Canada Markets

Canadian Economist Abandons the Energy Bandwagon for Agriculture

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
Connect with Cliff:
Author Jeff Rubin writes in his latest book that oil consumption will peak in five years only to fall by 12 to 13% to 80 million barrels/day, backed by U.S. Energy Information Administration research. (DTN photo by Elaine Shein)

Back in 2008, with oil futures reaching $147/barrel, Canadian Imperial Bank of Commerce chief economist Jeff Rubin predicted that a continuation of the then-current global growth rates would result in a further spike in prices to $200/barrel.

As an aside, DTN Senior Analyst Darin Newsom tells a story of debating this very issue on a U.S. business network at that time, suggesting the move in prices was over and the collapse in futures spreads was telling a story of growing commercial bearishness.

In this case, Darin was right, and just five months later the continuous chart reached a low of $32.48/barrel. In Rubin's defense, his web page does state that he forecast soaring energy prices as far back as 2000.

P[L1] D[0x0] M[300x250] OOP[F] ADUNIT[] T[]

Rubin left CIBC in 2009 and remains a well-known and sometimes controversial economist/author/speaker/futurist and continues to take bold positions on Canada's economic issues. Rubin's recently released book is titled The Carbon Bubble -- What Happens to Us When it Bursts? led to a number of interviews in the Canadian press with Rubin sharing his latest thoughts on the state of Canada's oil industry.

As discussed on a Globe and Mail video, Rubin sees a false fundamental premise as being the constant or common denominator that is seen across all previous bubbles throughout time. This time around, Rubin claims the false premise is that we can burn all of the fossil fuels we can or we like to. He goes on to suggest that this is not true, that there is a limit that is fast approaching and that oil consumption will peak in five years only to fall by 12 to 13% to 80 million barrels/day, backed by U.S. Energy Information Administration research.

The impact to Canada is what he describes as a "stranded asset" in Alberta's oil sands, a source of high-cost oil in a low global price environment with falling demand, instead of the "engine of economic growth" as promoted by governments.

At the same time, Rubin joins other gurus such as Jim Rodgers in talking up the potential of agriculture in Canada, given favorable changes due to climate change. A 2-to-3-degree Celsius change in temperatures is viewed to add weeks to the Prairies growing season which will allow for a greater diversification of crops while reducing the chances of early frost. Rubin sees Canada moving from a top 10 agriculture exporter to a top three ag exporter. "In a world of climate change, food is going to be a lot more valuable than oil," he said, while noting a 30-year window for his predictions. He also sees Western Canada as an economic driver of Canada's economy, because of food production rather than energy production.

Water will be the key over the upcoming decades, and Rubin sees a potential to divert water away from the oil sands producers to the southern Prairies for crop irrigation, given a scenario where the value of food is higher than the value of oil. Rubin cites Saudi Arabia's involvement in the partnership taking over CWB as a value-added way of exporting water to countries in need.

Cliff Jamieson can be reached at cliff.jamieson@dtn.com

Follow Cliff Jamieson on Twitter @CliffJamieson

(ES)

P[] D[728x170] M[320x75] OOP[F] ADUNIT[] T[]
P[L2] D[728x90] M[320x50] OOP[F] ADUNIT[] T[]

Comments

To comment, please Log In or Join our Community .