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Welcome to the first instalment of the National Post’s non-fiction book club, Speaking Volumes, an ongoing series that features National Post writers and expert guests. In this edition, we examine Jeff Rubin’s new book, Why Your World is About to Get a Whole Lot Smaller (Random House Canada) on peak oil and the end of globalization. The exchange below is the extended version of what appears in tomorrow's National Post.
First, meet the panelists:
Lawrence Solomon is executive director of Energy Probe and author of The Deniers: The world-renowned scientists who stood up against global warming hysteria, political persecution, and fraud.
Morag Carter is director of the Climate Change and Clean Energy Program for the David Suzuki Foundation.
Daniel Goldbloom is an associate comment editor for the National Post and host of the weekly Full Comment podcast.
Adam McDowell is an arts reporter for the National Post.
With introductions out of the way, let's get right to it.
ARE WE ALL ON THE SAME PAGE?
Adam McDowell: To get us started: Do you buy Jeff Rubin’s central, two-part premise, namely that (a) the world’s supply of easily accessed oil is running out, and (b) notwithstanding some cyclical fluctuation, we’re stuck with high gas prices from now on? I think we need to know where each of us stands on this before we can properly, er, fuel a discussion about this book.
Lawrence Solomon: I don’t buy either of Rubin’s premises. Access to oil and the price of gasoline are determined by government policy, not by physical constraints. The planet and its people can provide us with affordable oil and gasoline for the foreseeable future, as long as governments don’t turn off the spigots.
Daniel Goldbloom: I’m in for both. Rising oil prices may make previously unattractive oil deposits profitable to extract (e.g. Alberta’s oil sands), but even the laws of supply and demand are not powerful enough to put more oil into the ground. And peak oil theory isn’t the reserve of environmental fundamentalist; even French oil giant Total S.A. has predicted that the world’s oil supply will “plateau” at 95 million barrels per day by 2020. If we’re running out of gasoline’s main ingredient — and the demand for oil continues to increase — then gasoline prices have nowhere to go in the long run but up.
Morag Carter: I agree Daniel, so I’m in for both as well. There is clearly a finite supply of light sweet crude that can be cost-effectively extracted. But I’m not sure that “cyclical fluctuations” is really what Rubin is talking about. What Rubin seems to be arguing is that surging demand for oil has stripped away the global cushion of relatively cheap oil and has now produced the first of what is likely to be several dislocating shocks to the economy. He argues that the oil shocks of the 1970’s were political and therefore artificial (which goes to Lawrence’s point about governments turning off the spigots). But I think that Rubin lays out a persuasive argument that peak oil is a geological, not political, phenomenon that will cause progressively deeper, longer-lasting economic dislocations and therefore will have much more profound consequences.
Solomon: Sorry, but Rubin is persuasive only in the sense that all the other pessimists over all the other decades have been persuasive while wrong. The U.S. Geological Survey in 1920 estimated the world’s total endowment of oil at 60 billion barrels. By 1950, the estimate rose 10-fold, to 600-billion and now it’s about three trillion. Last year, the Geological Survey estimated over four billion barrels of technically recoverable oil in North Dakota and Montana’s Bakken Formation alone — that’s 25 times the estimate of a decade earlier.
The only clear trend I see is up. Over the last two decades of unprecedented globalization, oil reserves grew in the Americas, in Europe and Eurasia, in Africa, in the Middle East, even in the Asia Pacific region that includes voracious China and India. All told, world oil reserves increased by a staggering 36%, and that doesn’t include the 152 billion barrels in proven oil reserves obtainable from Canada’s tar sands. Never before in human history has energy been accessible in greater abundance in every major region of the world; never before has mankind faced a brighter energy future.
McDowell: Lawrence, I guess what I’m left wondering about is the substance of the debate between people like Jeff Rubin and people like yourself regarding the amount of oil left. What are the points of contention? I’d be curious to hear you two argue it out.
For my part, I was ready to take a coming oil shortage as axiomatic and move on from there — I was more than ready, in fact, to move on to the repercussions. The book spent too long establishing the coming scarcity of oil and not enough time on how this might unfold for us. Whatever the reality might be regarding how much oil is under the ground, Why Your World would have made a more enjoyable read with some detailed doomsday scenarios. (If we can’t afford to import Chinese goods anymore, what happens in China? And so on.)
Instead, when Rubin finally does speculate, he digresses, uninterstingly, about coffee. As it stands, my favourite part of this book was the introduction — the story of a salmon’s long journey to Rubin’s dinner plate — because that was the part with the best lore. Lore really matters in an our-civilization-is-doomed book (compare Thomas Homer-Dixon, Jared Diamond, et al.). Charts matter, too. Why couldn’t they give us one measly graph to pore over?
SHIPPING FUEL SHIPPING COFFEE
Solomon: OK, let’s switch from the implausible (that we’re going to run out of oil anytime soon) to the impossible (that high oil prices will decimate shipping). And let’s use Rubin’s coffee industry example, and his warning that “your grandchildren may never know what a barista is” because of the exorbitant cost in future of shipping coffee from the Third World.
