395. OIL BULL FALTERING?
Since the crash started in summer 2008, the general view in the peak oil community has been that the current low prices are an anomaly, and that prices will soon return to their upward trajectory. A number of voices are starting to question this view. The main issue seems to be this: Is the economy going to actually recover any time soon?
It reminds me of an inconsistency I often noticed when oil prices were skyrocketing. Many doomers were simultaneously claiming that: a) the economy was dying, and b) oil prices would continue to go through the roof. Something had to give, and as we all now know, that turned out to be claim b).
Now we've got the same contradiction all over again. Naturally the doomers are jazzed that the credit crisis is sending the economy into a death spiral, but at the same time they keep talking about oil prices soaring "when the economy comes back". It doesn't add up. If the financial crisis is a death spiral, the economy isn't going to come back for a long time. I keep wondering, are they just in denial, hoping for their oil portfolios to come back?
Consider the Asian Financial Crisis of 1997. That was peanuts compared to what we've got happening now, and it knocked the price of oil down to $10 a barrel -- equivalent to only $13 a barrel in 2009 dollars. It would seem that oil has a lot more room on the downside.
The Wall Street Journal Blog is starting to wonder:
With already tottering demand getting even weaker, oil bulls are having second thoughts. Barclays Bank, which for months has warned oil prices will rebound because of supply shortages, slashed its 2009 forecast for Brent crude to $61 from $70.Another skeptic says the unthinkable in Your Oil Stocks Aren't Coming Back:
Remember when Intel (INTC), Microsoft (MSFT), Dell (DELL), Lucent (ALU), Yahoo (YHOO) and Cisco (CSCO) ruled the markets? There was an era, roughly 1997 to 2000 when those stocks actually mattered. They were important companies doing big things in terms of providing the technology needed for the next century’s communications and internet build-out. And then, they just didn’t matter anymore. Once the dot com bubble burst, every bounce or rally in these names was basically a selling opportunity…for 8 years and counting! See the above chart for a notion of how frustrating it must have been to stay positive on NASDAQ tech names.Traders talking about "dumb money" in the oil markets:
It took a long time for people to get it through their heads that these stocks had seen the best valuations and prices that they would ever see. Investors couldn’t imagine a world where these stocks would no longer be important, but with each passing quarter and year, these NASDAQ Generals diminished in stature and market cap.
I believe that this story is repeating itself in the oil patch. Market participants seem to be in a state of disbelief that Chesapeake (CHK), Transocean (RIG), National Oilwell Varco (NOV) and ConocoPhillips (COP) aren't important anymore. These stocks may have have seen the best levels they will ever see, at least for a long time.
Flynn expects oil prices to eventually drop well below $30 a barrel in coming months as manufacturers cut operations and millions of laid off workers stop commuting to work.More in the same vein from Rigzone (hat tip to OilFinder):
"We're getting ready for a tailspin, but you just don't know what's going to happen," Flynn said. If it weren't for the new federal stimulus package and promises of further OPEC production cuts, "we'd probably already be there."
Trading on the Nymex has been erratic because of a influx of "dumb money" entering the market, analyst Stephen Schork said. Amateur investors are flocking to energy funds that have bet crude prices will eventually spike again.
"They're looking at the fact that crude went to $150 a barrel a year ago, and its in the 30s today," Schork said. "They think it's going back up."
Oil Cos' Bet on Swift Price Rebound Has Its Risks
Major oil companies are trying not to repeat the mistakes of the last price slump in the late 1990s, when cutting back on investment left them ill-prepared to meet growing demand in later years. This time they promise to maintain investment through the current price dip, but the risk is growing that a prolonged slump could stymie their plans.
If the years ahead follow the pattern of the last major recession in the early the 1980s, where global oil demand shrank during the downturn and remained well below production capacity for years, even as the recovery accelerated, prices may stay low for much longer than current expectations. Steady as she goes may be their mantra for 2009, but oil chiefs may be on course for some tough choices in 2010.
[...]
We are barely six months past the last peak in the oil price, but OPEC already has 8 million barrels a day of spare oil production capacity after big output cuts, said the group's Secretary General Abdullah Al-Badri. The group is very concerned about the impact the economic downturn will have on the medium- and long-term oil demand, he said.
OPEC's spare capacity looks likely to grow. Thanks to investment in the boom years, the world's productive capacity should grow faster between 2009 and 2012 than it did from 2003 to 2008, said a report from U.S.-based consultancy Cambridge Energy Research Associates.
Companies May Face Massive Cash Outflows
If companies do not reduce their upstream investment at all during the current economic downturn, CERA said spare capacity could reach 10 million barrels a day by 2013. "This would be an unprecedented margin and would tend to undermine the oil price," the consultancy said.
by JD
posted by JD @ 6:00 AM
139 comments
139 Comments:
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Thank you!
JD
Excellent post as always.
Production will eventually drop below even lowered consumption. It just moves the day of reckoning forward while in the meanwhile leaves us to navigate through a global depression. Not exactly a cakewalk.
I think if it's true the world will become a much different place. Oil has major impact to the whole world. We will need money, time and effort to prepare for this to happen.
This info. is boring and anal, but it sheds light on how big last year's oil glut was.
I've been studying last year's oil production graphs (via Oilwatch Monthly). During the months of August and September, when oil prices were beginning their Wiley E. Coyote free fall, oil production took a massive slump: a little more than a million bpd drop in August, and another million in September - both resulting mainly from declines in non-OPEC production.
This is nothing to be concerned about. The August plop was due to coincidental, but momentary plummet among a few non-OPEC producers; such drops occur time-to-time, with rebounds occurring a month or months later with no consequence (for example: Azerbaijan experienced a rough 400,000 bpd drop in September of 2007, which bounced back the following October as if nothing happened). The biggest offender was... Azerbaijan(!), with a 500,000 bpd drop in August.
In September, another massive bomb busted: a feisty hurricane season in the Gulf of Mexico. This resulted in a massive shut-down of Gulf oil production (which accounted for 25% of America's 5 mbpd of crude production).
Non-OPEC production regained most of its lost luster in October.
While I don't have any official numbers of how big the glut was, it's safe to suffice that it was big; and to think... if August and September didn't see such sizable cuts, OPEC and Russia would have been confronted with an even BIGGER glut, and would have confronted even larger financial problems. Today, demand for oil continues to drop today despite cheap oil, despite repeated production cuts. What’s very impressive is the drop in OCED demand (page 5) of 4 mbpd from a peak of over 50 mbpd in 2005.
Anyone can feel free to examine the graphs and come to conclusions of the glut's size; I plan to blog about this on my site later this week.
Good post as always, JD.
mos6507,
Eventually?
Eventually the sun will burn itself out. So what?
What kind of timeline are we talking?
Brewskie,
Good post. I'd like to take a look-- maybe after work.
the Federal Reserve, as always, does it's job, futzes with interest rates, and breaks the back of a current inflation. and as a side effect, throws whole heaps of jobs into the volcano of such inflation busting.
as a side effect, Ben exposes the glut that is crude oil, and the peak oil Wizard's of Id.
Boop Boop!
-Bob Dobb
Global oil production has increased just 1mm/barrels/day over the past 6 years. If that isn't near a peak I don't know what is. Why would production be flat when prices were going through the roof?
Peak oil is basic science and pretty irrefutable given the physical properties every single oil well has ever exhibited.
Using the stock market to determine oil reserves is not a reliable method. Just look at the housing and dot.com bubbles for examples where Wall Street incorrectly priced securities.
"Global oil production has increased just 1mm/barrels/day over the past 6 years. If that isn't near a peak I don't know what is. Why would production be flat when prices were going through the roof?"
Prices weren't going through the roof until recently (like the last couple of years). Right during the middle of the price spike, production was increasing, yet before during and after the price spike, demand was/is waning. Why would the oil companies/oil producing nations ramp up oil production when the demand is being met? Even before the subsequent collapse, oil production spare capacity was rising. Actually producing more oil would have been idiotic.
DoctorJJ
Brian,
Global oil production has increased just 1mm/barrels/day over the past 6 years. If that isn't near a peak I don't know what is. Why would production be flat when prices were going through the roof?
Lots of fallacious reasoning here.
1. First off, I'm not quite sure where you get your "1 million bbl/day" figure from, seeing as the EIA shows that oil production was 67.17 in 2002 and then 73.27 in 2007. BP's figures are similar. Since production increased from 2007 to 2008, we can assume that production was AT LEAST increased by 6 million bbl/day from 2002 to 2008.
Production is not flat. In fact, it's kept up with demand fairly well, for better or for worse.
Peak oil is basic science and pretty irrefutable given the physical properties every single oil well has ever exhibited.
As Robin Mills points out, production of a specific well and a region are often different things, and while the "basic" fundamentals of oil production are well known, that doesn't mean that we know how every well in every region and every discovery will play out. Even creaming curves are fussy, despite their relative utility compared to simple linearization of production.
Simply slapping a curve on data doesn't make it "scientific," and it sure as hell doesn't mean your model has predictive value.
"Naturally the doomers are jazzed that the credit crisis is sending the economy into a death spiral, but at the same time they keep talking about oil prices soaring "when the economy comes back". It doesn't add up."
Sure it does, you're choosing to ignore the parts that don't suit your purposes.
Will the economy "come back" to where it was, with the Dow at 14k or higher? Who knows? One thing is certain: world leaders want the economy to "come back," and they are trying to make the economy grow. At the least, they hope to slow the rate of contraction.
The economic engine oscillates wildly without the negative feedback of smart regulation and policy making. We just saw what what a spike in oil prices can mean to a consumer economy that is weak and overleveraged.
The pressure is on to revive the economy. Given the economic pressure to grow or die, the feedback loop of our economic amplifier seems likely to cause the system to run hot and cause another series of price shocks.
The real doom or tragedy of the growth engine is the inevitable oscillations when the system run with insufficient feedback. Debt is the heat that, if not dissipated, ultimately destroys the economic engine.
I think everyone, optimist or pessimist, agrees that Obama and other world leaders are trying to bring the economy back. And Obama is at least making noises about cutting deficits while he grows the economy. A real pessimist understands that it might be too little too late; there was over $50 trillion in unfunded US mandates before the latest crisis, and tens of trillions have been added to the deficit since. And the only "cure" for this oscillating growth pattern is more deficit spending.
We should start the pre-emptive apology to millennials now; you kids are picking up the tab for this clusterfuck. They are the ones who are going to know the real doom.
Debunkers can at least claim one little sliver of truth: at least oil won't be future generations' only problem, it'll just be one of many.
HDT
Don't forget about nat gas. Platts has an article talking about how it is going to $2
$20 oil is about the same on a btu equivalent basis...just as a point of reference. Both will probably go lower than 2/20, though, prob 1.5/15 or 1/10.
look out below!
This is an excellent post. I do think a period of "capitulation' is coming, in which oil bulls crater slowly to a worsening glut.
I suspect the NYMEX exchange is manipulated, but that can't last forever. (The CFTC has all but admitted they do not have oversight powers necessary to really know who is trading on NYMEX, and to what end).
We may see another dramatic crack in oil prices again, from high 30s to low 20s, then a drift down to $10 a barrel.
When you have a runaway glut of a fungible commodity, prices can almost go to zero.
Oil stocks? Some pay a good dividend, and that may be enticing. BP is offering a yield in excess of 8 percent. If you think prices go up within five years, that might be a buy.
On the other hand, the allusion to dot.com stocks is not hollow. Some sectors fall down, and stay down. Even the broader US stock market looks like it is years away from getting back to levels reached in the Clinton years (the good old days). And when will we see 5000 again on the NASDAQ (as it reached in 1999-2000)? Could be decades more.
Another spooky thought: Stocks in Great Britian are selling for seven times earnings, while they are still at 12 times in the US.
This could get uglier.
Production will eventually drop below even lowered consumption.
True, but the issue I'm raising is: How long is "eventually"?
I'm taking a class right now on Oil and the Middle East. Our professor sent us a post from an email list he participates in that touches on this issue by Edward Morse. He makes the following interesting point, largely congruent with JD's analysis:
"At every price spike over the past sixty years, global petroleum product demand has returned at a significantly lower level. Before 1973-74, for example, global demand was growing at over 8% per annum; the late 1970s recovery reduced the path to just over 4%. The price spike after the Iranian Revolution reduced to demand again by half, to just over 2%; the price spike that accompanied the UN embargo of Iraqi and Kuwaiti oil in 1990, short lived as it was, reduced demand to 1.5-1.8% annual growth. I believe there are very good reasons to believe that demand will recover in the 1-1.2% per annum range, with the US, Middle East, and China taking the lead in the new paradigm."
He goes on to note that peak oilers don't take into account the rapidly accelerating production of natural gas in the US and elsewhere:
"The US natural gas market is pointing to a new transformation with shale gas that can be tapped at today's relatively low prices. This past year US natural gas supplies rose by an astounding 9-10%. The Barnett and Haynesville natural gas plays are world class.
The leading firm in these just predicted (the opposite of what Total has been predicting) that the Haynesville alone has 700 trillion cubic feet of commercially retrievable natural gas. That would make the area larger than the Qatar/Iran-shared North Field. And it's only the beginning.
It's not just North America (where the Canadian shale resource base is leading to concrete plans to export LNG from the West Coast), but Australia and Europe as well. Europe is as rich a shale gas play as the US -- the UK, France, Belgium, Germany, but especially Hungary, Poland and Romania are likely to be the target of shale gas investments, perhaps accelerated by the geopolitics associated with reliance on Russia."
