Doom, gloom, and a dash of hope
Jeff Rubin is a man with a message. For 20 years he was chief economist and managing director for CIBC World Markets. He quit that job, though, to put full-time effort into spreading his message. And his message is somber, downright gloomy even. His message is that triple-digit oil prices are here to stay, and that for at least a generation we will have no viable alternative power options.
And Rubin delivers this message with a very cheery disposition. It's okay, his comments and mannerisms seem to radiate out while he talks, because we'll adapt. Yes, he says, gasoline will be $8 a gallon, but we'll adapt: we'll drive less in less powerful cars. We'll do so, he says cheerily, because we'll have no choice. Get ready to see more bicycles on our streets.
Another important part of his message: all that stuff we used to make but no longer make because it's cheaper to have it made in Asia and shipped back... it will no longer be cheaper to make the stuff there because it will cost too much to ship it back. Get ready manufacturing, there's going to be a new North American industrial boon. Human capital in manufacturing may not be as pricey as it had gotten before we started shifting manufacturing overseas, but it will be a lot more expensive here than there, meaning all those manufactured things we love will have significantly higher price tags. That's ok, Rubin says, we'll make do with less stuff, and like our parents (or grandparents for a lot of readers), we'll fix the things that break rather than throw them out and buy new.
One more thought to really pile on the gloom, because why not? Rubin is happy to share it--and here's a bone for all those who consider China the boogey man. There's a reason China has chosen to purchase so much U.S. debt. As Rubin says, "it's not out of benevolence." They are betting that in any foreseeable future the U.S. economy will still be the dominant economy. The financing of our debt acts as an oil insurance policy. You see, China knows that triple-digit oil is the single greatest threat to its continued economic rise. What Rubin predicts is that at some point in the future, China will allow its currency to float instead of being artificially pegged to the dollar. At nearly the same time, they will begin selling the U.S. Treasuries they own. The result will be a Chinese yuan that increases in value rapidly against the dollar, which will itself decrease in value. And this matters because... the price of oil on international markets is in U.S. dollars. The effect will be even bigger spikes in oil prices, and China will get a steep discount with the increased buying power of its yuan.
At the risk of being a commercial for an ASAE product, I'm going to say this is why I love the Invitational Forum on Leadership & Management, where Rubin spoke. What does any of this have to do with association management? Other than a few affected industries, not much directly. Indirectly? Everything.
Again, to quote Rubin: "There's not an airline operating today that's profitable with $100 oil." You know how you feel when you find a good airfare, say New York to Chicago for $150? What's it going to mean for your conferences, events, and even board or other volunteer group meetings that require travel when you're positively giddy at finding New York to Chicago for $650?
Another example: produce markets and supermarkets are byproducts of the industrial revolution. Still it was only 20 or 30 years ago that you started seeing fruit from halfway around the world showing up in February. Would you pay $10 for a single Chilean orange? Me neither, so we'll likely revert to the way it used to be just a generation ago: your fresh produce is going to mirror your local seasons. Not only did the price tag for getting there get ugly, the cost to feed meeting goers spikes, too. And as a special kick in the teeth, you'll have fewer options for the additional money.
Beyond meetings and capital T travel, it will affect how associations are staffed. Will the trend be more remote work or locating in high population density areas? (Probably both.)
And of course, there is how such changes will affect your members in their industries and professions.
According to Rubin we're facing a new economic reality. It's easy to see the logic. Supply is finite, and production is either topping off, or has already topped off. Demand is also increasing rapidly, and alternatives are expensive or need years of development. What can you do with this information? Admittedly, probably not much right now or in the planning for next year even. What can you do is be wary, keep an eye out, and spend some of whatever thinking time you have thinking about what triple-digit oil will mean for your association.
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