A few years ago, I went to the University of Waterloo in Ontario, Canada, and had a few economics classes with an excellent professor and economist, Larry Smith. I recently asked Larry the following: “Is it possible that economic growth could be over? forever?”

This was his answer:

There are several aspects to your question.  First, economic growth is not over, and certainly not forever.

While conventional oil [that is cheap] reserves many be nearing their limit, there are many untapped unconventional sources [that is expensive] that await their full exploitation.  For example, oil sands, shale and coal itself.  And nuclear power sources can, in due time, supply ALL our needs if necessary. And it will be safe if we tolerate the expense of safety features.

What we are seeing is the end of cheap energy. And this will [is] disruptive of our life styles and industries and economies. But we will adapt, as we always have, with pain and much complaining. But why would this slow or stop growth? Expensive energy production afer all adds to GDP.

Growth is about the generation of value, NOT physical goods. And already most of our production [about 70%] is services.

As well, high oil prices will spur the reduction of greenhouse gases and the increase of conservation measures. We have ALREADY reduced BTUs per dollar of GDP.  This will continue.

The personal challenge to you is to adapt yourself as a producer and consumer to the new realities.  And prosper as a result.

I wish you success.

It’s worth noting that Larry is mainly talking about the Canadian economy. Certainly some countries will be much worse off, but the lesson here is the same. High prices have the magic effect of making people finally change, as non-oil products and energy sources become comparatively cheaper, on a scale that government intervention or environmental campaigning could never achieve.

These high prices will be the kick in the ass we need to make major changes, changes which will improve our environment, require huge effort (ie. create many jobs), and potentially make our countries and our world a much better place to live.