Jeff Rubin On How Shale Oil Might Be Like Sub-Prime Mortgages

jeff rubin book cover photo

Jeff Rubin quit his job as Chief Economist at a big bank to write Why Your World Is About To Get A Whole Lot Smaller. Tyler Hamilton does a terrific interview of him in the Toronto Star, in which Rubin unleashes his usual memorable zingers. Hamilton asks him about where oil prices are going:

The reality of this for prices is that we're going to be at triple-digit oil prices within the first quarter of 2011. We may even be taking a run at the $147-high watermark (per barrel) before 2011 is over. The question is whether the world economy is any better prepared to operate at that level of fuel cost than it was in 2008. If it isn't, we're going right back into a recession, which is really the point of my book. It's about how do we grow with triple-digit oil prices. That requires going from a global economy to a much more local economy. That hasn't happened yet. It will happen. Certainly, that will happen if we have another oil-induced recession.

He predicts political turmoil in Canada:

Alberta is going to have Middle Eastern-type cash flows in this world. But the polarization, the impact of that, the mirror image of that is a $1.20 Canadian dollar against the U.S. dollar. That exchange rate is not going to deter Alberta's bitumen exports to the U.S., but how many motor vehicles will Ontario be producing at $1.20 exchange? So we're going to have a hell of a political fight over energy.

(the exchange rate was $ 0.70 three years ago)

On shale gas:

The debate is about the real cost. If you exclude the natural gas liquids that come with most shale projects, is the real cost $4 per Mcf (1,000 cubic feet) or is it $8? If the real cost is $8 then a lot of people, like Chesapeake Energy, the biggest gas producer in the U.S., have a big problem. Is shale gas the sub-prime mortgage market of the natural gas market?

Read it all at the Star

More great quotes from Jeff Rubin:

We will be living in denser communities, driving smaller cars, living more frugally and locally. When we travel, we may soon be boarding an electric-powered train rather than an oil-powered airplane.

But living in a clean, efficient, densely populated city is not exactly the end of the world. Where would you rather spend your vacation: Paris or Houston?

from Jeff Rubin: Peak Oil Will Make Our World A Whole Lot Smaller
In a world of cheap oil, your taste buds can easily go global. But with the planet already on the cusp of triple-digit oil prices, your menu will have to change.

Start getting used to local produce, because there'll be a whole lot less Chinese food delivered in the smaller world of the future.

From Quote of the Day: Jeff Rubin On Chinese Food Delivery
"You know you are at the bottom of the ninth when you are schlepping a tonne of sand to get a barrel of oil"

From Canadian Tar Sands: a Hydrocarbon Hurricane

More Jeff Rubin:

Jeff Rubin Predicts "Mass Exodus" From Cars in US
Gas $7 Per Gallon in Four Years

More Tyler Hamilton:

Warming Warning: Hell and High Water
Listening to Cellphone Warnings
Iron Chefs Everywhere: Recycle your Heat
EEStor Capacitors- "This could change everything"