I think his analysis is pretty spot on, and Pickens may be on to something here: there is potential for natural gas to displace other petroleum fuels to a significant extent.
Good post. We won't see the 10 mbpd spare capacity because the world ends in 2012.. kidding of course.
This is good news to me & a good post. I just hope this doesn't hurt renewable energy efforts & us getting of the oil teet. It hasn't yet, but what if we have 5 more years of prices like this. What happens then?
JD Walters,
It sounds like your professor's a smart man who knows his stuff - learn a few things from him. Yes, nat. gas is going to be big indeed.
Opt. Doomer; Renewables get killed. This glut has legs written all over it.
JD Walters: Ask your prof if the economics of GTL (gas-to-liquids) makes any sense.
We have abundant natural gas, and we can convert it to a near oil, whammo! Another 30 years until the next "oil shortage." There are gigantic reserves of gas everywhere.
Actually, JD and Ari, this would make a great post. In the last couple of years, the outlook for natural gas has gone from potential scarcity to glut and abundance for decades.
Okay, is GTL feasible. I know a huge 650,000 barrel per day GTL plant is being built by Shell, I think in Qatar.
(Also a potential 1 mbd CTL palnt in Indonesia, but that's another story).
Shessh, just 10 such Shell GTL plants worldwide, and we are talking 6.5 mbd of production, enough to change a market from tight to glut.
Benny,
Your figures are off. The Shell GTL plant in Qatar will be coming on line in 2010 as the largest GTL plant in the world, with a capacity of 140,000 barrels per day of high quality GTL fuels and products along with 120,000 boe of condensate, liquid petroleum gas and ethane. That's more like 260kbd. The costs are also very high: $20 billion for the facility. The project was launched in 2006, so completion time should be roughly 4 years.
GTL is definitely a good niche product, but not a panacea.It might be more straightforward to use the gas directly as a tranportation fuel, or (even better) burn it to drive EVs and use the waste heat to provide district heating.
I have to ask, is it not possible to have a natural gas/electric hybrid? That seems to make more sense to me than an oil/electric hybrid. Then again I know nothing about mechanics.
^
OD, it's definitely possible:
"Come November (2009), Toyota will debut its CNG-electric hybrid Camry at the Los Angeles Auto show, but the company has not yet decided to put the vehicle into production."
Link
San Diego has a CNG-hybrid bus.
JD-
Thanks for the correx. It is an expensive plant, and "only" 260 kbd. Still, if the new gas drilling techniques result in a "centipede glut" of natural gas (a glut with legs), then does GTL make sense?
And has Shell learned anything, like how to build a GTL plant for less?
If we assume Shell can sell its liquid output for $50 a barrel, they gross $13 million a day, or $4.75 billion a year. Don't know taxes, profit etc. They spent $20 bil.
My back-of-the-envelope guess is that GTL is yet another technology, along with CTL, or PHEVs, or many biofuels, that promises to take off if ever oil prices are sustained above some point, like $80-90 a barrel.
The fact that new drilling techologies mean abundant natural gas for decades to come, suggest that maybe a vastly expanded network of GTL plants is in our future.
To sum up, this again means that doomer scenarios are just patho-fantasies. Sure, liquid energy may cost more in the future--but not that much more.
Still, if the new gas drilling techniques result in a "centipede glut" of natural gas (a glut with legs), then does GTL make sense?
No. You may know that I spent some years working on GTL, so I am familiar with the economics. Capital costs are so high that you need a very large quantity of stranded gas to make the economics work. There are only a few places on earth that fit that bill.
One was Qatar, which is where the latest flurry of serious GTL activity occurred. Another is Siberia, which somewhere down the line may be the next location that GTL plants start getting built.
But you need enough gas to run the plant for 25 years or so, and you have to be fairly sure that it won't find a better (i.e., more financially lucrative) home during those 25 years. Those are pretty high hurdles.
Cheers, RR
OD, it's definitely possible:
"Come November (2009), Toyota will debut its CNG-electric hybrid Camry at the Los Angeles Auto show, but the company has not yet decided to put the vehicle into production."
Excellent, thank you!
We already have the natural gas fill up stations in my state, so this could be a real possibility for me if they make production.
“Naturally the doomers are jazzed that the credit crisis is sending the economy into a death spiral, but at the same time they keep talking about oil prices soaring "when the economy comes back". It doesn't add up. If the financial crisis is a death spiral, the economy isn't going to come back for a long time. I keep wondering, are they just in denial,…”
This article and this argument are supposed to convince me everything is ‘a-ok’ for the foreseeable future??? What’s there not to get, a spiral goes round and round, with every subsequent loop being smaller/bigger, I would assume death spiral would imply a closing loop. Hmmmm I don’t follow your train of thought ” but at the same time they keep talking about oil prices soaring "when the economy comes back". The two do not contradict one another… look again!!!
As for Ari…
“Eventually?
Eventually the sun will burn itself out. So what?
What kind of timeline are we talking?”
Nice debating tactic Ari (not), criticize your opponent for being vague - something you do ALL the time in these posts, you never provide exact dates and your own arguments vary form PO is happening now all the way to it may happen within 30 year. When your opponent finally does provide a timeline or a date then you will whip out the “well there goes the ‘peakniks’ at it once more, with their absolute certainty!” line of bull. Crying wolf, does not mean wolves do not exists, it simply means there is no way of determining when the wolf is actually striking.
New Guy
Some oil speculators have stayed at the market. It will take them some time to realise that oil prices will not recover. Some oil bulls still think that the world economy will start to grow again at Q3 2009 and prices will rise (this of course if history is any guide will simply not happen) After they are totally dissapointed about the prospects of oil markets, they will sell their positions and the price of oil will fall below 20$
Benny,
I suspect the NYMEX exchange is manipulated, but that can't last forever.
Which side subscribes to conspiracy theory’s now? How is this an excellent post Benny? There’s no data, just opinion, which coincides with your own. If that is your definition of excellence, God help us all…
New Guy
Am I to understand the the ‘PO Debunkers’ have now resorted to arguing that recession is the answer to debunk Peak Oil. There’s a solution the world wants! How lame-brained is this idea. Historically speaking we’ve always come out of a recession sooner or later, so what if you are suggesting that it’s not 2010, you argue it’s later… In the mean time IEA is ‘readjusting’ their always optimistic production capacity numbers downward! So what if your right and the recovery is 5 years from now, the point is production capacity is now being readjusted downwards! So the problem is five years from now (which I don’t agree) it’s still the same problem. Your arguments are so watered down your left cheering on a recession. Get a life!
Where are all the transit projects, fuel efficient cars, carpooling, my favourite mopeds, anything that can and will reduce consumption is currently NOT being implemented because of people such as yourselves with silly arguments that the market will correct consumption. You guys should be arguing that we push hard and fast for efficiency, instead I hear, “don’t worry about it, the market will fix it all”. Right now the market is encouraging MORE spoilage, more people to purchase SUVs - notice I did not say sales are up, simply that more people are buying SUVs now than would be if the price of oil was $100 bucks.
New Guy
New Guy,
Let's take your points bit-by-bit.
Nice debating tactic Ari (not), criticize your opponent for being vague - something you do ALL the time in these posts, you never provide exact dates and your own arguments vary form PO is happening now all the way to it may happen within 30 year.
Actually, I've never provided a specific time for when peak oil occurs. Not now, not 10 years, not 30 years. I've said that I believe it's unlikely for it to be near term based on reserve data, and that it has yet to be reached if production data is to be believed.
That's it.
When your opponent finally does provide a timeline or a date then you will whip out the “well there goes the ‘peakniks’ at it once more, with their absolute certainty!” line of bull.
There's a difference here, perhaps a subtle one, but a difference nonetheless.
Making no claim for absolute or certain knowledge
vs.
Making absolute statements with vague language
I don't claim to be perfectly scientific or impartial, but I do try to avoid absolute statements and vagaries (note that stating uncertainty is not being vague in a Popperian sense). The problem with mos6507's statement is that it implies that production will NECESSARILY drop below demand. We don't know that. By using the word "eventually," he gives a vague timeline for this that is essentially irrefutable.
Crying wolf, does not mean wolves do not exists, it simply means there is no way of determining when the wolf is actually striking.
The point of the story of the boy who cried wolf was that he LIED. Aesop said at the end that, "Even when liars tell the truth, they are never believed. The liar will lie once, twice, and then perish when he tells the truth." The story was less of an argument against imminent danger, and more about the dangers of lying and losing the trust of others.
You are completely ignoring the science. Forget what people are saying and do some research.
Am I to understand the the ‘PO Debunkers’ have now resorted to arguing that recession is the answer to debunk Peak Oil.
OK, I'm going to try to be nice here... but... have you been paying attention?
First off, I, and pretty much everyone else here, accept the idea that oil is a finite resource. Like I said to an anonymous poster of the past:
""Take care, sir. Those over there are not giants but windmills.""
There’s a solution the world wants! How lame-brained is this idea. Historically speaking we’ve always come out of a recession sooner or later, so what if you are suggesting that it’s not 2010, you argue it’s later… In the mean time IEA is ‘readjusting’ their always optimistic production capacity numbers downward! So what if your right and the recovery is 5 years from now, the point is production capacity is now being readjusted downwards!
Now for the important question: by how much and why?
So the problem is five years from now (which I don’t agree) it’s still the same problem. Your arguments are so watered down your left cheering on a recession. Get a life!
Pot, kettle.
Anyway,
Where are all the transit projects, fuel efficient cars, carpooling, my favourite mopeds, anything that can and will reduce consumption is currently NOT being implemented because of people such as yourselves with silly arguments that the market will correct consumption.
Wait a second.
I've been arguing in favor of transit, increasingly efficient autos, etc. since I started commenting and writing on this blog. This is absurd. I don't think anyone on this blog is arguing against any of the things you listed. In fact, I'd say we're all in favor of them to a greater degree than most people. But the fact of the matter is that increasing sales of fuel-efficient cars IS a market response.
You don't have to be anti-market to be pro-transit or pro-hybrid or pro-scooter.
You guys should be arguing that we push hard and fast for efficiency, instead I hear, “don’t worry about it, the market will fix it all”.
Where?
I was a huge supporter of the California high-speed rail project, and part of the reason I've been a supporter of Obama for so long is that he listed infrastructure improvements as part of his platform.
Right now the market is encouraging MORE spoilage, more people to purchase SUVs - notice I did not say sales are up, simply that more people are buying SUVs now than would be if the price of oil was $100 bucks.
What do you mean by "spoilage" in this context?
And how much are SUV sales up, relative to sedans? Data?
Anon,
What science, what people?
Weasel words make it hard to know what you're actually trying to say.
New Guy:
I did use the word "suspect" to describe my feelings about manipualtion on the NYMEX. I did not say it was a fact.
But think about it: If you are a Russia or OPEC, it would be your patriotic duty to manipulate prices upwards. The Texas Railroad Commission used to do it, years back. OPEC did by curtailing production in the 1970s, and again they have cut production.
Obviously, it is in the interest of OPEC and Russia to have higher, rather than lower prices, and they can cloak their identities through financial quislings, and trade on the NYMEX.
Okay, so we at least must expect manipulation on the NYMEX.
The CFTC has admitted they lack proper oversight authority to really know what happens on the NYMEX.
I would say it is extremely naive to think the commodity exchanges are never manipulated.
Benny,
The higher prices are only efficacious up to a point. At a point, you get diminishing marginal returns on price increases, and you start losing enough sales that your gross revenue is reduced. Equilibrium is tricky to find, even with simple markets.
Not that you probably don't know this, but I have to be pedantic for a moment. :-)
I actually think that OPEC's goal price of about $70 is probably a realistic equilibrium price for the market, even if it hurts some producers to not have it higher.
Ari,
And how much are SUV sales up, relative to sedans? Data?
Give me a break Ari, you can’t argue out of one side of you mouth that price drives demand, then you ask for proof of this (data?) in your next retort. We both know I don’t have data to support this claim, that’s why I worded it that way, but now you decide to question this… please… it’s this type of minutia that drives everyone crazy, and in my opinion, reduces your credibility.
Let’s look at it another way, you are questioning my argument, that I ‘think’ SUV sales are higher now, with oil at $40 than sales would be with oil at $100. Yet one of your own favourite arguments is how we can all purchase and ride cheap mopeds when oil prices force us to (whatever price that is). Even at $150 oil moped sales modestly increased, I’m asking you for data on this, and also please provide the data that will indicate a landslide of moped sales, and at what oil price will this occur???
New Guy
Ari-
To say that an OPEC or Russia can't rig prices forever is true, or that they can find the revenue-maximizing price.
But, this one is so fat for them, they don't have to. Would you rather sell 8 berrels at $147, or 10 barrels at $30.
And sure, demand is long-term elastic, so there are consequences.
But think about the transfer of wealth in the meantime. We are talking about hundreds of billions of dollars every year.
Anyway, I will stock with my point: It is possible to rig trading on the NYMEX -- any market man has made can be gamed -- and extremely powerful players would benefit from gaming the NYMEX. Ergo, we should expect the NYMEX is being gamed.
If Obama was smart, he would connive to flood Cushing with oil all the time.
Benny,
But think about it: If you are a Russia or OPEC, it would be your patriotic duty to manipulate prices upwards.
Welcome to the concept of 'swing oil producer' prior the early 70s that nation was the US. They could turn on the spigots and flood the markets anytime any other nation threatened to build enough infrastructure to challenge their oil producing supremacy and they were the only ones that could weather the subsequent economic storm because of established infrastructure. Then, they could curtail oil exports, after enough infrastructure projects world wide went belly up, and drive prices back up.
