Nothing is shrinking faster these days than global trade. For the first time in decades, world trade volume, the lifeblood of the global economy, is actually falling. And chances are that downsizing is here to stay.
One reason global trade is shrinking is that most major economies have been contracting. Recession-scarred economies will of course recover. They always do. The Chinese economy is already on the mend and in time other economies will also get back on their feet. But unfortunately for an oil-hungry global economy, so too will crude prices — which is not only the real reason the economy tanked in the first place, but also the reason the economy coming out of this recession will be very different than the one that went into it.
Whether we move goods by air, ship, rail or truck, the global economy runs on oil.
And soon that oil is going to cost more than we can afford. Long distance transoceanic trade is about to go the way of the gas-guzzling SUV. Both are relics of an age of cheap oil that no longer exists.
Oil prices are already trading at around $80 per barrel when the red ink hasn’t even dried yet on the deepest postwar recession in the largest oil-consuming economy in the world. If oil is trading at this level when world oil demand has actually fallen this year, where do you think oil prices will be when the world’s energy appetite recovers?
Jeff Rubin's Smaller World (Rubin's new blog, at the Globe and Mail)
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Nothing is shrinking faster these days than global trade. For the first time in decades, world trade volume, the lifeblood of the global economy, is actually falling. And chances are that downsizing is here to stay.
