The Effects of Climate Change and Oil Depletion on Global Trade

The global market depends on reliable, inexpensive transport of goods along long-distance supply chains.  Global warming and oil depletion have the potential to dramatically alter transportation costs and freight movement.  Fred Curtis argues that climate change and oil depletion will result in “peak globalization,” after which point the volume of world exports will decline (Curtis, 2009).  By examining scholarly literature on the pathways of the effects of global climate change and oil consumption on global trade, Curtis takes a unique look at the effects of climate change and natural resource management on human goods and transportation, and concludes that current policies designed to mitigate climate change and oil depletion will be ineffective in halting the onset of “peak globalization.” Cattrin O’Brien
Curtis, F., 2009. Peak Globalization: Climate change, oil depletion and global trade. Ecological Economics 69, 427–434

Fred Curtis examined existing scholarly literature on globalization and the environment in tandem with data on peak oil and climate change.  While most existing scientific literature has focused on “the impact trade treaties and increased global trade flows have on the ecosystem,” Curtis examines how environmental changes have the capacity to alter human trade.  In particular, Curtis focuses on oil depletion, as oil is heavily used in global transportation, and on the effects that global warming will have on oil use and transportation infrastructure.  Finally, Curtis examines both real and proposed policies designed to mitigate climate change and oil depletion, and concludes that these policies are “too little and too late” to prevent peak globalization, and will not be able to protect global supply chains.
Globalization, or the liberalization of international trade among nations, has caused a rapid increase in global economic growth and international trade.  This growth in global exports has been supported by the creation of a massive global transportation infrastructure, as goods are transported worldwide over roads, railways, ports and airports.  In order for this long-distance trade to be efficient, transportation must be cost-efficient, rapid and predictable.  The physical impacts of global warming will reduce this efficiency, and increase the cost of transportation.  Melting arctic ice is expected to cause sea levels to rise by three to six feet by the end of the century, which will threaten coastal roads, railways, port and airport facilities.  Greater evaporation due to rising temperatures is expected to lower water levels in intercontinental lakes and rivers, which will reduce the amount of goods that can pass through these waterways, slowing transportation and increasing costs.  Climate change is expected to cause an increase in catastrophic natural disasters similar to Hurricane Katrina, which can have devastating impacts on transportation infrastructure.  Climate change is also predicted to have devastating effects on agriculture and manufacturing, as higher temperatures and changes in precipitation decrease crop output and make the transportation of manufactured goods less predictable and more expensive.  Overall, Curtis argues that climate change will damage physical infrastructure, cause delays in freight transit, and increase costs to the extent that global warming will “undermine the economic logic of current supply chains.” 
The effects of climate change on globalization will be reinforced by the effects of oil depletion.  Petroleum is the most common fuel used for the movement of goods, and it has been predicted that peak oil will occur prior to the year 2015.  After this point, world oil production will begin to decline, and the price of crude oil will rise significantly and become much more volatile.  Shortages and interruptions in oil supply will be common as world oil continues to decline.  Oil depletion will have a huge effect on the global trade of goods.  Air freight uses the most fuel per ton-mile of all transportation modes, so it will be the most adversely effected by increased oil prices.  Air speeds can be slowed to conserve fuel, but this would decrease the efficiency of the supply chain.  Container ships use bunker fuel oil, which is untaxed on international journeys and therefore will not be as impacted by oil price jumps as air travel.  However, Curtis notes that “it is possible for ocean shipping costs to rise high enough to impact the global sourcing of production.”  High oil prices also destroy global supply chains by impacting goods production, as higher oil prices result in increased food production costs.  The current global trade market will be greatly impacted by higher fuel costs, slower movement of freight and potential fuel supply interruptions as a result of peak oil. 
Curtis argues that the current policy responses to climate change and oil depletion are too late and too costly to prevent peak globalization.  Climate change policies designed to reduce greenhouse gas emissions could have direct impacts on globalization, but these policies have not been effectively implemented.  These policies, which would involve taxes, regulations and/or cap-and-trade systems, would not prevent the shrinking of global supply chains.  Policies designed to slow the onset of peak oil primarily include increasing vehicle fuel efficiency, fuel taxes, and improving oil recovery techniques using new technologies such as hydraulic fracturing.  The author argues that even if the most ambitious of these policies were implemented, the impending worldwide oil crisis would not be avoided.  Curtis concludes that globalization will be threatened as long as climate change and oil depletion continue, and the only solution would be for production and trade to become more local or regionally-based. 

2 thoughts on “The Effects of Climate Change and Oil Depletion on Global Trade

  1. crude oil in the first quarter compared with a year earlier to meet higher fuel demand from car owners and factories in the world’s fastest-growing major economy..


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