When America peaked back in the early 70s, so did their ability to influence prices so quickly, and eventually this diminished to little or no power to affect prices upwards. This torch of was passed on to Saudi Arabia which now enjoys that power. You are right they are now 'gaming', if you will, the system by producing less to get a decent rate of return on their oil. It's tough to criticize Saudi for doing something America has been doing for the better part of the last century. Might explain some of the animosity aimed at the States.
Have you ever asked yourself why Saudi just doesn’t produce half as much oil in an attempt the drive prices excessively higher? They did that back in the 70s, however, it's a delicate balance being the swing state, the higher the prices are the more opportunities exist for producing nations to ramp up their own capacity.
I'm getting to a point and that is, did you notice that as oil prices where shooting up to 150$ that Saudi was in fact producing more? They did not drive it up by producing less. This means the system was indeed approaching capacity limits. I'm sure Ari will disagree, and provide some 'data' and scream that is was greed that drove prices to $150. A more reasonable take, and much simpler I may add, was the fear that we were indeed approaching a worldwide capacity limit. Far to many major world events and/or recessions occur immediately after large shifts in oil prices for me to buy his weak arguments.
The point is, we likely approached near capacity in 2007, and prices and stockpiles at the time appear to support this. Now that the oil price has depressed, infrastructure projects are being delayed worldwide ($60 Billion here in Alberta alone!). Ari, although true, please don’t argue Canada is a small player, the point is if $60 B worth of projects have been scrapped or delayed here, you can bet (anything you want) that similar stories are occurring world wide.
What happens when we eventually recover, one year or as Ari will say 5 or more years from now? Our peak capacity is diminishing as we speak and when there is any semblance of recovery we will hit a new worldwide production ceiling that is now extremely likely lower than the last one.
Food for thought,
New Guy
Ari,
Please address my “Thursday, February 26, 2009 1:46:00 PM PST” post before attempting to pick apart the ‘swing nation’ post.
I’ve seen you do this before, when a good point is made, you wait till there are enough posts for everyone to forget about those points, then pick on some minutia you do not agree with in a subsequent post.
New Guy,
Relax, new guy. Your attack on Ari is ridiculous. I've yet to see any other commenter in any given peak oil blog as responsive and understanding as Ari.
Given that, your assumption that more people are buying SUVs now than would be if the price of oil was $100 bucks is quite correct, of course, and I agree that Ari is not being accurate in his "minutiae", but seriously, do you really believe that people are actually thinking to buy a SUV given the economic storm they perceive themselves to be in?
Yes, if all other things are equal, given 100$ oil or 30$ oil, you'll get more people buying SUVs in the second scenario. But this is not happening. And that's because the 30$ are a response to the dire economic recession we are in, which also affects directly SUVs market.
100$ oil in a booming economy vs 30$ oil in a dire recession one is not a market comparison you will want to make.
At all.
New Guy-
Sure, world crude demand grew in a 20-year period of solid global GDP growth and low prices (1980-2004). The price signal did not spur crude oil investment or conservation, for 20 years straight.
Then, we might have brushed up briefly against supply constraints, and that was the brief window of higher prices (2004-2008).
But by 2008, and the highest prices, I would argue supply was exceeding demand, but that speculation/manipulation was keeping prices up. Manipulation thrives best in the right context, and that was some real story, and a lot of scare story, from TOD and others. The statements of Simmons, Boone Pickens and others were mightily self-serving. (Pickens played the game too long, and lost a bil or two).
But, by 2008, many states claimed they had oil for sale and no buyers, such as Algeria and Libya. KSA said said "we furnish all buyers,no one is turned away." Iran was filling tankers up, no buyers. Some of this has to do with heavy oil, and a lack of refineries, although that problem is getting fixed, and many new refineries come online.
It was a bubble, is was manipulation, it was speculation. Of course it popped.
But before it popped, maybe a trillion dollars went into thug coffers. Lucky them.
For that matter, maybe oil should be $10 a barrel now, but manipulators are making a stand at $40. And cutting 4 mbd from production.
But check out global demand after the 1979-80 price spike. It went down by 11 percent. That's about 9 mbd equivalent today.
This spike in some ways was worse, and the global recession today is bad. The last global regional recession (1998 Fra EAst) sent oil to $10.
I see a centipede glut coming, and $10 oil. Maybe OPEC can cut enough to hold it above $20.
I figure it is 20 years until we see $147 oil again.
New Guy,
I'll go ahead and do what I always do.
Give me a break Ari, you can’t argue out of one side of you mouth that price drives demand, then you ask for proof of this (data?) in your next retort.
Let's be clear here: price is a very important variable in determining demand, but it is not the only one. I never say that price is the ONLY variable, but it sure is an important one.
That said, price of oil ≠ SUV demand per se. You have a lot of factors going on right now that can possibly affect demand for SUVs (or any other vehicles) other than the price of fuel.
These are not mutually inconsistent arguments.
We both know I don’t have data to support this claim, that’s why I worded it that way, but now you decide to question this… please… it’s this type of minutia that drives everyone crazy, and in my opinion, reduces your credibility.
I apologize then, and rephrase my question:
Do you happen to have any data that corroborates your argument?
Besides, how can asking questions hurt my credibility? I would like to think that asking questions and looking for answers, wherever they are, is a boon to one's credibility. Isn't that one thing that made Dr. Holmes the great detective?
Incidentally, data on auto sales is pretty easy to find. Wards Auto publishes this info on a monthly basis: http://wardsauto.com/keydata/
What we find is that even despite reduced oil prices, light vehicle sales of all types have dropped considerably, with trucks/SUVs remaining hurt the most relatively speaking.
Let’s look at it another way, you are questioning my argument, that I ‘think’ SUV sales are higher now, with oil at $40 than sales would be with oil at $100. Yet one of your own favourite arguments is how we can all purchase and ride cheap mopeds when oil prices force us to (whatever price that is).
You're misconstruing my argument. I'm saying that it's technically feasible-- that's all. I'm basing my argument on the fact that production could potentially scale quickly under the right circumstances. I don't know that it's likely, but it's feasible. That's all.
Even at $150 oil moped sales modestly increased, I’m asking you for data on this, and also please provide the data that will indicate a landslide of moped sales, and at what oil price will this occur???
Two things: modestly is a bit of an understatement. Sales increased over 65% during the first half of 2008. People clearly responded quickly to oil price increases, as that kind of sales increase is phenomenal in any industry.
Secondly, I don't have the data to tell you with any sort of certainty what the inflection point is for scooter sales. Most of that seems to be proprietary and the only site I found that offered it was charging $200 for the report. I apologize, but I can't afford that.
I’ve seen you do this before, when a good point is made, you wait till there are enough posts for everyone to forget about those points, then pick on some minutia you do not agree with in a subsequent post.
Please don't assume bad faith. I do this on the side, and I sometimes miss people's comments. If anything, it's more an issue of me not remembering to respond to a comment than anything else.
Let me make one thing clear, though: I owe nothing to anyone on this site. I do this to explore ideas, offer an opinion, and take part in some conversation. I will not always have the time, energy, or inclination to respond to everything. I'm sorry if you wanted more.
Welcome to the concept of 'swing oil producer' prior the early 70s that nation was the US. They could turn on the spigots and flood the markets anytime any other nation threatened to build enough infrastructure to challenge their oil producing supremacy and they were the only ones that could weather the subsequent economic storm because of established infrastructure. Then, they could curtail oil exports, after enough infrastructure projects world wide went belly up, and drive prices back up.
I'm not sure that I agree with you that the US was a swing producer, simply because the market was not internationalized. I may be wrong, but it seems to me that "swing producer" is not the right term. Maybe "self-sufficient producer?" It also helped that there was far less demand at the time, and there weren't Chinas or Indias to also demand the stuff.
Again, I don't think you're wrong per se, but I don't know that swing producer makes a lot of sense in the pre-OPEC market.
When America peaked back in the early 70s, so did their ability to influence prices so quickly, and eventually this diminished to little or no power to affect prices upwards. This torch of was passed on to Saudi Arabia which now enjoys that power. You are right they are now 'gaming', if you will, the system by producing less to get a decent rate of return on their oil. It's tough to criticize Saudi for doing something America has been doing for the better part of the last century. Might explain some of the animosity aimed at the States.
Some, maybe. I'd say most of it is our absolutely botched foreign policy and hubris.
Bet you didn't see that one coming, Mr. Thinks-Ari-Is-A-Neo-Con? While I think Saudi Arabia's role is somewhat exaggerated by some, I think the big reason for most of the animosity aimed toward the United States has to do with occupational activities. I tend to align myself with Robert Pape at the University of Chicago on the role of occupational activities being incendiary. If you have the time, I recommend his works a great deal.
Have you ever asked yourself why Saudi just doesn’t produce half as much oil in an attempt the drive prices excessively higher? They did that back in the 70s, however, it's a delicate balance being the swing state, the higher the prices are the more opportunities exist for producing nations to ramp up their own capacity.
Saudi has also lost a lot of its power relative to the 1970s as other states, particularly Russia and Venezuela, have become significant producers and taken away market share. We see this in other markets as well.
But yeah, that was my argument. What we tend to find is that the closer we get to "perfect competition," the flatter the demand curve, and a lack of economic profit. Prices are theoretically set by market equilibrium, blah blah.
However, KSA enjoyed a period where it was closer to a lead oligopolist, which lends itself to a downward sloping demand curve, and economic profits for the producers.
I'm not sure, though, what to say about oil today. It's a partly oligopoly-led market with non-oligopoly price mechanisms. It's just messy. In any case, too high of a price has both short-run and long-run effects. A very simple short-run vs. long-run assessment may be:
Short-run: decreased demand as you demand shifts left. Depending on elasticity of demand, you may see reduced overall revenue. In a market like oil, you experience diseconomies of scale.
Long-run: production increases because of increased prices (there's a motivation to sell more), demand re-equilibrates somewhere closer to before.
However, commodities are... commodities. You don't want to be the guy who threw the price up just for the sake of making a short-run dollar. Otherwise, Russia will come in and produce more. And if you can buy Russian oil, virtually the same thing as Saudi Oil, well... what do you care?
Or even Exxon. If they can figure out how to keep pirates away. Yarr.
But yeah, generally you're right about the short-run effect. You do NOT want to drive prices too high and encourage competitors, reduced consumption of your good, and substitution if you're in it for the long-haul.
Iran on the other hand...
I'm getting to a point and that is, did you notice that as oil prices where shooting up to 150$ that Saudi was in fact producing more? They did not drive it up by producing less.
Yep. Because they know how their market works and aren't morons.
This means the system was indeed approaching capacity limits. I'm sure Ari will disagree, and provide some 'data' and scream that is was greed that drove prices to $150. A more reasonable take, and much simpler I may add, was the fear that we were indeed approaching a worldwide capacity limit.
Let me make a few things clear here.
First off, I think that it is entirely possible that we reached a short-run production limit. However, short-run ≠ long-run. One thing that Mills points out in his book that I think is often ignored is the fact that capital investment in oil exploration, development, and exploration was significantly cut in the decades of "cheap oil." Even a nice steady run up in prices cannot spur investment quick enough to respond "in time." The problem is arguably a capital restriction more than a geological restriction, and it seems to me that we should ask: are we talking short-run, long-run, physical scarcity, capital scarcity, etc.? It's hard to bring rigs to market when you've basically halved the world rig count. It's even harder to train human capital when people fled the sector for silly fake jobs like i-banking.
Far to many major world events and/or recessions occur immediately after large shifts in oil prices for me to buy his weak arguments.
You can call my arguments "weak" all you like, but we know something: correlation ≠ causation. My point is never that it CANNOT be oil, but that we live in a multi-variate world with multi-variate explanations where oil alone does not do as good of a job explaining events as a multi-variate explanation does.
The point is, we likely approached near capacity in 2007, and prices and stockpiles at the time appear to support this. Now that the oil price has depressed, infrastructure projects are being delayed worldwide ($60 Billion here in Alberta alone!).
Yes, but how long will they be delayed, are they being delayed because companies see no reason to develop because of predicted negative discounted returns, or are the delays due to capital scarcity or something else?
It's not enough to say that projects are being delayed. It's important to know WHY they're being delayed. It may be perfectly rational for IOCs and NOCs to be delaying projects if they believe it to be financially prudent to do so.
However, I don't know the answer to that.
Ari, although true, please don’t argue Canada is a small player, the point is if $60 B worth of projects have been scrapped or delayed here, you can bet (anything you want) that similar stories are occurring world wide.
First off, Canada is not really a small player, so please don't presume to know what I'll argue. You might want to realize that I'm not the caricature you've drawn up of me.
Sure, but to what degree? Alberta's oil projects are, as far as I know, capital intensive and much more price sensitive than, say, that new Saudi megaproject. Why not delay it if you think that the Saudi megaproject will provide excess capacity and keep prices down in the mid-term?
But, I don't know the details of every project delayed everywhere, so I'm throwing out a hypothetical as well. The point is that it's probably a pretty big and diverse set of reasons for all the various projects, and I don't believe that a "one-size-fits-all" answer will work.
What happens when we eventually recover, one year or as Ari will say 5 or more years from now? Our peak capacity is diminishing as we speak and when there is any semblance of recovery we will hit a new worldwide production ceiling that is now extremely likely lower than the last one.
Considering that reserves are fairly high, why does it have to be peak capacity? Never mind that we finally have a president who has his head screwed on the right way, and we might finally get infrastructure development.
