Oil prices are directly linked to economic growth. Faster the growth, more likely is the chance of oil getting costlier, a trend which became more pronounced ever since the global economic meltdown some two years back. The debate on oil largely veers around prices, its future projections and how best countries, more so the producing ones, adjust to the changes to ensure that a steady stream of supply is maintained at all times. But more that just its price, oil as a commodity concerns us all, it directly influences the way we live, the jobs we do and also the choices that we make and will increasingly do so in coming years.
The more cheap and easily available oil is, the more is the chance of we getting economically stronger and prosperous. That no way suggests that expensive oil would stop economic growth and push us into the dark ages. Not at all, but it will definitely pose new challenges that need to be countered to keep the global engine going. The new world of costly oil prices will open new opportunities and might also be better than the current state. Triple digit oil prices, recently seen during the economic boom preceding the recession, might no longer remain an aberration.
Jeff Rubin?s latest book, Why Your World Is About To Get A Whole Lot Smaller, published by Virgin Books, is a welcome departure from the mundane investors-driven debates about oil prices. Remember, he was the one who accurately predicted soaring oil prices way back in 2000, much to the discomfort of many. The book, while looking at the global oil prices and its future thereof, does not limit it to it. It goes much deeper, wider and more importantly convincingly into the entire global oil dynamics and why should we brace for a future of high oil prices. His utterly logical and convincing argument that rapidly rising depletion rates and increasing cost of finding, extracting and then transporting non-traditional sources of oil (oil sands, deep water rigs) presents a fair and accurate assessment of the dangers surrounding the world oil market. High oil prices will bring about a dramatic change in our societies. People will live in denser communities, drive smaller cars, live more frugally and locally. With climate change driving down the throat, it is indeed a welcome and much-needed change. Though initially it might take time to adjust (particularly for Western countries, long used to steady stream of readily available crude oil, either from own sources or through imports), but slowly communities will adjust to change. Of course, there would losers in such a scenario, as Rubin argues, but it has its benefits. All those high-paying jobs that were shipped outside would start coming back to their native countries. China?s wage advantage becomes less prominent as transporting produced goods across the Pacific becomes less profitable, breathing life into the America and European economies. Rubin presents an interesting choice, of investing in economies and infrastructure tagged to oil that are exposed to the dangerous cycle of bust and boom (four of the past five recessions, including the 2008 one, were caused by soaring oil prices) or decouple ourselves from this and adapt to lifestyle that is more dependent on less energy. The transition might be difficult, but is a chance worth gambling on, and more importantly, increasingly becoming a necessity.
EXTRACT
?The fact that oil prices can trigger recessions may come as a surprise to many readers, who have heard repeatedly over the last three decades that the US and other developed economies are lot less vulnerable to oil shocks than in the past. It may take half as much oil to produce a dollar of GDP today than in the 1970s, but GDP is whole lot bigger than it was three decades ago and, because of falling domestic production, the US economy is almost twice as dependent on imported oil as it was during the first OPEC oil shock. Oil prices, not delinquent sub prime mortgages, are what brought down the global economy.?