Rubin provides a little history of the coffee industry, showing its extensive trade throughout the world, starting with Yemen in the 14th century. He seems to have missed the fact that the robust coffee trade of the 17th and 18th centuries that fed the coffee houses of Europe preceded the era of oil-powered freighters, and so could not have depended on the an availability of oil.
How would we transport merchandise across the oceans without oil? We would use natural gas, which is in immense supply in the Third World. We would use uranium, also in immense supply. And we would use wind-powered vessels, updated versions of the Flettner craft, invented in the 1920s. These unusually stable commercial ships plied the Atlantic until the Great Depression and the Second World War, followed by the rise of aircraft, made them uncompetitive.
To end shipping, we would not only need to run out of fossil fuels, we’d need to close our minds to new solutions that met new problems. In short, we’d need to stop being human.
Goldbloom: Rubin exaggerates to make his point at times (you’ll always need someone to serve coffee), but his argument that expensive oil will make existing global trade uneconomic still holds.
Seventeenth-century coffee importers didn’t need massive oil-powered container ships because they weren’t transporting that much coffee by today’s standards. In order to move the enormous amount of stuff required for globalization to work, you need to do it cheaply and quickly.
The low wages paid in far-off factories don’t save you money if the cost of shipping is more than the amount you save by using cheap foreign labour. Without cheap oil, we’d still be able to get things around the globe, but the distance between factories and markets would suddenly matter again, making local production more attractive — and not just for feel-good 100-mile diet reasons.
Solomon: Sounds good in theory. Here is some reality. The shipping cost today of importing coffee beans from Kenya to Toronto is about 8¢ per pound, only a fraction of which represents energy costs. Even a quadruple of oil prices will matter little relative to the cost of the actual coffee beans.
That said, the market will easily bear high shipping costs if the product warrants it. For example, the cost of bringing in Nepalese coffee beans from the highest frost-free valley in the Himalayas via air, routed through Abu Dhabi, is under $1.50 per pound.
My source for these figures? Myself. I am president of Green Beanery, a non-profit company I started a few years ago to support the work of Energy Probe Research Foundation, the environmental group I represent. Green Beanery is now Canada’s largest supplier of specialty coffees but we are still relatively small importers. A Starbucks would face lower shipping costs.
Carter: Bypassing entirely the debate about coffee and concentrating on the point that needs to be made here; in planning for an oil-constrained future, we need to be making investments in modes of transportation and goods movement that are the most energy efficient and therefore least vulnerable to increasing oil price shocks. Ultimately, those countries and economies that invest wisely in rail and shipping will have the most resilient and competitive economies.
The losers will be economies that are far too dependent on truck and air transportation. This of course has huge consequences for Canada and our relatively inefficient goods and passenger transportation system.
The last oil shock could be a wake up call. We should be joining other governments around the world who together have invested US$430-billion in upgrading and greening infrastructure, including investing in rail and transit as part of their economic recovery plans.
NON-GLOBAL GROWTH
Goldbloom: Lawrence, you seem to have the upper hand on coffee. But come 2025 when I’m CEO of a foundering global shipping company (Globe-bloom Inc.), let’s have another talk. Moving on. There are a few more interesting aspects of the book I’d like to delve into.
If we don’t decouple our economy from oil, Rubin argues, peak oil may soon become peak GDP (as well as peak food, peak water, etc.). He says we need to find a new source with which to fuel GDP growth, although he doesn’t settle on an alternative, leaving it up to future thinkers and doers to figure out what will work. The question remains, however, if we can find some sort of fabulous new way to fuel our economy, why wouldn’t it be able to power global trade as we know it today? What is this magical non-fossil-fuel energy source that can power GDP growth but not globalization?
Solomon: First, readers should understand that, until recently, science unambiguously held CO2 to be a beneficial gas, fundamental to the well-being of the planet. Only recently have some scientists come to question the benefits of CO2. Based on my discussions with scores of scientists over the last few years, I believe that the majority of scientists, and particularly the majority of top scientists, continue to believe that CO2 is beneficial and that attempts to control CO2 would harm the planet. The premise that we need to revamp our society to cut back on CO2 emissions, in other words, is likely wrong.
Right or wrong, politicians are fully capable of outlawing CO2. If they do, the global economy would run on alternatives that are now available in limitless supply: These include nuclear power, wind power, and solar power. While all three technologies have cost and environmental drawbacks, and need to be perfected, they would and should power the economies and the globalization of the future.
You have astutely highlighted the nonsense in Rubin’s reasoning.
Carter: Countries that have put in place carbon pricing are already decoupling from fossil fuels while continuing to grow their economies. There are many existing technologies and the potential for even more in the future that will assist us to maintain and develop a robust clean energy economy.
POLITICS AND PARADOX: THE REBOUND EFFECT
Goldbloom: Energy efficiency is one of the most touted goals of the environmental movement. But as Rubin reminds us, energy efficiency is not energy conservation. It leads, paradoxically, to higher total energy use. In what is known as the “rebound effect,” improving efficiency lowers your energy costs, which in turn allows you to use more energy for the same price.