By the way, I don't actually know when we will recover. I never said five years, so I'm nonplussed by that statement. It may be one, it may be a decade. I honestly don't know. Based on what I read and hear from my finance friends, it ain't the yellow brick road, and try as Dorothy might, those government-funded ruby tarps don't take you back.
Alas.
But I do suggest you read Mills, as like I said before, it's almost certainly not an issue of physical scarcity, but short/medium-run capital scarcity. That can be overcome. It's not like we're mining the Moon for diamonds here.
You just really have to hate the 'new guys' who make the same old arguments as the 'old guys' while attempting a air or doomish novelty. There isn't anything about the teotwawki that the peak freaks havn't attempted in their fatalistic procrastination ( i'm SURE were all going to die tomorrow; sorry about being wrong about today) about bringing about the end of the world.
Any chance the new guy can say something about peak oil we have not seen debunked here and elsewhere?
Thank... ( for nothing)
Stellar
"fatalistic procrastination"
Is that like Apocalypse Later?
HDT
"Production will drop below consumption"?
It can't. We cannot consume more than we produce.
The price mechanism works it out.
Sure, there may be another stretch out there somewhere 2017-2021 for example, when supplies are rationed by high prices again. Then we will see another glut--and possibly the passing of the fossil age.
PHEVs, biofuels, mass transit--the price mechanism will guide us to a post-fossil economy.
I happen to look forward to such a world. I think we will see cleaner air, quieter streets, more dollars circulating in the United States.
"...the price mechanism will guide us to a post-fossil economy."
That's kind of like saying that gravity will guide a falling object to the ground. Was it the price mechanism that guided us to our current happy juncture in the mid-fossil economy?
God save us from free markets.
HDT
PO has reverted to consumerism to capture the urgency of our demise. Take Note. The world is ending. We are going back to the 18th century. Look at their firkin site, there is actually PO gear. Talk about the ANTITHESIS of their religious doctrine. Let’s gives them a break. Like the old saying…never argue with an idiot, he will drag you down to his level, and beat you with experience.
Salt Shaker
"Talk about the ANTITHESIS of their religious doctrine."
Please, talk on. It sounds as if you're suggesting that someone is violating the tenets of his religion and thus is committing hypocrisy. Please, talk about that antithesis.
HDT
Um, Salt Shaker's point is not that difficult to understand, your faux naivete aside.
One of the central tenets of those predicting post-peak oil doom is that we have developed an unsustainable consumerist society that will ultimately do us in. And, yet, there they are, selling consumables because they want to make money.
Ari,
One thing that Mills points out in his book that I think is often ignored is the fact that capital investment in oil exploration, development, and exploration was significantly cut in the decades of "cheap oil."
We both agree there, nothing new to the PO community; Matt Simmons (on this topic) has been preaching the same thing. He actually went at fart to say that infrastructure should have been built during this ‘down’ time to account for new demand about to come on board, however this is not economically feasible, so as responsible business men, they don’t.
You’re arguing my point for me Ari…
Even a nice steady run up in prices cannot spur investment quick enough to respond "in time." The problem is arguably a capital restriction more than a geological restriction, and it seems to me that we should ask: are we talking short-run, long-run, physical scarcity, capital scarcity, etc.? It's hard to bring rigs to market when you've basically halved the world rig count. It's even harder to train human capital when people fled the sector for silly fake jobs like i-banking.
I honestly could not have said it better myself. We are currently in a recession, how’s everything being fixed right now, not very well. Sooner or later the recession ends.
But I do suggest you read Mills, as like I said before, it's almost certainly not an issue of physical scarcity, but short/medium-run capital scarcity. That can be overcome.
I suggest you read much more Matt Simmons, what I took out of his books, was that he argues geological limits leads to capital scarcity. Weather it’s a geological limit, capital limit, or political interference, the point is when there was plenty of oil, none of this mattered much as any purchaser could turn to any number of new suppliers to fulfill their needs. All these points you make, ‘that can be overcome’ are currently not being overcome, and are issues. As you approach a point in the extraction (Matt argues the halfway point), all sorts of other issues crop up, and all issued combined lead to cause a supply constraint. This is the message Matt has be preaching, and I’ve been attempting to paraphrase.
Your arguments in that post support my claim that it is hard (I say maybe impossible) to address when economic times are tough. If we can’t improve infrastructure when the world is in recession, were does the extra needed oil come from when the recession lifts???? Answer this! And remember, conservatism will not help lift an economy out of recession. Conservatism leads to a recession.
I hear many of your debunker arguments, we can provide more security in Nigeria, we can conserve, we can use alternatives, we can improve efficiency, we can build more oil infrastructure if need be. ALL of these are only problems because oil is no longer as abundant and cheap as it used to be. This might be too simple for you, but really is the root cause in many of the issues we are seeing today.
Put an oil field twice the size of Gwahar, right in the middle of the US, and come tell me that you still need to go to war in Iraq, tell me we need mopeds, tell me we need to be concerned with the rebels in Nigeria or the dirty oils sands in Alberta. None of that would matter! It only matter because America needs more oil than it possesses.
Why hasn’t America gone to Nuclear, Wind, BioFules, you name it, and at the same time curtailed its demand, to the extent that it is not dependent on external countries for it’s supply. Because your markets led you here. Now your markets are about to lead you to a dead end, but you continue with optimism that borders on religious fervor. Capitalism may be the best we have, but it is certainly not infallible, if you’re suggesting that it is, you’re are basically suggesting that capitalism is the first on only human creation that will last forever.
My own theory, capitalism on the way up -> because it the greatest mechanism to exploit resources. Socialism on the way down -> because it’s the fairest way to distribute as much of the wealth to as many people as possible on the way down.
I believe we are on the crest, nationalize your banks, your auto-makers. On the next cycle, you’ll be forced to nationalize even more of your precious corporations, or face something worse than the great depression. Sooner or later China’s going to realize they will never be able to collect on their debt in the US…. That should make for interesting times.
New Guy
"One of the central tenets of those predicting post-peak oil doom is that we have developed an unsustainable consumerist society that will ultimately do us in."
So, you disagree with that central tenet, and you believe that our consumerist ways ARE sustainable? Or are you and Salt just pointing out what you believe to be an inconsistency or worse, hypocrisy? Either way, it would appear that consumerism as we practice it now, is not a dependable vehicle to move us forward collectively.
More importantly, it's not accurate to say that doomers are hypocritical for practicing commerce. It's not any all commerce and consumerism that we find objectionable and ultimately unsustainable. We doomers buy and sell those things give meaning to our life, such as food and food-producing and storing technologies. That doomers engage in commerce is not inconsistent with our "religion," as you so scornfully put it.
"Put an oil field twice the size of Gwahar, right in the middle of the US, and come tell me that you still need to go to war in Iraq, tell me we need mopeds, tell me we need to be concerned with the rebels in Nigeria or the dirty oils sands in Alberta. None of that would matter! It only matter because America needs more oil than it possesses."
Well said! Let's try to guess what kind of retort this will elicit from the debunkers. First, I would expect another windy diatribe on fungibility. And what's wrong with using more oil than one can produce for oneself? Look at all the other countries who do the same thing, they import oil, ergo it's a sound idea.
Yes, if we had a few Ghawars underneath US territory, we would not even be having this discussion.
Good point. It's a shame that these debunkers cannot abide even the suggestion that obtaining and using oil could be problematic.
"If we can’t improve infrastructure when the world is in recession, were does the extra needed oil come from when the recession lifts????"
We'll get it the same way we always have. Once the recession lifts, if oil consumption goes back up (and I actually question that it will), the increased demand in the face of lowered production will cause the price to increase. That price increase will lead to more oil being produced, due to lifting of self-imposed production limits, more projects coming online and being restarted, and more sources of liquid fuel becoming economically sensical. Will there be a lag? Possibly, but there always has been. It's the natural cycle of the oil business (and most other businesses too).
At some elevated price point, as long as that higher price is sustained, you will see substitution and further conservation. Your point about why the US hasn't already gone totally to wind, bio, nukes, etc. is ridiculous. It would be idiotic to switch to another higher priced resource when the currently being used it cheaper and abundant.
"Good point. It's a shame that these debunkers cannot abide even the suggestion that obtaining and using oil could be problematic"
No one one this site is saying that it might be problematic to keep obtaining oil. In fact, I think we are all big fans of conservation and alternative energy sources, but it has to make some financial sense.
DoctorJJ
I'm new to this site and have read a pretty large chunk of it. Also I'm not a doomer - but I have got to say that the 'debunkers' generally don't argue their points very well; I think New Guy has raised some decent arguments.
The Ari Argument Cycle:
- Split into out-of context quotes
- Miss the point and concentrate on annoying trivia/minutia
- If all else fails, use latin
jamelet,
Duly noted. I may cut down on the splitting, if only to save myself trouble. However, let me note that I only do it because I've had people tell me that I don't address things specifically enough.
In other words, I can't win. If I try to respond to general points, I'm "vague," if I take things point-by-point, I'm annoyingly minute. Any suggestions on how I might achieve balance? I'm serious, as I like constructive criticism.
However, I do protest about accusing me of using Latin. I don't recall using a heckuva lot of Latin phrases, and what I have used I've tried to either Anglicize or link to a various explanatory site.
Again, if you can point out instances where I've committed the act of Latinization, I'm glad to admit fault (I almost used the phrase "mea culpa!" Hah...
New Guy
We both agree there, nothing new to the PO community; Matt Simmons (on this topic) has been preaching the same thing. He actually went at fart to say that infrastructure should have been built during this ‘down’ time to account for new demand about to come on board, however this is not economically feasible, so as responsible business men, they don’t.
Right, but it's not due to PHYSICAL SCARCITY. That's my point. The limitation is not due to a lack of oil, but a lack of motivation. The constantly trumpeted point amongst the doom'n'gloomers is that we are literally at “50% of reserves.”
Different beast.
Even a nice steady run up in prices cannot spur investment quick enough to respond "in time." The problem is arguably a capital restriction more than a geological restriction, and it seems to me that we should ask: are we talking short-run, long-run, physical scarcity, capital scarcity, etc.? It's hard to bring rigs to market when you've basically halved the world rig count. It's even harder to train human capital when people fled the sector for silly fake jobs like i-banking.
I honestly could not have said it better myself. We are currently in a recession, how’s everything being fixed right now, not very well. Sooner or later the recession ends.
I don't get it.
So, things aren't being fixed well in the financial industry, and therefore... something? This part of your comment makes little to no sense, other than the obtuse implication that once the recession ends we're all totally screwed.
But if it's being “fixed” badly, then oil demand will stay depressed for a long time, as we saw post-1979. It could stay depressed even longer...
I suggest you read much more Matt Simmons, what I took out of his books, was that he argues geological limits leads to capital scarcity. Weather it’s a geological limit, capital limit, or political interference, the point is when there was plenty of oil, none of this mattered much as any purchaser could turn to any number of new suppliers to fulfill their needs. All these points you make, ‘that can be overcome’ are currently not being overcome, and are issues. As you approach a point in the extraction (Matt argues the halfway point), all sorts of other issues crop up, and all issued combined lead to cause a supply constraint. This is the message Matt has be preaching, and I’ve been attempting to paraphrase.
I've read Simmons. Now you ought to read Mills.
First off, the “geological scarcity” that Simmons preaches has yet to really show up. Simmons was saying that Saudi Arabia was done for, yet we have yet to see that. Bad argument + similar result = bad science. Just because we ended up with a recession doesn't mean that it was due to physical scarcity.
Your arguments in that post support my claim that it is hard (I say maybe impossible) to address when economic times are tough. If we can’t improve infrastructure when the world is in recession, were does the extra needed oil come from when the recession lifts???? Answer this! And remember, conservatism will not help lift an economy out of recession. Conservatism leads to a recession.
It's hard, but not impossible. For one, recession actually often breeds infrastructure development. Look at Japan, for example. IOCs are not hurting as badly as other sectors, so it seems unlikely that
I hear many of your debunker arguments, we can provide more security in Nigeria, we can conserve, we can use alternatives, we can improve efficiency, we can build more oil infrastructure if need be.
Hey, you know what? Screw you. I'm so sick of you putting words in my mouth and lumping me with whatever group you feel I fit in. You and your ilk have called me a Cheneyite, a Bushite, a Friedmanite, a Republican, etc. Let me say this again: pay attention. I'm not some free market fixes all type, and if you'd bother reading what I friggin' say you might have figured that out.
ALL of these are only problems because oil is no longer as abundant and cheap as it used to be. This might be too simple for you, but really is the root cause in many of the issues we are seeing today.
Define “abundance” and define “cheap.” In terms of reserves, we've seen significant reserve growth from the past. In terms of cheap, oil was still less a percent of GDP in 2008 than it was in much of the past. In 2007 weighted dollars, the spike in 2008 was painful, but arguably far less painful than 1979 (for a number of reasons.)
Put an oil field twice the size of Gwahar, right in the middle of the US, and come tell me that you still need to go to war in Iraq, tell me we need mopeds, tell me we need to be concerned with the rebels in Nigeria or the dirty oils sands in Alberta. None of that would matter! It only matter because America needs more oil than it possesses.
Huh? Last I checked, Japan imported nearly 100% of its oil. But we can't hate the Japanese! They make Hello Kitty and anime!
