free html hit counter Peak Oil Debunked: 209. THE ULTIMATE PEAK OIL HERESY

Tuesday, January 10, 2006

209. THE ULTIMATE PEAK OIL HERESY

The doomerosity scale runs from 0 (peak oil will be a non-event --Marshall Brain) to 8 (back to the stone age --Richard "Olduvai" Duncan). Virtually everyone in the peak oil community falls on that continuum, disagreeing only about the severity of the coming economic slump.

But notice that the doomerosity scale doesn't cover the whole range of possibilities. What if peak oil is very much NOT a non-event, because it causes a boom rather than a bust? Why are we so sure that the economic impact of peak oil will be non-stimulative?

Think about the economics of retrofitting and change-overs. For example, consider the switch from video tape to DVD. People are always saying "It's those damn companies. They change the format so you have to buy the new player." You hear similar complaints about the upcoming switch to digital TV, which will make conventional TV sets obsolete. "It's just a conspiracy by the TV manufacturers to boost sales." In these contexts people see changeovers as a form of growth, at least in terms of corporate sales. You could say the same thing about the conversion of the telecommunications network from copper to fiber optic. That involved a hell of a lot of jobs -- i.e. employment growth.

It seems that peak oil discussions often end up with a pessimist saying: "We're screwed. The only way out would be to retrofit the whole society, build new power plants, replace the vehicle stock, rebuild cities, deploy electric car charging stations, refurbish train lines, install energy saving equipment everywhere etc... And that's impossible." But what if it isn't impossible, and that's exactly what we do? What if peak oil gives a massive boost to the economy, and starts driving up other stocks, just like it is driving up the stock of Boeing? What if that trend becomes so obvious that people start saying: "Wow! Business is going gangbusters with this peak oil thing." Betting on that outcome might be quite lucrative because it's so contrarian, and so few people expect it. Meanwhile, the people invested in oil might be left holding the bag, watching their oil stocks droop as sales of conservation products and alternatives skyrocket. They'd be like a guy who knew whale stocks were peaking, and was positioned to clean up in the futures market when the price of whale oil went through the roof.

Anyway, it's good to think through all the possibilities. Why are we so sure that peak oil will cause a bust rather than a boom?
-- by JD

17 Comments:

At Tuesday, January 10, 2006 at 5:53:00 AM PST, Blogger JD said...

Y2K is another example of this phenomenon: The Y2Kers expected computers to crash and bring down civilization, but in fact, a large part of the problem was solved simply by people going out and buying new Y2K compliant computers. So while the Y2Kers eagerly watched their stock tickers, waiting for date foul-ups to crash the stock market, computer owners with Y2K problems were all out buying new computers, causing stocks to (ironically) rise.

 
At Tuesday, January 10, 2006 at 7:53:00 AM PST, Blogger Joel123 said...

So much of the scarce oil issue sounds positive. Cleaner energy (nuke and renewable), revival of local domestic agriculture and small manufacturing, expansive of mass transit, booming inner city development, booming oil and gas sector I don't know where to stop. Doomernomics is mostly wishful thinking by "hate America" ists

 
At Tuesday, January 10, 2006 at 8:49:00 AM PST, Blogger Quantoken said...

There is a fundamental difference that all previous science and technology progresses are propeled by abundant energy supply. And from now on the picture of abundant energy supply is permanently changed.

Amoung the many things we invented, not a single thing is invented that does not utilize energy. There is one exception which is called perpertual motion machines. Many of these type of machines were patented. But some how none of them are commercialized. Are you suggesting that now that we have an energy crisis, we are going to see perpertual motion machines going into main stream applications?

Let's face it, you can not invent anything that breaks physics laws or physical limits.

 
At Tuesday, January 10, 2006 at 9:45:00 AM PST, Blogger John Markos O'Neill said...

I think the potential for an economic boom due to an increase in petroleum cost is quite real, JD. By continuing to live in the San Francisco Bay Area and work in technology, I am, in effect, betting on it.

Even if the economy in general goes into recession for some time, certain sectors of it (renewable energy, for example) could boom. If you live in the right place (one with lots of sun, wind, or waves), you might think things are going great.

 
At Tuesday, January 10, 2006 at 10:15:00 AM PST, Blogger The Masked Lemming said...

JD,

You're right, yet again. Case in point. The doomers often point out that "people fight wars over oil, and these wars tend to drive the countries prosecuting them into bankruptcy."

I say "poppycock!!!" Look at the war in Iraq. A recent study says it's costing us a scant 1-2 trillion dollars. That's peanuts for us. Besides, it will infuse the weapons makers, oil companies and other patriotic American corporations with lots of money. So in the end we all benefit.

Same thing with all this claptrap about "GM going bankrupt." I say "who cares?"