Rubin’s solution? “If efficiency is to lead to actual conservation, consumers must ultimately be kept from reaping the benefits of initiatives in the form of ever greater energy consumption. In short, energy prices can’t be allowed to fall...” In other words, the government must put a price on carbon.
My question, then, is whether you think citizens will support government action that raises energy prices, and then exhorts them to become more energy efficient, just so they can go back to paying the same prices they had before the intervention?
Carter: Doing more with less energy is a necessary thing and will help cushion the blow in an oil constrained future — and more to the point it makes great economic sense as Rubin points out at some length.
The rebound effect is a product of a world of artificially low and steady oil prices. But this is not the world that we are now living in. Both peak oil and the need to address global warming are already resulting in the increased costs of fossil fuels.
As Rubin points out, the oscillations in oil prices do not provide clear signals to the market about the long-term trend toward rising oil prices. But a price on carbon provides a clear long-term economic signal that increases the costs of polluting energy sources and makes clean energy solutions more affordable. This can then guide effective market responses by businesses and individuals. Responses that not only benefit their bottom line, but help safeguard the future of the planet.
However, care needs to be taken when developing and implementing a carbon price to ensure that the most vulnerable households are protected and can participate in — and benefit from — energy-efficiency initiatives. These are often the very people who are stuck with the least efficient, most energy-intensive and therefore most expensive energy options.
Your question, Daniel, about whether Canadians will support innovative policy measures such as a carbon price was answered in this month’s provincial election in British Columbia. The province introduced a carbon tax last year, which actually took effect at the very moment that gas prices hit an all time high. Doomsayers predicted that the carbon tax would result in a massive public backlash against the government and that they would feel the effects at the polls. Well, the carbon tax provoked a vibrant debate during the election and the government was returned with a majority.
Solomon: There’s nothing inherently wrong in consuming energy — wrongs only arise from pollution that might result. Controlling harmless behaviour, on the other hand, certainly is abhorrent.
Polling and electoral results show the public punishes governments that raise energy costs. In Canada, we had the Liberals historic collapse — their worst showing since Confederation — after they tried to sell us on the Green Shift. The B.C. Liberals, to their relief, didn’t collapse, but only because their opponents joined them in advocating energy hikes.
BACK TO THE FUTURE?
Goldbloom: Rubin’s expensive-oil future is a lot like the pre-globalization past, especially when it comes to free trade. Not only will the fuel costs of transportation become a barrier to trade, Rubin argues, but he believes that countries using a carbon tax or a cap-and-trade system should place a “carbon tariff” on countries that don’t price their emissions. While he argues that this is not a traditional tariff because it “levels the playing field” by putting emissions into financial terms, it would still have the same deleterious effect on global trade.
The potential “natural demise” of global shipping and Rubin’s not-a-tariff argument notwithstanding, how can creating barriers to global trade fail to have a disastrous effect on economies around the world? In other words, why would this time be different?
Carter: Eminent economist and former head of the World Bank, Sir Nicholas (now Lord) Stern, said that “climate change presents a unique challenge for economics: it is the greatest and widest ranging market failure ever seen.” Specifically, the real cost of greenhouse gas emissions is not counted at all in the production cost of goods and services.
Carbon tariffs could be an interim solution that encourages reluctant countries to incorporate the real price of greenhouse gas emissions into domestic production costs through a cap-and-trade and/or carbon-tax system. Stern notes that we could also lower existing tariffs on carbon pricing economies.
Lord Stern estimated back in 2006 that the costs for not taking action to address global warming would likely be in the range of 5-20% of global GDP, while the costs of taking action would amount to approximately 1% of global GDP by 2050.
To put it simply, the costs of doing nothing far out weighs the cost of taking action.
Solomon: Rubin’s prescriptions would do more than harm global trade; they would harm the global environment. The more efficient our economies become, the less polluting they become. The rise of globalization, and the proliferation of best practices, has led to higher environmental standards worldwide.
WHAT IF IT'S MY FIRST TIME?
McDowell: Quickly, everyone, to wrap up: Do you think Rubin’s book makes a suitable introduction to the first-time reader on the oil supply issue? If not, do you have another book to suggest?
Personally, I’d read a bunch of articles before but this was the first time I’ve really been up to my eyeballs in oil. Despite hungering for harder data and more concrete examples at times (and yes, charts), I found Why Your World left me keen to read onward — the peak of my curiosity has yet to be reached.
Carter: Rubin’s book is a great read. It makes links between energy prices and the current state of the economy. We should take heed of his warnings and listen his advice. I’d definitely recommend the book to novices and old hands alike!
Solomon: Rubin’s book, like dozens of predecessors that predicted an end to oil, will befog any reader. For a clear-eyed look at resources, I recommend Julian Simon’s The Ultimate Resource. Or, try Wired’s article on him, “The Doomslayer."
Goldbloom: As someone in a similar position to Adam, I found the book an enjoyable entrance to long-form energy writing. As far as other starters go, I’d recommend Carbon Shift: How the Twin Crises of Oil Depletion and Climate Change Will Define the Future, edited by Thomas Homer-Dixon.
Got your own take on Rubin's latest? Post your thoughts below or email dgoldbloom@nationalpost.com. We will post the best responses.