Why hasn’t America gone to Nuclear, Wind, BioFules, you name it, and at the same time curtailed its demand, to the extent that it is not dependent on external countries for it’s supply. Because your markets led you here. Now your markets are about to lead you to a dead end, but you continue with optimism that borders on religious fervor. Capitalism may be the best we have, but it is certainly not infallible, if you’re suggesting that it is, you’re are basically suggesting that capitalism is the first on only human creation that will last forever.
I hate to break it to you, but these are YOUR markets too. Sorry, but you're on the Internet, buddy! You know how you get there? THROUGH MARKETS. I'm sorry, but you can't lay this at the feet of people who actually study markets and try to explain them. You aren't Pontius Pilate, friend. You're another man of the crowd, trying to say, “down with the market,” as you enjoy the fruits of its labors.
And let's be clear here: oil's share in the energy mix has dropped nearly every year since 1973, from 48% to 36%. So clearly something is happening. The US has
Let me make something else clear (for the umpteenth time): I AM IN FAVOR OF MARKET INTERFERENCE IN MANY CASES. Holy hell, I don't get it. How many times must I say that I'm a tax-and-spend Democrat before you people all finally bloody understand?
I AM A TAX AND SPEND DEMOCRAT, DAMMIT. AND PROUD OF IT. In fact, my economic beliefs are a strange mix of neo-Keynesianism with a dash of Japan central planning and a hint of Northern European socialism.
Stick that in your pipe, sir.
My own theory, capitalism on the way up -> because it the greatest mechanism to exploit resources. Socialism on the way down -> because it’s the fairest way to distribute as much of the wealth to as many people as possible on the way down.
Well, it might be interesting if not for the fact that it plays fast and loose with the philosophies and ignores the many states that run entirely counter to your argument. The Russians experienced some of its fastest economic growth under a Stalinist system. Japan had a degree of central planning that most Americans found uncomfortable-- we all know how Japan grew in the post-war period. I'm all in favor of intelligent regulation.
I believe we are on the crest, nationalize your banks, your auto-makers. On the next cycle, you’ll be forced to nationalize even more of your precious corporations, or face something worse than the great depression. Sooner or later China’s going to realize they will never be able to collect on their debt in the US…. That should make for interesting times.
You're a riot, man. I love how you pin this all on me, as if I'm the majority shareholder of Citicorp, GM, and a variety of other companies. And, you make it sound like you've never used an automobile, never bought anything “corporate,” and are somehow not part of the system.
GO GET THE MACHINE BIG GUY. YOUR RAGE FOR IT IS PALPABLE.
Seriously, though, I actually have few of the typical objections to nationalization of banks that many have. I think that there is something to be said about nationalization and increased regulation of banking.
As for China not buying debt, we'll see. Many other countries have shown that they can sustain debts (relative to GDP) as great if not greater than the US's and not starve to death or lose bond purchasers.
So, you disagree with that central tenet, and you believe that our consumerist ways ARE sustainable? Or are you and Salt just pointing out what you believe to be an inconsistency or worse, hypocrisy? Either way, it would appear that consumerism as we practice it now, is not a dependable vehicle to move us forward collectively.
Agreed. I'm actually a moderate critic of much of the consumer economy as practiced in the United States. I believe that it's a poor proxy for happiness, and would definitely like to see a reduction in the rat race. I found my simpler life in Japan very nice in a lot of ways, and let me put this on the table:
I never want to own a home (I'd prefer a condo in a city with good transit)
I hate owning a car and will get rid of it once I'm able to do so
I don't have a particularly ostentatious wardrobe
I rarely travel (mostly due to lack of money, to be honest)
When I do travel, I usually take trains or buses
I eat a relatively low meat diet
I rarely go out for dinner
And so on and so forth
But so what? These are all value judgments. I also own a 40” TV and use it to play video games. Damn me for it, but I enjoy it. Few things make me happier than playing a round of Street Fighter IV on my PS3 and hadoukening my way to glory. But... is this unadulterated consumerism? I don't know. That's a case for the philosophers. My problem with arguing that x or y is “bad” is that it's so personal.
In my case, the time I spent living in Japan and Korea has been so key to my development as a human being that I can't imagine my life without it. I will never apologize for the fact that I flew there via 777, as I've grown in ways that were otherwise impossible. But according to some, I'm some sort of sinner for having been on an airplane. Am I? I don't really know.
More importantly, it's not accurate to say that doomers are hypocritical for practicing commerce. It's not any all commerce and consumerism that we find objectionable and ultimately unsustainable. We doomers buy and sell those things give meaning to our life, such as food and food-producing and storing technologies. That doomers engage in commerce is not inconsistent with our "religion," as you so scornfully put it.
So... what's objectionable and “unsubstainable?” And which foods are acceptable? Where is the line drawn? The problem with your attitude is not that I necessarily disagree with toning it all down, but I think that despite my opinion to that effect, I realize how hard it is to actually draw the line.
I mean, it takes millions of dollars-- billions, even!-- to develop many life-saving drugs and treatments. But are those “necessary” resources? Do we spend money trying to cure diseases only suffered by a few, like Lupus?
Look, I hate SUVs and bullshit like that. I loathe the suburbs. But how do we draw the line?
Suburb post peak oil:
The burbs are now a waste land
Thugs decide they do not like gardening
Thugs say we cannot make money in these here slums
Thugs say money is in the City
Thugs go to the City and shoot Kuntsler since he has all the doomers’ money
Salt Shaker
For one, recession actually often breeds infrastructure development.
Vs.
Even a nice steady run up in prices cannot spur investment quick enough to respond "in time." The problem is arguably a capital restriction more than a geological restriction,
Which is it??
You and your ilk have called me a Cheneyite, a Bushite, a Friedmanite, a Republican, etc. Let me say this again: pay attention.
Republic is the only one I know, I’d have to look up the other definitions, so I could not have possibly given you these labels.
we've seen significant reserve growth from the past.
Sure, a bigger gas tank, some may question the validity; however without getting into that, all I care about is the size of the nozzle (worldwide capacity), saying Mars is a ball of oil will not help at all if we can’t get to it economically.
Huh? Last I checked, Japan imported nearly 100% of its oil. But we can't hate the Japanese! They make Hello Kitty and anime!
Not sure where you’re going with that.
You aren't Pontius Pilate, friend. You're another man of the crowd, trying to say, “down with the market
Words in my mouth?
I AM A TAX AND SPEND DEMOCRAT, DAMMIT. AND PROUD OF IT.
Directed at me? Or at all people that have pissed you off in the past? Personally, I’m with you on that 100%.
Stick that in your pipe, sir.
No insult taken, whatsoever, I’m not arguing that and couldn’t care less how you label yourself, simply care about the augments you make.
You're a riot, man. I love how you pin this all on me
Not really, that statement had nothing to do with you, it was more of an observation.
And, you make it sound like you've never used an automobile
Please point out where I implied this, you’ll find it hard. I’m a user of the free markets, own a mid sized SUV, and personally quite enjoy the markets for the time being. I’m simply pointing out that it may not be the best vehicle going forward in light of what I perceive to be happening.
GO GET THE MACHINE BIG GUY. YOUR RAGE FOR IT IS PALPABLE.
??? What rage…. Seriously, Ari are you ok? You’re losing it buddy.
Are we done with the tantrum yet…. Can we get back to discussing ‘debunking’ or rather debunking ‘debunkers’.
Now getting back to one of your previous post on the moped discussion which I use as a straw man for many of the alternatives suggested..
You're misconstruing my argument. I'm saying that it's technically feasible-- that's all.
Now that is the point of this whole debate is it not? Almost every alternative presented by anyone, so long as the EROEI is above one, is technically feasible…. Sure… but the trillion dollar question is, is it economical? A lot of the ideas have not been implemented, simply because they are not economical.
New Guy
"Look, I hate SUVs and bullshit like that. I loathe the suburbs. But how do we draw the line?"
I'm not here to draw lines, or to make universal prescriptions. My purpose in this last exchange was to expose the lame charge - this time coming from from Salt Shaker and Anywhere - that "doomers" engaged in commerce was something akin to religious hypocrisy.
Wasteful, unsustainable consumerism is a little like pornography; we don't always have ready, unambiguous definitions to describe it, but we know it when we see it.
HDT
Er, for one thing, I've never snidely referred to your beliefs as "religion". For another, it wasn't my charge; I was explaining Salt Shaker's comment just in case your naivete wasn't so faux. Clarification of a point is not the same as agreement with it.
That said, do you disagree that there's a potential credibility issue when the same people warning about the end of civilization are offering to sell you highly marked up survival gear?
"That said, do you disagree that there's a potential credibility issue when the same people warning about the end of civilization are offering to sell you highly marked up survival gear?"
The last few years have seen credibility issues coming from every direction - public, private, conservative, liberal, optimists, pessimist, you name the category, someone is making a claim that has proved to be absolutely false or completely self-serving.
That said, I personally think that those who have carved out their little niches predicting economic downturn and social unrest have been generally accurate. If I truly believed that hard-times and social unrest were imminent, I would see no contradiction or credibility issue with selling goods or services that were in line with my prognostications.
Who does - or has done - the greater disservice to the public; those who predict severe economic downturn and hardship and sell survival gear, or those who stubbornly insist that our economy is sound and there is nothing to worry about?
Given the choice to believe the typical sunny American optimists in 2008, like John McCain and the GOP touting a 'sound American economy,' or JH Kunstler, Wendell Berry and others like them, I'll take Kunstler and Berry, and I think the preponderance of evidence is solidly on their side.
So, to answer your question another way, there are all sorts of credibility issues out there competing for debunking time. Kevin Kelley, Nicholas Negroponte, George Gilder and almost anyone who's ever written for Wired magazine or the Weekly Standard have been predicting the stock market will be north of 30,000 by 2010, and their magazines are full of ads for consumer 'stuff' and investments whose value/utility are just as suspect as anything for sale by the "doomers." Where were the PO debunkers when Bernie Madoff and the big investment banks were promising double-digit gains ad infinitum? Focusing on Matt Simmons decimal points doesn't really absolve you from completely missing the boat on the issues that really matter to working people.
So, if we need a guide to credibility, let it be 'caveat emptor', and not some "price mechanism" as worshipped by the armchair free-marketeers.
HDT
Well said HDT.
New Guy
For one, recession actually often breeds infrastructure development.
Vs.
Even a nice steady run up in prices cannot spur investment quick enough to respond "in time." The problem is arguably a capital restriction more than a geological restriction,
Which is it??
These two aren't mutually exclusive, actually. Capital can be found even amidst a recession, sometimes more easily than during non-recessionary periods as governments issue bonds and try to spur job creation through "New Dealesque" programs.
Some of the greatest infrastructure projects in the 20th and 21st centuries have been during recessions. Recessions seem to be good at giving nations focus, at any rate, and allowing them to take stock of what really needs to be done.
You and your ilk have called me a Cheneyite, a Bushite, a Friedmanite, a Republican, etc. Let me say this again: pay attention.
Republic is the only one I know, I’d have to look up the other definitions, so I could not have possibly given you these labels.
Note, it's you and your ilk. My point is that you and others like you are so quick to label me that you have no apparent interest in what I'm saying. The second I say "we're not doomed" gets me the label of "BUSH GOP FREE MARKET NUTJOB HURHUR!"
Sure, a bigger gas tank, some may question the validity; however without getting into that, all I care about is the size of the nozzle (worldwide capacity), saying Mars is a ball of oil will not help at all if we can’t get to it economically.
The size of the nozzle is not nearly as limited as Campbell et al. have argued. This is especially true of heavy oil, the reserves of which are particularly large worldwide.
But the problem with the "tank" vs. "nozzle" argument is that it constantly shifts depending on with whom you discuss the issue. Some argue we have large reserves, but cannot access them. Others argue we have small reserves, but are gobbling them up too quickly. Others even argue both problems.
The problem is not reserves or actual ability to access them. It's simply that oil is cyclical.
Huh? Last I checked, Japan imported nearly 100% of its oil. But we can't hate the Japanese! They make Hello Kitty and anime!
Not sure where you’re going with that.
My point is this: you're constantly trying to smear the US for importing oil, yet the US at least has significant reserves (about 80b according to IHS), and a wealth of other resources (large uranium, shale, natural gas, and mineral resources.) Yet, Japan, which imports nearly 100% of all of its key raw resources, is spared the smear campaign that you and others have aimed at the US.
So why the double standard? Why is it that the second largest economy is allowed to import its resources, but the US imports the majority share of a resource and it's a failure?
As for the Pontius Pilate remark, never mind.
Please point out where I implied this, you’ll find it hard. I’m a user of the free markets, own a mid sized SUV, and personally quite enjoy the markets for the time being. I’m simply pointing out that it may not be the best vehicle going forward in light of what I perceive to be happening.
It's your language that's the problem. You keep saying "YOUR banks" and "YOUR auto makers" as a strange attempt to wash your hands of this, but here you are admitting that you own an SUV!
I've never owned a car bigger than an Accord! And I think my Accord is HUGE! And I'm the wasteful free market nutjob... sheesh...
Anyway, let's be fair here: "free markets" is nothing but a canard. No markets are truly "free." The United States' economy is not a "free market," any more than the Norwegian economy is. Now, the question is: which current set of regulations and market philosophies is best in the "post-2008" era? The canards, though, are useless.
??? What rage…. Seriously, Ari are you ok? You’re losing it buddy.
Are we done with the tantrum yet…. Can we get back to discussing ‘debunking’ or rather debunking ‘debunkers’.
You have not really "debunked" anything. You have offered little in the way of factual responses to the counter-arguments posted on the blog, and you have really not offered much in the way of economic logic to explain phenomena. What you have offered are vagaries and canards that suit your paradigm.
