Transitory Globalization

I think globalization is likely a transitory condition. It didn’t exist 40 years ago. In my opinion, it will unravel in 40 years’ time. Sure, there has always been and always will be trade across oceans and continents, but the current mega-scheme is based on three things, I think, that have come together: 1) relative international peace 2) cheap foreign developing-nation labor and 3) cheap fossil fuel energy.

What can be said about #3? Is this about to change? If consumption patterns in developing nations continue on their upward arc, there will be a lot more competition for energy, so if supply can keep up, energy will still likely cost more and more as time goes on. And if supply can’t keep up – well, then there will be a third class of nations – “Nations Never-To-Develop” -- North Korea, Suriname, Bangladesh, Botswana, etc.

Personally, I don’t think supply will keep up. I try to imagine an oil scarce future, when my son Tyler is, say, 20 years old. Only 8 years away. Not scarce as in not available, but certainly not as liberal as we had it just 8 years ago, when oil was $30 a barrel and the North Sea, Mexican Cantarell, Indonesia, and a dozen other countries and fields were still on their upward production cycle. These are all now in depletion, and by all estimates, Mexico will not be exporting oil at all to the US in eight years’ time. They are our #2 supplier of oil, behind Canada.

So I see cheap fossil fuel energy going away, moving to expensive fossil fuel energy. All the domestic resources we have aren’t 300 feet down, on land, with enough natural pressure that we don’t even have to pump it out. That easy oil was already extracted, refined and burned by my parents’ and my generation. The remaining domestic oil is in the Arctic, under 13,000 feet of rock under 2,000 feet of water in the gulf of Mexico, or housed in kerogenic shale in the Rockies. All this oil will be taken, ANWAR will be developed, you can be assured of that. This consumer nation will make sure of it. But it won’t come as cheap.

If transportation energy is more expensive, then I don’t see how we can efficiently exploit cheap labor markets overseas. I see the Chinese developing their own US-styled internal consumptive markets, anyway. Their laborers will start demanding higher wages for their own Chery automobiles. Their kids will want to listen to their own Chi-pods. But oil will be as expensive for them as it is for us. The U.S., China, South Korea, Japan...none of us have more than 2% of the world’s remaining oil reserves. We will all be competing for the same diminishing, ever more expensive resource.

What does that say about relative international peace? Imagine a short, one-time, temporary supply disruption here, say, a refinery explosion in Galveston. I can’t even see my own City of Elk Grove handling scarcity well, let alone how a nation of NASCAR morons would take odd/even fill up days. Shit, there would be fist-fights, thefts, hoarding, angry mobs, neighbor against neighbor, brother against brother, poor vs. rich. Can you see South Sacramentans allowing their energy squandering birthrights to be taken away voluntarily? How about the citizens of New Orleans, Gary, Detroit, or Atlanta? So how would we do internationally, when we compete for oil from West Africa, Russia, Venezuela, Iraq, or Iran. And their own citizens -- isn’t their own domestic consumption going to grow? Their own resources are going to be depleting while their own domestic consumption is going to grow. So how fast will their exports fall? You can look to Dubai today, right now. A massive city, built up in just the last five years, and now using a much, much larger share of UAE’s own domestic resources than before.

I like to think about such things. That’s why we invented blogging. I have to admit, I do think we are more resilient than I sometimes like to think. But I do think of worst-case scenarios. I’m a Doomer...what can I say?