Tuesday, October 27, 2015


In a previous book Jeff was noted for his contention that the price of oil would rise and amongst many other effects would restore local manufacturing as transportation costs would force investors to bring factories closer to consumers.  In this book during the year it took to write he found himself editing from the future tense to present tense.  So far it seems his predictions are close to reality.

The price at the pump is significantly lower while at the same time the cost of extracting oil is going up.  Renewables are playing only a small role, but technology has found new ways to extract energy and demand has slowed.  The Saudi Arabians have decided to keep flooding the market to drive out high cost producers.  The technology while improving production is more costly and also aggravating environmental.  A lot of ground is covered and it is well argued.     .

Canada is in a very vulnerable position and it could have been predicted (not by me) that when the price comes down there will be unhappy consequences.  Or perhaps they knew, but hoped that they could reap some short term benefits.  When the price was up Canadian tourists enjoyed an advantage, but manufacturers lost business.  Now as the exchange rate favours manufacturers some ground may be recovered.  Lack of refineries especially those that can handle bitumen. adds to the problem.

Pipelines  are necessary to get oil to where it is wanted cheaply.  Unfortunately for Stephen Harper natives and environmentalists have succeeded in blocking his efforts within Canada.  British Columbia feels there is too much risk and not enough revenue to justify any pipelines.  Provinces to the east are also resistant.  In the meantime the railroad is benefitting with greatly increased oil traffic.  Warren Buffet who lives in Nebraska where the Keystone Pipeline would cross and a Obama supporter has literally invested billions in rail lines and oil tankers.

China has become a focal point, but investors have become too dependent on it without understanding all the underlying dynamics.  Major cities are suffering severe pollution and the bureaucrats and political powers recognize they have to do something.  A lot of consequences.  They are now willing to talk about climate change and offer to make concessions.  One of the biggest concessions is to use less coal which in turn affects countries like Australia and Canada that supplied coal.  Indirectly it is causing the economy to slow down and that in turn means less imports.  With pollution concerns driving policies oil consumption will decline aggravated by a slower economy.

Jeff is essentially an investment advisor and where there are problems there are also opportunities.  Growing season will move northward.  Prairies are already increasingly growing corn.  Wine is developing in Okanagan, Niagara and Prince Edward counties amongst others while traditional wine areas will be negatively affected by climate change.

Water will be as valuable as oil.  It will be in demand especially amongst Americans, but there will be environmental as well as political concerns.  As an investment Rubin suggests farmland in Canada has a great future.  One way is just to buy the land and lease it out, but there are other methods suggested by the author going through institutions.

I am not sure what to expect from the next Jeff Rubin book, but I plan to read it.

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