I say that it's statistically difficult to sort out the catalytic factors in the current situation, and you respond by simply saying, "IT HAS TO BE OIL." I even offer a rough statistical explanation for why oil may not be the causative factor, and you offer nothing.
Debunking? Hardly. You're just gazing into a crystal ball and see what you want, scribing it, and then calling it a day.
Now that is the point of this whole debate is it not? Almost every alternative presented by anyone, so long as the EROEI is above one, is technically feasible…. Sure… but the trillion dollar question is, is it economical? A lot of the ideas have not been implemented, simply because they are not economical.
Well, considering that moped sales grew by around 70% during the oil price increases, I would say yes.
Remember that "economical" is:
1. a moving target
2. dependent on risk and the tolerance for it
3. dependent on the assumptions put into the long-term discounting (a kind of financial tool)
4. dependent on financing options, tax breaks
Here's the problem with questioning whether something is "economical" or not: that can change with the passage of a single tax break. We can't say what's economical and what's not beyond the present, and even that is subject to interpretation by those who will be developing the business!
HDT,
I'm not here to draw lines, or to make universal prescriptions. My purpose in this last exchange was to expose the lame charge - this time coming from from Salt Shaker and Anywhere - that "doomers" engaged in commerce was something akin to religious hypocrisy.
Wasteful, unsustainable consumerism is a little like pornography; we don't always have ready, unambiguous definitions to describe it, but we know it when we see it.
It's funny, by the way, that so many people quote Potter Stewart in Jacobellis v. Ohio, but they ignore his later recanting in Miller v. California, when he said that his argument was untenable. And it is.
Look, "unsustainable consumerism" is so broad a term that it's essentially meaningless. It basically means that ANY consumerism can be labeled "unsustainable," and by proxy bad. It's essentially a recipe for breeding superciliousness.
And to be honest, I do think that it's somewhat hypocritical for the "doomers" to be consumers like the rest of us. It's a "do what I say" kind of philosophy that allows them to maintain a false moral high ground.
"Oh, you own a TV and an X-Box? That's unsustainable consumerism!"
"You own a computer and a 22" monitor..."
"So?"
Furthermore, nearly none of the "doomers" are actually as philosophically honest as greenneck. See, I disagree with him, but at least he's walking the walk. As Russell once said: "We have two kinds of morality side by side: one which we preach but do not practice and another which we practice but seldom preach."
I am as guilty of the former as anyone else, but at least I WANT to be aware of it. Look, I LOATHE much of the consumer culture in the US, but who am I to judge its morality and "sustainability" aside my own personal purchases? I have not done the numbers, and I can look all I want, perhaps apply a "Stewart test" in my head, but in the end, it will be my moral compass that guides the conclusion as much as anything else.
"Loud indignation against vice often stands for virtue in the eyes of bigots."
That said, I personally think that those who have carved out their little niches predicting economic downturn and social unrest have been generally accurate. If I truly believed that hard-times and social unrest were imminent, I would see no contradiction or credibility issue with selling goods or services that were in line with my prognostications.
Here's the problem: it's kind of like having a church sell "Rapture Readiness Kits" made by Kraft when the church says that our sinful corporate ways are bringing the rapture itself. Is it okay? I'm not really sure.
I do know that it puts into place an interesting question of motivation. Are the "doomer powers that be" interested in the message when the dollars roll in? Or is the message getting confused with dollars?
We cannot assume that their motives are any purer than anyone else's.
Who does - or has done - the greater disservice to the public; those who predict severe economic downturn and hardship and sell survival gear, or those who stubbornly insist that our economy is sound and there is nothing to worry about?
Given the choice to believe the typical sunny American optimists in 2008, like John McCain and the GOP touting a 'sound American economy,' or JH Kunstler, Wendell Berry and others like them, I'll take Kunstler and Berry, and I think the preponderance of evidence is solidly on their side.
I swear, if I have to see Kunstler given credit for predicting that which greater men predicted before him one more time...
You guys ALL need to go out and read Roubini, Stiglitz, Taleb, Krugman, and others like them. Let me say this again: Kunstler is a lamprey, attached to the delicious coattails of others. He did not do anything special, or anything interesting. He has very little apparent grasp of economics. Read from those who do, and you will be much better at arguing these points.
If anything, do it for yourself.
So, to answer your question another way, there are all sorts of credibility issues out there competing for debunking time. Kevin Kelley, Nicholas Negroponte, George Gilder and almost anyone who's ever written for Wired magazine or the Weekly Standard have been predicting the stock market will be north of 30,000 by 2010, and their magazines are full of ads for consumer 'stuff' and investments whose value/utility are just as suspect as anything for sale by the "doomers." Where were the PO debunkers when Bernie Madoff and the big investment banks were promising double-digit gains ad infinitum? Focusing on Matt Simmons decimal points doesn't really absolve you from completely missing the boat on the issues that really matter to working people.
I think that Madoff and the i-banks are leeches. I don't know that I would lump Bear Stearns in with Madoff (in the sense that Bear added some social welfare to the economy), but I think that Wall Street and its satellites were somewhat of a pimple on the face of the world.
But so what? Bear Stearns not maintaining the capital necessary to handle its level of leverage has very little to do with peak oil directly. When should I have brought it up? What opportunities did I have to go, "OMG MADOFF WAS A PRICK!" without simply being completely off-topic?
You want us to basically commit non sequiturs (sorry, Latin.) I mean, if you want me to do so, fine. I'll gladly tell you how much I loathe i-banks, i-bankers, and the entire financial community. But what does that have to do, if only directly, with oil?
So, if we need a guide to credibility, let it be 'caveat emptor', and not some "price mechanism" as worshipped by the armchair free-marketeers.
One does not have to be a "free-marketer" to believe in the price mechanism. That's just silly.
"You guys ALL need to go out and read Roubini, Stiglitz, Taleb, Krugman, and others like them."
Amen to that! If I thought for one minute that anyone of this blog had read Taleb or Roubini (and took them seriously) I would have mentioned them long ago. The reason I mentioned Kunstler is because he seems to be the favorite target for ridicule around here. And of course, with all his cynicism and hyperbole, Kunstler is still more relevant to our contemporary problems on a bad day than JD and his band of "what me worry?" sycophants on a good day.
By all means, read Taleb and Roubini, the REAL Dr. Doom. I don't know how you could read Taleb, take his black swan idea seriously and keep insisting that a nation that depends on imports for 2/3 of its oil is not in an extremely precarious position.
Instead, you and JD seem content to cheer for pizza delivery via hybrid scooters and tilting at backyard gardeners.
"And to be honest, I do think that it's somewhat hypocritical for the "doomers" to be consumers like the rest of us."
REally? I thought you and JD had bragged enough about your own austere lifestyles. And you still want us to take you seriously when you want "doomers" to be even less consumer-oriented than you are? Who could be that righteous, Gandi?
"Look, I LOATHE much of the consumer culture in the US, but who am I to judge its morality and "sustainability" aside my own personal purchases?"
You issue judgments here on a regular basis. We all do. I'm not saying that I'm qualified to judge every individual act of consumption. But I will go on record saying that the US presence in the Middle East is a misbegotten attempt to police the world's largest oil fields, and that it is essentially immoral and unsustainable.
Very interesting post
New Guy,
Amen to that! If I thought for one minute that anyone of this blog had read Taleb or Roubini (and took them seriously) I would have mentioned them long ago. The reason I mentioned Kunstler is because he seems to be the favorite target for ridicule around here. And of course, with all his cynicism and hyperbole, Kunstler is still more relevant to our contemporary problems on a bad day than JD and his band of "what me worry?" sycophants on a good day.
Want a shocker? I've read all of them because they were required reading in my classes. Here's the thing: I'm classically trained in economics and trained in both classical and Bayesian statistics. These guys are pretty much standard reading for most people doing econ or stats at a good university.
You seem to have this strange notion in your head that "doesn't agree with you" means "hasn't read the same things as you." It's possible to read Taleb, Roubini, et al and not conclude that we're doomed. It's also possible to agree with some of what they say, disagree with some, and withhold judgment on other things.
And the reason I think Kunstler is a jackass is because he is a leech and has been caught with his pants down enough times to make his ass permanently cold. He's another "internet pundit" who crouches his arguments in absolute certainty and then coyly moves on to the next disaster. At least Roubini and Taleb speak of their limitations. Kunstler would rather say bad words and pretend he's accurate to the day.
By all means, read Taleb and Roubini, the REAL Dr. Doom. I don't know how you could read Taleb, take his black swan idea seriously and keep insisting that a nation that depends on imports for 2/3 of its oil is not in an extremely precarious position.
The black swan is interesting, and while I think the book is largely just written at a "layman audience" level, he's mostly correct. The problem, however, is how we interpret what "black swan events" mean. You focus on the fact that the US imports 2/3 of its oil, but fail to mention that this is the case for pretty much all of the OECD. For some reason, you seem to believe that the US is in a unique position relative to the rest of the world, which I've demonstrated is clearly untrue.
The US, unlike most of the rest of the OECD, still has significant oil reserves that it's either not developed or has made illegal to develop. That's a better situation than most of Europe and Japan, who have pretty much nil. And I realize that "two bads don't make a good," but you ought to consider that it is not a unique situation amongst most developed nations to have to import certain goods: hell, look at Singapore.
Personally, I find the fact that the US imports much of its human capital to be a greater constraint than oil in the long run.
Instead, you and JD seem content to cheer for pizza delivery via hybrid scooters and tilting at backyard gardeners.
You seem to have trouble noticing that JD has explored the issue over the course of 300 posts, and most of us have been interested in discussing transit, emerging technologies, and alternative energy solutions as well. YOU for some reason are obsessed with the damn backyard gardening and hybrid scootering. Most of us just see them as one or two issues amongst a panoply of issues.
REally? I thought you and JD had bragged enough about your own austere lifestyles. And you still want us to take you seriously when you want "doomers" to be even less consumer-oriented than you are? Who could be that righteous, Gandi?
Practice what you preach. You may damn me, but I don't preach absolute consumption celibacy, and I don't claim to be anywhere near austere. Then again, I'm not running around and screaming end times on account of wanting to buy something. If you're going to spend much of your time damning the consumption machine, doesn't it make sense to remove yourself from it?
You issue judgments here on a regular basis. We all do. I'm not saying that I'm qualified to judge every individual act of consumption. But I will go on record saying that the US presence in the Middle East is a misbegotten attempt to police the world's largest oil fields, and that it is essentially immoral and unsustainable.
Why is it immoral? Would it be better to have oil at the hands of tinpot dictators?
Why is it bad for us to "police" the Middle East, but not immoral for us to have the 7th Fleet policing Asian waters? I mean, we are essentially extending our military authority into the Strait of Malacca and the Sea of Japan. Is that okay?
I mean, look, I'm as glad as anyone else that the date has been set to August 2010. But I also have to realize that even if the US weren't importing oil, pretty much every other OECD nation would be-- would it be any better for Japan to post the SDF in KSA? Because if the US weren't importing, do you think that the Japanese would be okay with Mideast oil being in a tumultuous region? Would China see fit to allow it into the hands of Husseins? I don't know. I do know that for all the talk of the immorality of the US presence, it's a helluva lot better than plenty of other alternatives.
Wake up: even if the US stops importing, the OECD has plenty of need for the stuff. Imagine being a place like Singapore, who is essentially nothing more than an entrepot. There are plenty of countries far more "dependent" on foreign goods than the United States.
A couple more data points on this topic:
1) Oil prices unlikely to bounce back
2) "A new Deutsche Bank analysis finds that in the short term, oil prices likely would have to fall to $20/bbl and below for nonmembers of the Organization of Petroleum Exporting Countries to shut in a large amount of production.
However, with investment now falling, the downside risks to supply forecasts are increasing. This suggests that upside price risks, once demand recovers, are considerable."
Link
"There are plenty of countries far more "dependent" on foreign goods than the United States."
You say that like you think its a good thing. PO debunking as schadenfreude.
You're the ones who need the moral wake-up, Ari. Five thousand Americans and 100s of thousands of Iraqis, trillions in borrowed money - all to police the Persian Gulf.
Oh, well, it's all fungible, eh? Oil, human life, infrastructure.
You guys are a hoot.
HDT
Another data point:
"Investors are concerned demand for oil will continue to weaken amid the worst global slowdown in decades. Prices could fall to $25 a barrel within the next three months, said Alan Plaugmann, head of futures and options trading at Denmark-based Saxo Capital Markets.
"We expect another leg down from here," Plaugmann said. "Consumer demand is in a downward slope. I don't think we'll bring ourselves out of recession for at least three to five years.""
Link
"I don't think we'll bring ourselves out of recession for at least three to five years.""
Who-hoo! Five years of recession!! 1.7 trillion dollar deficit. And we haven't even a single riot yet!Is this a great country or what?
HDT
Thanks JD,
However, with investment now falling, the downside risks to supply forecasts are increasing. This suggests that upside price risks, once demand recovers, are considerable.
That's been my point all along....
Today's low oil prices in the recession will only exacerbate the problem when we recover (whenever that is). The low prices, although a nice breather I admit, are nothing to start cheering about to loudly.
Going back to my original post on another story, see the dangerous cycle that could develop here guys? Ari indicated this was technically feasible, but not likely. I say VERY likely. I don’t see to much happening around the world to stop this. Everyone is busy attempting to repair economies by rescuing banks, GM & Chrysler, instead of pouring money into more oil capacity (or aggressively into alternatives for that matter) in an attempt to keep oil prices reasonable when we recover.