GM going bankrupt and raising unemployment rates will simply increase the demand for security forces and crowd control technology once people start to riot. This will be great for those patriotic companies like Blackwater!!!

I say "Bring on Peak Oil!"

TML

 
At Tuesday, January 10, 2006 at 10:17:00 AM PST, Blogger The Masked Lemming said...

"So much of the scarce oil issue sounds positive. Cleaner energy (nuke and renewable), revival of local domestic agriculture and small manufacturing, expansive of mass transit, booming inner city development, booming oil and gas sector I don't know where to stop."

Exactly!!! Plus lots of money for weapons makers and defense contractors like Blackwater!!!

If you hate Hallilburton and Blackwater, you hate everything great about America!!!

TML

 
At Tuesday, January 10, 2006 at 10:56:00 AM PST, Blogger Chris said...

jd: Y2K is an example of a problem that could have been very serious (although not likely as serious as some would have claimed--no aeroplanes falling out of the sky) but was recognized and successfully mitigated. The fact that the people who did such a good job of mitigating it aren't given any credit for it is unfortunate. Whether Peak Oil is successfully mitigated remains to be seen, but I don't think it looks too good.

 
At Tuesday, January 10, 2006 at 11:49:00 AM PST, Blogger Quantoken said...

There are important differences.

The Y2K problem is a technicality problem, and can be mitigated by utilizing technical expertise. You have a computer program that contains a Y2K bug, and you spend time to fix it, and run tests to make sure it works. On the other hand, the peak oil is not a technicality problem. It's a problem of physical resource limit. You can write and modify computer code easily, but you can't generate petroleum.

On the Y2K problem, there is no controversy. EVERY one agrees that if a computer code can not handle year 2000, it is a bug. And bugs in computer code can frequently causing crashes and series consequencies. EVERY ONE agree, and EVERY ONE agree that tremendous amount of efforts need to be invested to mitigate that problem. And every one agrees exactly how urgent the problem is: the exact time is new year's day 2000. So there was never any disagreement and we did pull out huge resources to pull it through.

I do not see that happen in the case of peak oil. The equivalent of fixing Y2K problem, before Y2K, in terms of peak oil, is quivalent to pulling something out like figuring out controled nuclear thermal fusion, and ramp it up to massive industry scale, and develope other alternative energy sources in massive scale, within just 5 or 10 years. I do not see it happening.

 
At Tuesday, January 10, 2006 at 1:04:00 PM PST, Blogger Roland said...

As I see it, Peak Oil will come in several stages.

The first is beginning right now — with mildly high prices, people want mroe fuel-efficient cars, boosting the car industry (or at least the more innovative Japanese firms). The same goes for airlines.

The second is when oil gets a bit higher, and people want to live closer to work to avoid driving, or maybe telecommute, and demand better public transport — boosting the building industry, the bus/train/tram/ferry industry and the IT industry.

The third, which may come before or after the second, is alternative fuels such as coal liquefaction, alternative oil and biofuels — boosting farrmers, the coal industry, the construction industry and certain regions like Canada, Australia or Brazil.

The fourth, which will probably come gradually over time, is renewable energy — and we are already seeing how good a subsidy expensive oil can be for renewable energy, with booms in solar, wind and other power sources (including, sadly, nuclear).

There doesn't need to be any forward planning for Peak Oil for it to have positive effects in any of the above-mentioned sectors. The question is, can these positive effects outweigh the negative effects? I think it's quite possible.

It reminds me of JD's post on Liebig's law: "people are not going to die, lifestyles and approaches are going to die". In other words, high oil prices practice natural selection on companies (GM vs. Toyota) and economies.

 
At Wednesday, January 11, 2006 at 2:10:00 AM PST, Blogger popmonkey said...

hey lemming, you were funny and made your point about 2-3 weeks ago. can you come up with something new to rant about? kthnx

 
At Thursday, January 12, 2006 at 3:16:00 AM PST, Blogger Roland said...

So I guess we have doomers, and then we have boomers.

 
At Saturday, January 14, 2006 at 12:54:00 PM PST, Blogger AustinElliott said...

As a peak-oil believer, I found this is a brilliant and original take, as sort of a "doom and boom" point of view. As the capitalist system is challenged, perhaps as never before, by hydrocarbon scarcity, it will respond with a tsunami of "creative desctrution." But the dislocations coming will be intense and very painful for those who have dedicated their careers to industries that vanish.

Also note that if biofuels grown in the USA replace a significan percentage of oil imports, we will vastly improve our balance of trade, create many new jobs, eliminate the need for agricultural subsidies and improve the environment. Those who doubt the potential of biofuels, should see what is happening in Brazil, today, right now, and read about biodiesel from micoralgae on the DOE site.

