The 2009 View: Globalization may be Thwarted as a Result of Climate Change and Diminished Oil Supply

by Margaret Loncki

Just how devastating are the potential effects of both global warming and peak oil on global trade? Fred Curtis, professor of economics and environmental studies at Drew University, explains that the effects are potentially disastrous. Curtis points out the four main characteristics of climate change are capable of undermining global trade: increased temperature, rising sea levels, increased precipitation, and increased hurricane severity. Curtis also explores how peak oil will play a role in global trade. Peak oil, a point at which maximum oil output is reached, will result in an increased gap between oil demand and oil supply leading to increased oil prices. Increased gas prices lead to less cost-effective shipping, and therefore, discouraged international trade. Curtis concludes that current climate change policy is too insignificant and will be unable to mitigate the effects of decreased international trade.

Increased temperature causes engine combustion to be less efficient causing all types of shipping to be less cost-effecting. Increased temperatures also decrease the amount of water in inland rivers resulting in the inability of large vessels to bring goods inland. Curtis suggests that rising sea levels threaten shipping infrastructure at low sea level such as ports and coastline airports. More frequent and intense precipitation as well as increased hurricane severity will most certainly result in more common flooding, slowing, or potentially temporarily stopping, shipping operations as well as transit speed. The impacts of global warming will most certainly increase the cost of freight-shipping, incentivizing manufacturers to produce products near the market in which they are to be sold. Importantly, this will decrease division of labor and increase the cost of production.

Increased fuel prices as a result of peak oil will similarly affect global trade. Increased fuel prices, as a result of high demand and low supply, will also increase the cost of global trade, making it no longer beneficial to produce products in distant locations. Infrastructure will have to be created near product markets in order to decrease shipping cost thwarting Globalization. Current climate change policy has been too insignificant to prevent the effects of global warming mentioned above. Although more policy needs to introduced in order to prevent further environmental decline, it appears that the peak of globalization will soon be behind us.

Curtis, F., 2009. Peak globalization: Climate change, oil depletion and global trade. Ecological Economics 69, 427–434.

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