High Oil Prices Will Fracture the World and End Globalization

Economist Jeff Rubin speaks with U.S. News about the future of the world's economy.


Should President Obama read this book?

Yes, definitely. And I'm encouraged by many of the things President Obama has said, like, for example, tying oil policy with carbon policy because they are two sides of the same coin. There's absolutely no point in shutting down a coal plant in Texas or in Ontario if China is going to be building 80 coal plants in the next year. Unless we can get the compliance of other countries, this is going to be absolutely futile. And the way we're going to get the compliance of other countries is by charging a carbon tariff. Which is to say, you can burn as much coal as you want, but if you power that auto plant or steel plant with dirty power, then we're going to countervail you to the same rate that our producers have to pay for coal emissions in our economy. And that's, by the way, very different than Kyoto. Americans quite correctly rejected Kyoto, not so much on environmental but economic grounds. Kyoto wasn't a plan to cap emissions but to redistribute emissions from the developed world to the developing world. But now 90 percent of the emissions growth has come from the very countries that are exempted from Kyoto. In what way is today's push to move off oil similar to the push of the 1970s?

A lot of the initiatives are the same, and you hear a lot of the same things. But the irony of the 1970s and the 1980s is that all of the government policies that encouraged greater energy efficiency, and this is as true in the U.S. as it is in Western Europe, ultimately led to us consuming more and more energy. For all the improvements in the internal combustion engine's efficiency, the average car or vehicle in the United States consumes just as much oil as it did 30 years ago because we've consumed all those efficiency gains in bigger and faster cars with more energy-sucking options. The real challenge going forward is we've got to become more efficient without the reward of cheaper energy prices.