The End Of The Consumption Economy?
A few weeks ago, I watched a presentation from The Business of Climate Change conference wherein Jeff Rubin (@jeffrubin) articulated with compelling, if anecdotal, evidence that we are going to see $200 / barrel oil and $7/gallon gasoline within the next 12-18 months. Watch the video below:
I don’t spend a lot of time studying the oil market, but Jeff Rubin does. Additionally, he has some pretty serious street cred in terms of calling past volatility in the marketplace. He was one of the first economists to predict the last oil spike and it’s ramifications. I found several really interesting points to consider in this video:
- The current global recession has more to do with oil than with the mortgage crisis in the US. Countries around the world were in recession long before the US mortgage market imploded.
- The coming oil price spike will force us to start making very hard choices about where we live. Mr. Rubin predicts the end of the suburb, as an example, because people will no longer be able to afford to drive. These vast suburban wastelands will be converted back to ground that can be farmed and produce food.
- The current economy, built primarily on our proclivity to consume, is about to come crashing down around us, and will be replaced by a newly energized production economy, where we begin to make all of our own stuff again. He predicts the end of the cheap TV and other consumer goods from China, the end of cheap food from South America and so on, primarily because the cost of fuel to move goods around the world will make those goods too expensive.
It all sounds a bit far-fetched when you first listen to it. C’mon Jeff, we aren’t really going to park our cars in our driveways, not be able to live an hour from where we work, produce our own food, and start caring about fixing things rather than replacing them! That sounds like a return to the early part of the 20th century. We are supposed to be moving forward, not backward.
On the other hand, there are already a number of signs that indicate that we could be headed back to a production economy. Remember what happened when gas went to $4? We all drove less, lots of people that had to drive scrambled to find hybrid cars, and people started to find ways to live differently. Some examples:
- Telecommuting into work spiked massively during the period of $4 gas
- People started growing their own food
- People went out to eat less
- People bought less because they spent more times in their home.
It is not hard to imagine that if gas really does go to $7 / gallon that our behavior would be affected even more radically. Additionally, in the last edition of Fortune magazine, there was an article about a project underway in urban Detroit to convert a large part of the city that is currently unused to an urban agricultural area. But that’s Detroit, you say! That would never happen in my particular slice of heaven. Don’t be so sure.
It is interesting to think about the changes that might come about in a world of $7 gas. The short-term inflationary effect on the economy would be staggering. But, I am not so sure that the long term effects would be all negative. You might not be able to get a box of pretzels the size of your car at Wal-Mart for $2, but you might grow your own tomatoes and eat better. You might actually live somewhere where you can walk to almost everything you need. You might focus on creating something that has real value, rather than just working to make enough money to afford the lifestyle you think you need.
We chose to live where we live because it affords us the opportunity to work from our home, educate our kids from our home ( more on that in the coming weeks ), walk to everything we need, grow our own food on a small scale, and live a pretty decent life without HAVING to drive. We still drive everywhere of course, but it’s because we can afford to.
Do you think Jeff Rubin is right, and if so, what would it change about how you live?
