Economist Jeff Rubin discusses the future of oil (peak oil) in an entertaining way that doesn’t take a PhD to understand. If you are a regular reader of Schaefer’s Blog this is a must-watch, even if you just watch the first 10 minutes. Basically, Rubin lays out a convincing argument why triple digit oil, translating to $6-$7 per gallon at the pump is all, but inevitable and will probably come sooner than we think. HT to Paul Kedrosky for this find.
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Cameron, I’m not gonna lie, I’m surprised you got so excited about this guy. How long have people been making ridiculous claims about oil? FOR-EV-ER. Sure, he’s probably right to some degree, oil will continue to get more expensive. And as it does, the world economy will rapidly adapt. There will be winners and losers, and all will balance out again. Haha, I kind of feel you’ve gone a little radical here on the blog lately. Must be those Northwestern politics getting in your blood!
I hope your family is doing well. Congrats on the new addition! I loved your wine and book newsletter, by the way.
@ Collin,
I agree with you that people have been making ridiculous claims about oil for a long time, however, some people have also been making very accurate claims…that’s true of just about anything in life. Past predictions and performance have zero bearing on what will happen in the future.
So, if predictions are largely worthless maybe I shouldn’t have posted this video, although I think more than his prediction, I just appreciated Rubin’s thought process in how he reached his conclusion.
However, peak oil, or “the point in time when the maximum rate of global petroleum extraction is reached…” (wikipedia) isn’t as “radical” as you’d suggest. Oil is a finite resource that at some point its going to run out. Not sure how to get around this point, though I’ve tried.
Economists argue that supply and demand will draw this out to infinity as the decrease in supply and corresponding increase in price leads to a continually shrinking demand for oil as less and less people can afford it.
I would agree with this to a point, but when looking at my own behavior when gas reached $4-$5 a gallon a couple years ago, I am not convinced its that simple.
During this period in time our family moved from Oklahoma to Washington – this move had to take place regardless of the price of gasoline. We don’t always act as rationally as economists believe. If gas reached $7 gallon I think many people would drive up thousands of dollars of debt and go bankrupt before they would significantly change their consumption habits.
No doubt some people will start carpools, ride their bikes, etc., but because nearly every part of our life is built on cheap oil, I am skeptical that we can adapt at the same pace as we deplete our oil supply.
I guess this is really the meat of the question, can we adapt our behavior more rapidly than the depletion of oil? You say, “…the world economy will rapidly adapt.” Is this before or after a major crisis?
Eventually we have to for sure, but I think this adaptation is going to be much more violent, difficult and slow due to oil’s pervasiveness (transportation, heating, plastics, national defense, food production, etc.) in our global economy.
All this to say, I think this is a perfectly valid discussion to have and the fact that it is often lumped in with extreme left-wing conspiracy theories seems a bit nonsensical….but then again, maybe its the Northwesterner in me coming out
.
Glad you liked the newsletter and thanks again for the comment!
Collin, you bring up a good point, although it’s not your main point, that buying into a system (left-leaning politics) is sometimes called “legalism” and is dangerous in leading those unable to think for themselves down a calamitous path. But, equally dangerous as being molded by northwest politics is being molded by stereotypically conservative thinking. I know Ive been written off by a lot in ‘our’ circle as the token lib who lives in Seattle and gets around by bike or biodiesel, but here’s my take:
To me its simple math: there’s a finite amount of a resource and there is an increasing demand for that resource. Obviously prices are going to go up, fine, we may be on our way out as the global empire but most of us can afford the gradual price hike of oil with little sacrifice. Can developing countries afford it? Do we have an obligation to them? Should we not be an example of sustainable development?
I dont know about carbon tariffs, seems a bit far-fetched, but should we write off the problem? Despite our individual perception of the global energy “crisis”, it has spurned fat americans to get on their bike, creativity, scientific innovation, and development of cleaner, more sustainable methods of maintaining our current energy consumption. How is that bad? To simply say “the world economy will rapidly adapt. There will be winners and losers, and all will balance out again” is easy to say for entitled americans but seems economically, environmentally, and socially irresponsible for a people who have been appointed rulers over the works of His hands and charged with caring for the least of these (people in developing areas for the point of this argument) who will undoubtedly be the aforementioned “losers.”
I love you both, but Cam, a 45 minute Friday video?