Economist: Pricier Oil Means Less Globalization
Just last summer, oil was surging toward $150 a barrel and gas prices were hitting $4 a gallon. The recession brought those prices crashing down, and today it may seem like high oil prices are one of the few economic problems that we don't have to worry about.
But Canadian economist Jeff Rubin says what we saw last summer was a glimpse of our future.
In his new book, Why Your World Is About to Get a Whole Lot Smaller, Rubin contends that oil, which is currently around $60 a barrel, will quickly top $100 a barrel when the world economy rebounds.
"We're going to see triple-digit oil prices very early in the next recovery," Rubin tells NPR's Steve Inskeep. Furthermore, he says, we should expect oil to stay at those levels because demand will consistently outstrip supply in the coming years.
Rubin argues that high oil prices will have sweeping ramifications and will reverse many of the trends we've seen in recent years in the world economy.
"The model of globalization is not going to be economically viable," Rubin says. "What we're going to find is it's not going to make sense to produce things on the other side of the world, no matter how cheap labor costs are there, when it's so expensive to transport things."
Rubin says the United States is likely to import less from low-wage countries like China and make more things at home, from steel to furniture to food. He predicts that the continued expansion of the suburbs ringing American cities will come to an end, as families move back to cities in the face of much higher commuting costs.
But critics note that the United States has bounced strongly from past oil shocks, and new technologies hold out the possibility of lessening dependence on oil.
High oil prices are a virtual certainty, according to Rubin, but he acknowledges that the U.S. economy can adapt. "I think there are a lot of silver linings to this," he says. "I think that in many respects, the new smaller world around the corner will be a more enjoyable world to live in."
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