September 1, 2010

Will Continuous Oil Price Hikes End Globalization?

I just read about the new Jeff Rubin's book, Why Your World is About to get a whole lot Smaller: Oil and the End of Globalization. The article is disturbing since it points out what increasing oil prices can do to the world's economy and how it can cause globalization to end.
The whole world is heavily dependent on oil. It is also a fact that if the price of oil in the world market increases, then local oil companies do not have a choice but to increase prices as well. It all boils down to the usage of energy. It’s a basic law of economics: the higher the demand, the higher the supply. Then again, oil is expensive since it is being exported plus the fact that world reserves are fast diminishing, it can already be expected that oil prices would increase. In relation to globalization, if oil prices continue to rise, then it would be more expensive to export to other countries. You might save on labor costs but transport costs would be the death of your business. It is not too far-fetched an idea then that as oil prices increase, there would be a preference to conduct business in local areas and plans for globalization would be set aside.

No comments: