Economic localization is the process by which a region, county, city, or even neighborhood frees itself from an unhealthy dependence on the global economy and looks inward to produce a significant portion of the goods, services, food, and energy it consumes from its local endowment of financial, natural, and human capital (see Areas of Focus). Economic localization brings production of goods and services closer to their point of consumption, reducing the need to rely on long supply chains and distant markets so that communities and regions can, for the most part, provision themselves.

While it is certainly not possible to produce every kind of good and service locally, economic localization seeks to restore an efficient balance between local production and imports that fully accounts for the social and environmental costs neglected by free trade agreements. Local production strengthens the local economy, creates worthwhile jobs, and increases local self-reliance. Refocusing the economy locally will necessarily revitalize the community, increasing camaraderie, cooperation, and support for local culture and a sense of place.

Local production for local consumption also reduces the need to ship materials and products large distances. Reducing transport lowers CO₂ and other pollutant emissions and reduces dependence on burning fossil fuels (see In Context: Climate Change and Peak Oil). This is particularly important considering that the transportation sector is the largest emitter of CO₂ and a near consensus of scientists believe that global CO₂ emissions need to be reduced 60-80% to have a possibility of stabilizing the climate. This will not occur without reconfiguring our economies and cities for much less transport and energy consumption.

In light of widely predicted oil shortfalls in the years and decades to come, localization appears to be inevitable. Oil fuels 90% of global transportation. Like any other non-renewable resource, it exists in finite quantity, and at some point will reach a peak annual extraction rate; this phenomenon is called "Peak Oil". A growing number of industry experts predict that the rate of global oil extraction will peak within two to five years. According to the U.S. Department of Energy-funded "Hirsch Report," it would take two decades for an orderly transition off our oil-centered transportation system. And this report did not address all the other things for which we use oil such as plastics, synthetic fabrics, artificial rubbers, fertilizers, and pesticides. As oil peaks and becomes increasingly less available and prices rise, there will be an unyielding economic push towards localization as well as regentrification.

Ever-rising gasoline prices will force many long-distance commuters to relocate closer to their jobs, increasing demand for urban housing. This will accelerate the regentrification of urban areas and the corresponding displacement of low-income urban residents to slums and older and outer suburbs. While the suburbs may initially seem attractive for some former urban residents, they will lose their luster as gasoline prices continue rising and wealthier residents abandon suburbia for the city. Further, as energy and fuel prices continue to rise, urban and suburban families living from paycheck to paycheck (or on the margins) and transport-intensive businesses will be increasingly stressed, if not destitute. Without swift response and action, the middle class will be next to feel the pain of utter dependence on a dwindling resource and inadequate preparation for the transition to an intensely local, post-petroleum future.

Therefore, choosing to progress now to a more localized economy will be the wise move, and less painful if it is planned for and managed well in advance of world peak oil production. The obvious starting point is an assessment of what each community already possesses both in natural and human resources and their abilities to produce and store food, energy, water, essential goods, and community currencies with the aim to integrate these efforts into a parallel public infrastructure that can serve as a safety net for when times get hard, and as a launch pad to scale up local operations. The process will require experimentation since each community has different circumstances including natural systems, built infrastructure, community resources, and culture.

While there is a relatively large amount of activity in local food and energy in the Bay Area, it is fragmented and is insignificant with respect to provisioning the Bay Area. In the city of Willits, California, a group called Willits Economic Relocalization (WELL) is conducting an assessment to understand how much of their needs could be met locally. Several other communities and municipalities are in various stages of assessing their vulnerability to oil shocks and how they might localize their economies (see Models for Inspiration).

Economic localization offers the Bay Area a tremendous opportunity to disengage from the zero sum game of competition with other states and nations for the attention of global corporations and export market niches and to reap a wide array of lasting rewards for the people who live and work here (see Benefits of Localization). These include a restoration of manufacturing jobs and economic linkages, a more diverse and resilient economic base, increased food and energy security, a workforce with more skills and entrepreneurial know how, less urban sprawl, and a much greater pool of financial capital that recirculates in the local economy rather than leaking out to other regions and nations. Localization also enhances democratic decision-making by shortening the distance between policymakers and the people and communities they represent thereby diminishing the economic power of distant, unaccountable entities like the World Trade Organization and multi-national corporations.