Peak Oil

Jeff Rubin on the Future of Local Airports

By David Thompson
Published June 12, 2009

Jeff Rubin, former Chief Economist at CIBC World Markets, has written a very enlightening book about the end of cheap oil and the rise of global warming, titled Why Your World is About to Get a Whole Lot Smaller.

Here is a short video in which Rubin summarizes some key points of the book:

One of the happier possibilities for Hamilton is that higher energy costs and carbon pricing are going to make globalization more expensive. With shipping costs high, some jobs outsourced overseas will be coming back to North America.

Particularly susceptible to de-globalization are heavy goods with relatively little labour cost embedded in their price, e.g. steel. He notes that in a host of industries "ranging from chemicals to metal processing, putting a price on carbon emissions, just like soaring transport costs, will tip the competitive scale back in favour of North American industry.

On the other hand, here is what he has to say about local airports:

Most airlines need to see oil prices below $80 to so much as break even. At over $100 per barrel fuel costs, US airlines can expect to lose around $7 billion a year. As one airline executive recently commented, 'This is structural, not cyclical.'

Unable to immunize themselves from soaring fuel costs, airlines will have to dramatically change business practices. Flight of half-empty planes traveling to more remote secondary locations will be cancelled...

You may soon find yourself driving past the empty local airport on the way to a bigger one in the next city down the highway.

Pearson Airport in Toronto is not going to close.

So does it make more sense for Hamilton to expand at the airport, or to shore up its inner core in an effort to attract any steel production re-locating to North America?

David Thompson is an independent consultant specializing in environmental and energy policy and organizational development. His clients include research organizations, corporations, government, First Nations and non-profits.

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By Capitalist (anonymous) | Posted June 12, 2009 at 13:23:26

Nothing sells better than fear-mongering and the sky is falling scenarios.

People are not going to stop flying or driving because oil prices are going up. They will come up with new ideas so as to get improved fuel efficiency. Today's airplanes and cars use much less fuel than in the past. There is no reason to think that this will not continue.

In addition, if fuel costs rise, perhaps more airlines will be attracted to Hamilton because the landing fees are so much cheaper than Pearson's? This can offset the increased fuel prices.

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By no fringe (anonymous) | Posted June 12, 2009 at 13:36:47

"Nothing sells better than fear-mongering and the sky is falling scenarios."

Yeah cause the chief economist at CIBC World Markets had trouble selling, sorry but you can't just dismiss Rubin as some fringe cassandra. This is a guy who actually quit his job at CIBC because his book was too far off-message for the bank, even through he's been right about oil prices the past decade while deniers like you were busy ignoring him and making fun of his message.

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By grassroots are the way forward (registered) | Posted June 12, 2009 at 13:48:56

We should be focusing on a local economy and not globization, as this methodology is a contributing factor to the rising poverty levels not only here but across the globe.

Never mind the fact that there are covering up farmland which we should be using to grow food for our residents, as food security issues are very prevelant.

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By jason (registered) | Posted June 12, 2009 at 15:18:33

Rubin is the best thing to happen as far as garnering attention to the crucial days ahead with high oil prices. In the past, the media and establishment just use their tired old lines of dismissal towards anyone who would share this kind of info - "fearmonger", "anti-business", "activist", "wacko" etc.... The same old lines are all it takes to keep the public from truly understanding the link between oil and the economy. I chuckled at todays paper - $1 gas is back. On the TV stations it's getting great airtime.
It's amazing after all we've been through in the past 2 years, the media continues to play this game. The public still doesn't understand that our economy IS oil. Everyone complains when the economy tanks, and now they're all complaining because it's slowly crawling up.

Rubin can't be dismissed with the tired old monikers. He IS the establishment. He IS the exact sort of person the media loves to interview and tell us all that there is plenty of cheap oil left.

It should be interesting to see how his new book is received in the media/public.

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By Really? (registered) | Posted June 12, 2009 at 15:37:45

I've always been told by my banker friends & fam members that CIBC is the Court Jester of Canadian Financial Institutions (ie: all the other banks laugh at their rediculousness. This advise has always helped. So the day I believe a CIBC Economist is the day I trust them with my finances... which will be never.

However, it's clear that City Staff have their priorities wrong when they put prime greenspace before reclaimed inner-city brownfields ontop the list of 'best industrial lands'.

So keep oposing Aerotropolis (or whatever it's called now), and keep pushing your Councilor / Reps for brownfield cleanups... it's all we (as citizens) can do. OH, that and not listen to CIBC's BS!

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By lorne (registered) - website | Posted June 13, 2009 at 19:05:03

Capitalist said:

People are not going to stop flying or driving because oil prices are going up. They will come up with new ideas so as to get improved fuel efficiency. Today's airplanes and cars use much less fuel than in the past. There is no reason to think that this will not continue.

That may well be, but as Rubin points out in his book, each increase in fuel efficiency, whether it be in cars, airplanes, or energy-saving devices, has resulted, not in energy savings, but in increased energy expenditures. For example, as airlines became more energy efficient, the cost to fly became lower. Consequently, more people took to the skies, resulting in more, not less oil usage. Similarly, as cars became more energy efficient, people could go further on a gallon of gasoline, and they did, the end result being that they drove more.

The book, though alarming in many ways, really needs to be read by people, especially those who hold to the belief of a 'deus ex machina' of new technology as the saviour of our bloated lifestyles.

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By hunter (anonymous) | Posted June 15, 2009 at 10:39:45

Rubin profile/interview in the Spec today, june 15:

thespec.com/article/583677

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By Dave Thompson (registered) | Posted June 22, 2009 at 20:22:24

lorne said:

"...each increase in fuel efficiency, whether it be in cars, airplanes, or energy-saving devices, has resulted, not in energy savings, but in increased energy expenditures."

This is the Jevon's Paradox, and Rubin unfortunately doesn't go very deep on this in his book. It's the biggest disappointment in his book in my view.

The Jevons paradox is quite complex, and it doesn't always hold. The Wikipedia entry on this is actually quite good. Also see the RMI article "Beating the Energy Efficiency Paradox" http://www.treehugger.com/files/2008/05/... for some examples of where the Paradox clearly hasn't held.

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