th Century.  Unlike the rest of the list, many of these people were from modest backgrounds, but rose to extraordinary wealth regardless.  The difference?  They were alive during a major shift in the American economy.  Prior to the Civil War, slaves had been a major tool in securing profits in various industries.  Their economy was built on an assumption of low input costs, the same as our current system depends on oil.

What Gladwell teaches is that the extraordinary wealth accumulated by Americans during this period was a result of these people embracing and pioneering the new economy, built on industry, transportation, and mass production.  Instead of slave owners, they were oil barons and railroad tycoons.

The lesson to be learned is that once in a while, we are dealt a new deck of cards and the game changes completely.  Those that are successful are those that recognize the limitations, but also the opportunities of the new world.  By focusing on climate change, we have become distracted by the symptom, rather than the true problems.  People fail to be motivated to change because we believe that we can simply eschew the problem by feigning ignorance; that it will pass, and we can proceed with business as usual.  What is not realized by so many is that our environmental problems don't mean and end to prosperity, but potential for a new prosperity.  All we have to do is embrace it.