New Guy
Ari,
I’ll apologize from the start for being snide on the next remark; however I’m having trouble getting the point across here.
Let’s say when the economy does recover, that we soon (not sure if it’s 1 year or 5) hit production capacity again, oil prices would likely spike again, then what? Enter the recession once more, or will you have different factors and excuses for the following recession? Maybe that one will be caused by blue collar worker greed, or something of the like. Although there are a million little factors that do add up and make economists look smart for explaining.
The bottom line, very high oil prices for an extended period of time = recession.
We’ve entered an extremely volatile point in oil prices because we’ve peaked; one writer explained this as the first phase, where market contraction could outpace the oil production decline rate, therefore providing temporary breathers. I read this about a couple of years ago, and it pretty much explains the mess we are in. The second phase occurs when market contraction can no longer keep up with production rate declines, I’ll let the ‘economists’ figure out the repercussions of that phase.
New Guy
New Guy,
First off, don't be confused by last year's run up to $147 as having anything to do with supply and demand. It wasn't. It wasn't about peak oil, either. It was about investments into the commodities markets by deep pocketed players, who typically don't get involved, like retirement funds, etc. Most of that was because they were moving away from something else and trying to protect their money due to inflation concerns.
Now onto what you were saying about production capacity.
The oil business has ALWAYS been cyclical. Production has ALWAYS fallen behind demand to where the price rose and spurred more investment toward the production side and therefore putting production above demand and the cycle repeats. Production has ALWAYS been economically controlled, i.e., why pump more, or from more expensive and exotic sources, when the market doesn't dictate that it's needed. Production has not met a geologic peak. As the price increases, more and more sources become economically feasible. Why is this time any different? Just because we are on the other side of peak? Well, first off, we're not. But even if we were, perhaps the price points necessary to produce the oil needed to match demand will be higher, but those higher price points will also mean lowered demand. Lowered to the point that the geologically limited production will be able to meet it. Example: At $500/barrel, almost all sources of oil are economically feasible. (Hell, I'd be killing fat people and rendering them down for that price. J/K, obviously). Also, at $500/barrel, demand (i.e. people who can actually afford $500/barrel oil) will be EXTREMELY limited.
When demand recovers, if demand recovers, the price may indeed go up, but as it goes up, more and more sources become available and the demand wanes at the same time. Will there be periods where demand outstrips supply? Sure, there always has been. Will it take higher and higher prices, over time, to make other sources available to meet that demand? Sure, but what else in the world hasn't increased in price.
All that being said, do you have a good reason to explain why demand in certain countries has already peaked, before the recent run up in prices and supposed scarcity?
I truly believe world peak demand has occurred. By the time the US and the rest of the world comes out of this recession, too many advances will have been made (PHEV's, etc.) and too many people will have made conscious decisions to lower their energy use that world oil demand will never recover to what it was.
DoctorJJ
Doctor JJ,
First off, don't be confused by last year's run up to $147 as having anything to do with supply and demand. It wasn't. It wasn't about peak oil, either. It was about investments into the commodities markets by deep pocketed players, who typically don't get involved, like retirement funds, etc.
Unless you provide support for this sweeping state, it’s really a stalemate, you have your opinion and I have mine… hmmm. And to use Ari’s favourite line, ask yourself why? Even if much investment was poured there, why??? Especially on a commodity that has ALWAYS been cyclical? This does not stack up neatly enough for me to buy this theory.
Why is this time any different?
I think you need to do a little more reading on oil history, peak oil aside. Let me paint a picture here then pose a question. Let’s assume for a moment no oil existed outside the US, what would have happed to the US after oil peaked in 1970-71? Keep in mind, right up to the year of peak production, very few people in the US considered Hubbert’s warning enough to action on it by aggressively moving into alternatives. Every year oil producers kept reciting, we can’t be at peak this is the greatest year of oil production. This is true until the first year after peak. If the rest of the world had not been there to subsidize America’s thirst for oil, with even cheaper oil from ‘73 onwards, I believe America would not be a fraction of what it is today.
If the world peaks, or has peaked, Mars is not coming to the rescue with even cheaper fuel. The world will be left using fuels with orders of magnitude less concentration of energy (many of the alternatives with the exception Nuclear). This reality is a far cry for the predicament the US faced in the 70’s. Oh by the way, why didn’t the US simply turn to alternatives back then instead of jumping on a path that would eventually lead to the Iraq war, and God knows where in the future?
I believe this explains why this time is different…
As for your arguments, honestly, what makes you believe so strongly that we can successfully switch to worse (leaving the environment out of the equation) fuels seamlessly, when America’s economy itself did not have the smoothest ride simply by importing more oil?
To date, with what I’ve seen here, I honestly believe your arguments to be a much greater leap of faith than believing Peak Oil will cause havoc.
New Guy
Speculation, not supply demand.
http://www.cbsnews.com/stories/2009/01/08/60minutes/main4707770.shtml
As for this time being different, it is and it isn't. And, BTW, I don't need to read anymore about peak oil to understand why you think being on the other side of the curve is TEOTWAWKI, I just happen to think you're wrong.
Back to the supply/demand picture. The price swings/supply and demand is and will always be the same. The difference this time around, as opposed to the 70's, is the technology. The Tesla car was not possible in the 1970's with any budget. Now for $100K, which is quite reasonable considering it's competition (Porsche 911), you can have an all electric, 200 mile range top of the line sports car. At this point, we can and will switch to alternatives to oil and oil based fuels. That is the difference in "peaksters" and "debunkers". Hardly anyone thinks oil won't physically peak, it's the consequences after it does. I say the prices swings and supply and demand fundamentals will still happen, but, unfortunately for doom-tards, oil will become less and less important.
DoctorJJ
I never asked you to read mor about peak oil.
And you still did not answer the question
This reality is a far cry for the predicament the US faced in the 70’s. Oh by the way, why didn’t the US simply turn to alternatives back then instead of...?
Unless of course your answer was a car??? The Tesla car was not possible in the 1970's with any budget. WTF?
New Guy
If the world peaks, or has peaked, Mars is not coming to the rescue with even cheaper fuel.
New Guy,
As always, you're excessively focused on the supply side, and completely ignoring the elephant in the room, i.e. the staggering amount of fuel wasted in the current system. As I pointed out earlier, the Hirsch report states that 1/3 of US oil use (6.3 million barrel/day, i.e. an amount equal to all Russian oil exports) is discretionary automobile and air travel. Half the US working population could very easily commute to work by bicycle. And those are just two out of dozens of demand side measures I could list. We don't need cheap oil to come to the rescue. Car pooling, bicycles and telecommuting will be just as effective as a solution, and much more practical.
Cheap fuel is like a drug. You don't actually need it, you just think you do. And you're talking like just another junky, freaking out about where your next fix is going to come from. It's telling that you drive an SUV. The concept of reducing or quitting the drug is something you just can't wrap your mind around, no matter how many times I point it out to you. That's what makes you just another doomer blowhard: your total stubborn unwillingness to take any demand-side response seriously.
If oil prices get too high or unstable, the solution is straightforward: rationing. That's the ultimate demand-side response, and I'm totally in favor of it.
America’s economy itself did not have the smoothest ride simply by importing more oil
Exactly - so why DrJJ, do you and the 'debunk-tards' believe that transition to an electron based solution will be any smoother - given the fact that we're not just talking transport but the entire rejigging of infrastructure to support it - potentially in economically unstable times?
I think the problem here is the fact that people are having problems visualising the sheer scale of what is involved, the inertia people have when trying to implement practically anything (todays financial mess, carbon emission reduction, etc) and the capital to fund all this when countries might not be so flush. Its one thing to type "build more nuclear powerstations, build more electric cars" - its another to actually do it.
Half the US working population could very easily commute to work by bicycle
Again very easy to type this into a blog - but I'm actually laughing now at the thought of the stubborn American people as whole taking up their bicycles with glee and cycling miles and miles with smiles on their faces. teh lolz
"I never asked you to read mor about peak oil.
And you still did not answer the question
This reality is a far cry for the predicament the US faced in the 70’s. Oh by the way, why didn’t the US simply turn to alternatives back then instead of...?
Unless of course your answer was a car??? The Tesla car was not possible in the 1970's with any budget. WTF?
New Guy"
My bad about the "reading about the history of oil" vs. peak oil. I was thinking one thing and typed another. My answer still stands. The Tesla car is just a glaring example of what is possible today vs. what was possible then. Here's a bit of history about electric cars
"Battronic worked with General Electric from 1973 to 1983 to produce 175 utility vans for use in the utility industry and to demonstrate the capabilities of battery-powered vehicles. Battronic also developed and produced about 20 passenger buses in the mid 1970s.
Two companies were leaders in electric car production during this time. Sebring-Vanguard produced over 2,000 "CitiCars." These cars had a top speed of 44 mph, a normal cruise speed of 38 mph and a range of 50 to 60 miles.
The other company was Elcar Corporation, which produced the "Elcar". The Elcar had a top speed of 45 mph, a range of 60 miles and cost between $4,000 and $4,500."
From this website: http://inventors.about.com/library/weekly/aacarselectric1a.htm
$4000 was about like $20,000-25,000 today, depending on what inflation index you use, FYI.
So, the performance, reliability, range, safety, etc. have all increased dramatically since that time.
Therefore, the change to electrified transportation back then would have been limited and much more painful. Today, meh, no big deal. I might just buy a Tesla myself. In fact, if I were in the market for a 2 seater sports car, it would be the one I would definitely buy. That was the point of the Tesla example.
DoctorJJ
DoctorJJ,
Thanks for clarifying your point. It does nothing however to help your argument. ukJay says it nicely, I think the problem here is the fact that people are having problems visualising the sheer scale of what is involved,.
I work in the power industry and see the challenges in meeting today's electricity demands without having an army of electric vehicles on the road. This is the part you blindly miss or assume will sort itself out. Are you saying trade oil for coal, wich is the quickest way to upgrade your power generation at the moment, or maybe your suggesting build all these hundreds or thousands of Nuclear power plants with what money??? Noticed the economy sucks at the moment, and will suck everytime oil spikes...
New Guy
You work in the power industry, hmm? Allow me to be a bit skeptical about that. I'd presume you'd know about the nature of production and load if you'd work in a central position.
Then you'd know that the consumption at night is dramatically lower than during peak hours. Putting a lot of electric cars on at that time won't be a problem for the network (which is probably when they would be charging). There is in fact a lot of overproduction at night time, and this energy is wasted. Also, because night energy is cheaper - the economics are already there to encourage the consumer to do this at night time.
"You work in the power industry, hmm? Allow me to be a bit skeptical about that."
+1
New Guy,
If you were in the power industry, I would think you would know about the DOE study,
http://www.hybridcarrevolution.com/hybrid_cars_articles/DOE_study_find_grid_can_handle_plug_in_hybrids.htm
and the Oak Ridge Labs study,
http://www.ornl.gov/info/press_releases/get_press_release.cfm?ReleaseNumber=mr20080312-02
But, I guess you probably know more than those people about this topic. Haha!!!
DoctorJJ
Babun,
Are you for real? Reduce the size of your gas tank by two thirds (to get similar ranges to an electric car) then only fill up at night. Let me know how that works for you? No one will ever want to fill up during afternoon rush hour??? Which is peak load with residential, commercial, and industrial all online at the same time…
Yes, I’m ‘sure’ we can make it work, if everyone obeys and is perfect. Good luck with that? Try looking for practical solutions instead.
New Guy
DoctorJJ,
Can you follow a thread? I said power industry, not car industry. Please try and follow conversations. And BTW I never claimed to know more than any of your proclaimed experts. Not sure how that was supposed to sting me or even be an appropriate response to the discussion.
Try removing the Doctor, it’s not you.
New Guy
New Guy,
Read the links, jerk-off. Those ARE studies about the power industry, and they are direct rebuttals to your fallacious claim about power companies not being able to supply the needed power for electrification of personal transportation.
DoctorJJ
JJ
Had a look at your links
http://www.hybridcarrevolution.com/hybrid_cars_articles
Doesn’t work.
And
http://www.ornl.gov/info/press_releases/get_press_release.cfm?ReleaseNumber=mr20080312-02
Interesting, I’ve read similar articles, but it does not prove your point. Did you miss the following excerpts…
In the worst-case scenario—if all hybrid owners charged their vehicles at 5 p.m., at six kilowatts of power—up to 160 large power plants would be needed nationwide to supply the extra electricity, and the demand would reduce the reserve power margins for a particular region's system.
So we would need between 0-160 power plants. It’s definitely not 0, and definitely likely not 160.
And my point, in the article you yourself referenced:
Some assessments of the impact of electric vehicles assume owners will charge them only at night, said Stan Hadley of ORNL's Cooling, Heating and Power Technologies Program.
"That assumption doesn't necessarily take into account human nature," said Hadley, who led the study.
I’m not saying it’s impossible or won’t happen, I’m simply arguing it’s not nearly half as straight forward you make it out to be.
New Guy
JJ,
I suggest you try reading and not skimming for the "no power plants needed" lines.
Might want to tone down your language as well, it doesn't convey a sense of wisdom.
New Guy
New Guy,
So you first come at my with an ad hominem attack by insulting my use of a username with the word doctor in it. Then you essentially admit that you popped off about the articles I listed before you had actually read them. Then after you read them, you took only the quotes you needed and suggested I needed to do more than skim the articles. Yeah, I'd say I was right. You are a jerk off.