 
At Wednesday, April 19, 2006 at 1:58:00 PM PDT, Blogger Floccina said...

More jobs is not good if it means more work to produce a given amount of goods and services. Unemployment is more often a result of rapid change and of government policy. There always plenty of work to be done. If I can more energy out of fewer hours worked that is good. If get less energy for more hours worked that is always bad.

But I do agree that peak oil will not be the end of the world as we know it but it may lower standard of living for a few years as a result of more man hours required to produce a given unity of energy (energy is not really what we consume but comfort, transportation, light and other goods and services).

 
At Monday, June 11, 2007 at 5:54:00 AM PDT, Blogger Caseygrl said...

I think like with all things, eventually people will start the switch from oil to other fuels. In some respect, it's already happening (i.e., huge solar power plant being built in california and ireland, the rise of popularity slowly occuring with alternative fuels). As with the video cassette to dvd switch, 10 years ago I wouldn't have thought that someday I would be using dvds, but now, I barely see video cassettes anymore in stores. My neices and nephews don't even really know what a video cassette is, all they've known is dvds. So progress takes time, but eventually we'll get there.

 
At Tuesday, January 22, 2008 at 9:24:00 AM PST, Anonymous Anonymous said...

"There is a fundamental difference that all previous science and technology progresses are propeled by abundant energy supply. And from now on the picture of abundant energy supply is permanently changed."

Point #1 abundant energy supply is true.
Point #2 picture of abundance is permanently changed.

I'm going to argue a little with point number 2.
I think by implication, that this point is really saying "we will see scarcity where before we saw abundance".

I don't think that's really truly the case. What it means is that it will cost more to increase the abundance but once the percentage ratios of expensive energy to cheap energy moves higher we will start to invest in greater efficiency.
The advantage we have is that we don't need to FIND more oil.
We need to BUILD more stuff.
Such as windmills, electric trains, electric cars and transmission lines.

We are moving from the hunter gatherer stage of energy production to an agricultural stage of energy production.
With practise we will get better and more efficient.

The only possible glitch would be a war with Iran right now, which would bring a potential shock induced collapse down on our heads. Let's hope our leaders are not so stupid.

 
At Wednesday, January 6, 2010 at 3:45:00 PM PST, Anonymous Hello! said...

@ The Masked Lemmig:

Hang on a second... the cost and benifits of the Iraq war being thought of in this way is at best cold and at worst rather selfish and pretty disgusting if you ask me.

Estimated Iraqi deaths as a result of the war are over 1 million, are they benifiting from the money being spent on weapons and energy companies?

Do you think these "patriotic" companies like blackwater care about your well being? Their prime focus is and always will be to make a profit... by putting "security" operations in the hands of a profit making organisation is dangerous if you ask me as they aren't accountable to any electorate. (after re-reading your post im hoping I missed some underlying sarcasam the first time round...)

@ JD

Pretty good blog you've got here, although I nearly didn't click on it because of the name I thought it be some "don't worry there's enough oil forever" / uber-right wing agenda going on, but was pleasantly suprised!

Peak oil definatley offers a potentially big change and with it some good opportunities to improve many different aspects of peoples lives as energy is central to most activities... I just hope that these changes aren't blindly taken in the search for profit in future "green" markets whilst missing a great chance to make some positive changes!

 
At Sunday, March 14, 2010 at 1:55:00 PM PDT, Blogger Helga said...

This is very creative, and a bit reassuring. Two points though: the coming crisis is not just about transportation - it is about systems of food production as well as a lot of other production systems. Secondly, the efficiencies of which you speak will cease to be meaningful if all the farmers' market produce is transported by other means (cycles with trailers, ATV's, horse-drawn wagons...) than the vehicle fleet you mention. The declining availability of petroleum and its rising price eventually will mean that the food system will use virtually no petroleum in transport AND production, rather than just less.

Systems of long distance transport will no doubt get more and more efficient, as profit ratios shrink with rises in fuel costs.

This at least gives us some reason for optimism concerning the continued availability of some of the other tropical products in the other latitudes. Especially things that don't spoil, like the beverage crops and spices... and there likely will be a day when a combination of sail, solar power and some kind of liquid fuelled engine may be a sustainable system for long range transport. But not on the scale we see today.

Moreover, there is more going on in the overall picture than Peak Oil. Even without the possibilities of a changing climate, there are other resources, like rare earth metals, topsoil, fresh water and world fish stocks all being depleted at an accelerating rate. And a human population, some have suggested, already in serious overshoot of the planetary limits.

Industries based on retooling in the face of declining oil supply are a positive aspect of the future; as are all the gains to be made by increasing conservation. But have you seriously considered the long range consequences of continuing economic models based on growth rather than stability?

 

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