Look, I have read those articles and the original studies done by both ORNL and DOE. I also know about smart grid technology and also know that consumer behavior can be greatly influenced by simple pricing mechanisms to encourage greater use during off-peak hours. Those effects combined with a few more power plants in the next few years and voilà, the electrification of personal transportation is completed. You said that we have no idea about the scale of want it would take. WRONG!! I do know the scale and I know how to make it successful. I know, apparently, more than you do. Your entire argument is fallacious.
DoctorJJ
HDT,
That American foreign policy is screwed, and has almost always been screwed, is not really that interesting or unusual. We sent tens of thousands to their deaths to fight an invisible scourge of communists in Vietnam. At least we might see a stable government in Iraq in a few years.
MIGHT. Please don't say I'm saying we WILL. I said MIGHT. MIGHT.
I think American foreign policy is naive, stupid, and generally impotent from a goal-seeking perspective. But that doesn't change the fact that the US isn't the only stakeholder in "the oil game." It doesn't make the US the weak party. Amongst OECD nations, the US is actually pretty well off.
It's amazing that people have missed the fact that buying oil from abroad is actually better in a lot of ways than producing our own-- specialization is one of those wonderful little things you learn about in macroecon courses. The problem isn't oil imports alone, but that we wanted to buy more stuff than we sold. We'll see how that goes in the coming years...
New Guy,
Let’s say when the economy does recover, that we soon (not sure if it’s 1 year or 5) hit production capacity again, oil prices would likely spike again, then what? Enter the recession once more, or will you have different factors and excuses for the following recession? Maybe that one will be caused by blue collar worker greed, or something of the like. Although there are a million little factors that do add up and make economists look smart for explaining.
Oil prices may spike again, they may not. They did not spike after demand picked up again decades after 1979 until a long time afterwards. That's a lot of time for Priuses to get on the roads.
I'm not "making excuses," by the way: I'm talking economics. You want to know the difference between a pseudo-scientist and a scientist?
A scientist states what he doesn't know as much as he states what he knows. The fact of the matter is that the exact causative factors for this recession are very hard to weight properly in an exact manner. I find it hard to believe, however, that the recession would have been as severe (or likely) had the US's financial sector not been overleveraged to the extreme it was. Thus is the nature of econometrics, economics, and applying some sort of scientific method to social inquiry. Want to damn someone? Damn those pesky scientists with their "uncertainty" crap. It's a real pain in the ass being INTELLECTUALLY HONEST.
The bottom line, very high oil prices for an extended period of time = recession.
Well, yes and no. We have a very limited data set to work with with oil, and it's hard to separate the variables.
We’ve entered an extremely volatile point in oil prices because we’ve peaked; one writer explained this as the first phase, where market contraction could outpace the oil production decline rate, therefore providing temporary breathers. I read this about a couple of years ago, and it pretty much explains the mess we are in.
Correlation ≠ causation. Correlation ≠ causation.
Correlation ≠ causation.
Correlation ≠ causation.
Correlation ≠ causation.
The second phase occurs when market contraction can no longer keep up with production rate declines, I’ll let the ‘economists’ figure out the repercussions of that phase.
Since you put "economists" in quotes, I can only assume that you have no interest in actually hearing what me or a professional economist would have to say anyway, so why bother?
The fact of the matter is that any number of things could happen, and none of them require economic contraction to "keep up with oil decline." That's a silly, and very fallacious, peak oil meme. Real economies are that simple, unfortunately.
By the way, give evidence for this peak you're arguing so passionately for. As far as I see, production in 2008 was higher than 2007, which was higher than all the previous years of the decade. Besides, how can we know that we've "peaked" if we don't wait for the following years of data to roll in?
You say we've peaked, yet you have no evidence to demonstrate this. You are basing predictions on conjecture. That's not, in and of itself, wrong per se, but it's not definitive. You need to state the uncertainty of your argument, or you're just yanking everyone's chain-- including your own.
And to use Ari’s favourite line, ask yourself why?
Pardon my language, but...
What the fuck does this mean? I don't think I've ever even said that! You know, instead of making up a caricature of me, you might try actually reading what I say.
when America’s economy itself did not have the smoothest ride simply by importing more oil?
So... you're saying that the average American lives with less today than before we imported oil? I think I live a far better life than my grandparents did, and they got to buy only pure American oil!
ukJay,
Again very easy to type this into a blog - but I'm actually laughing now at the thought of the stubborn American people as whole taking up their bicycles with glee and cycling miles and miles with smiles on their faces. teh lolz
Us dumb-dumb stubborn Americans have been known to do some CRAAAAAZY things from time to time. Y'know, like mobilizing the entire nation for a war effort, or I dunno, electing a minority to the executive office.
We can still be pretty nuts sometimes. Besides, I saw tons of fat ugly dummyhead Americans riding bicycles in CA when oil prices were up. They even rode buses!
Silly Americans-- we think we can adapt? Pfft. When have Americans ever been cutting edge? Like... ever?
Babun,
Are you for real? Reduce the size of your gas tank by two thirds (to get similar ranges to an electric car) then only fill up at night. Let me know how that works for you? No one will ever want to fill up during afternoon rush hour??? Which is peak load with residential, commercial, and industrial all online at the same time…
Yes, I'm for real. If you look at car users today, I'm sure that would suffice for most users. If you're one that drives a huge lot, you'll hardly be the first one to go electric, will you?
Sure someone will want to fill up. But the overwhelming majority will be doing it at night time. Not only because it's most convenient, but because it's the cheapest. Just look at how the cents move people's gas fill-up strategies. Tell me, why would the majority want to charge their cars at day time? What is your grand idea about the average car user that lead you to this conclusion? By just using common sense, I'd guess quite a lot of car users are at work during peak hours.
Yes, I’m ‘sure’ we can make it work, if everyone obeys and is perfect. Good luck with that? Try looking for practical solutions instead.
The aim of making it work doesn't require everyone to be perfect. It just requires most people not to act completely irrational. Get your facts straight. I see nothing unpractical regarding this solution.
babun,
Exactly. People tend to follow the path of least resistance whenever possible. The idea that PHEV buyers, who will probably be looking for gas-free commutermobiles, will charge willy-nilly at all times is just... odd.
Even if we see a spike in electricity consumption in the short-run thanks to PHEV adoption (or EVs, even...), it's possible that:
- energy companies will charge more for the daytime energy, thereby discouraging the "fill ups" in the day
- capacity will be built alongside PHEV sales (it's not like energy companies are stupid to trends... usually.)
- it's not like PHEVs will replace the fleet overnight in one massive wave of the market's evil cold dead hand. It may take years for any sort of saturation to occur at levels that the current grid would be seriously taxed.
The problem I see with a lot of the "we don't have the power, captain!" arguments is that they assume that energy use is all daytime energy, that capacity doesn't grow with PHEV adoption, and that we lack tools to encourage consumption at better times.
Hell, tiered rates do wonders for energy use in the summer... who's to say we can't do that during the entire year, but with EV/PHEV charging?
But the more important question is this: why the hell do we not try? The opportunity shouldn't be passed up just because there are associated challenges!
Besides, how can we know that we've "peaked" if we don't wait for the following years of data to roll in?
It's a faith thing :)
"At least we might see a stable government in Iraq in a few years. MIGHT. Please don't say I'm saying we WILL. I said MIGHT. MIGHT."
This is just another example of your equivocation I alluded to earlier. We MIGHT do a lot of things. We MIGHT see a meteor the size of China crash into the earth. Or we might see any number of black swans. Even if we did see a stable government in Iraq, it would still require massive amounts of US aid and manpower to survive. And none of your MIGHTs would negate the fact that we occupy Iraq because is its strategic location and not because of what might happen to the Iraqi government.
"It's amazing that people have missed the fact that buying oil from abroad is actually better in a lot of ways than producing our own..."
And what's more amazing is how you willfully overlook the fact that an economy dependent upon imported oil is actually much, much worse from a basic moral, human perspective than living within our means as a country. Imported energy, imported capital - decade after decade of "borrowing" what we don't have has led us to this juncture where we face incomprehensible debt just to maintain the status quo of borrowing and importing energy and capital.
"Correlation ≠ causation. Correlation ≠ causation.
Correlation ≠ causation."
Repetition, eh?
Correlation doesn't equal causation, but it sure as hell can be a strong hint.
HDT
DJJ
Then you essentially admit that you popped off about the articles I listed before you had actually read them.
Assumptions, assumptions. Have a look at the timing of the 'popped off' remarks I made. I was writing up my response to you when you came back with some lame read the links retort. Have a look at the timing, again it's all recorded here. 3 mins, not enough time for me to read the links and write the retort, wich means I had already read them and was in the midst of writing the retort when you came back.. Again try reading and paying attention to details, you might get further ahead.
New Guy,
Ari,
Correlation ≠ causation.
Agreed. But how does that help your argument? I’ve presented arguments that the recession is indeed a causation of high oil prices. Also provided evidence of this occurring many times in the past.
Please explain, and provide supporting evidence, maybe even links to graphs how this recession and let’s say all others where not the result of high oil prices.
Here’s what I think you don’t get, the high prices themselves do not cause the recessions, it’s the effects these high prices have on other parts of the economy, in this case it was the banking industry. Let’s examine the argument that greed was the cause of the recession. Let’s say the decisions made had less of a ‘greed’ factor in them. The banks would have larger buffers (increased restrictions on loan availability) to account for potential inflation. The way I see it, the recession would have still occurred, simply at a different oil price point, say $250 instead of $150. I can’t name the exact prices, but I’m willing to bet the every consumer will start to default on loans at a specific price point.
The greed argument, I my mind simply means that mortgage defaults starting rising sharply at prices above $80. Take away the ‘greedy’ bankers and place conservative bankers and you still have the same problem, simply at a different price point.
I realize this is not stated as eloquently as you yourself would put it Ari. I fully admit you do appear to be well educated and communicate well on economics, but that does not necessarily make you right, does it?
The point, I believe there is strong causation however because of the enormity of the topic no one can claim it 100%. That however does not imply that it must be correlation by default.
New Guy
"Assumptions, assumptions. Have a look at the timing of the 'popped off' remarks I made. I was writing up my response to you when you came back with some lame read the links retort. Have a look at the timing, again it's all recorded here. 3 mins, not enough time for me to read the links and write the retort, wich means I had already read them and was in the midst of writing the retort when you came back.. Again try reading and paying attention to details, you might get further ahead."
New Guy,
I think you're losing it, man. So which was it? You had read them before you responded or you hadn't had enough time to read them because it had only been 3 minutes? If you had already read them, they your retort that you left wouldn't have been condemning me for posting links to the "car industry". It's obvious that you saw my post, read the words in the links and the headlines, and just assumed that I had posted about the car industry. If you had actually read the articles at the time of your retort, then you would have known that it was about the power industry.
Bottom line: Either you read them and didn't comprehend them and came back with a retort about them being the wrong industry. In which case you are clearly retarded. Or, you popped off before you had read them, and are now trying to cover.
Either way, you're a jerk-off.
"I’ve presented arguments that the recession is indeed a causation of high oil prices.",
What are you even trying to say here? That the recession caused high oil prices?
Even if someone concedes that the high oil prices caused this recession, which I personally think those higher prices had very little to do with the recession, but even if they did, you would first have to prove what the cause was for the high prices in the first place. Was it because of shortages? Was it because of peak? I think there is VERY little evidence of that, yet MUCH evidence that it was investors/speculators driving up the price unnecessarily. Therefore, even if you could prove without a doubt that the high oil prices directly and singly caused this recession, unless you can prove why oil went high to begin with, your point is moot.
DoctorJJ
HDT,
This is just another example of your equivocation I alluded to earlier. We MIGHT do a lot of things. We MIGHT see a meteor the size of China crash into the earth. Or we might see any number of black swans. Even if we did see a stable government in Iraq, it would still require massive amounts of US aid and manpower to survive. And none of your MIGHTs would negate the fact that we occupy Iraq because is its strategic location and not because of what might happen to the Iraqi government.
This is not “equivocation.” I’m not trying to mislead or hedge. I’m simply being intellectually honest and providing for uncertainty. Again, I don’t speak the language of pundits and priests, and cannot say anything with absolute certainty. I do know, however, that the possibility remains, and that we see positive signs on the horizon for a relatively stable Iraq.
And what's more amazing is how you willfully overlook the fact that an economy dependent upon imported oil is actually much, much worse from a basic moral, human perspective than living within our means as a country. Imported energy, imported capital - decade after decade of "borrowing" what we don't have has led us to this juncture where we face incomprehensible debt just to maintain the status quo of borrowing and importing energy and capital.
How and why? Why is it immoral to buy from abroad? You throw out these terms without really defining them, and expect people to take it seriously on its face. How is importing a good immoral? Are you honestly saying that the Japanese should stop importing oil, lest they commit acts of immorality? Can you imagine the quality of life Japan would enjoy if it stopped trade?
Oh, wait, it’s called North Korea.
So... North Korea is a more “moral and human” existence than Japan? Correlation doesn't equal causation, but it sure as hell can be a strong hint.
Can be, but when we have other strongly correlated variables we should take note of them and be cautious in our conclusions. Probably the first thing you should learn in a decent statistics class is to be cautious in how you interpret coefficients and the results of a regression. The same applies to any sort of prediction.
New Guy,
Agreed. But how does that help your argument? I’ve presented arguments that the recession is indeed a causation of high oil prices. Also provided evidence of this occurring many times in the past.
No, you’ve basically just provided correlative statements in the vein of “gas prices went up around the time the economy tanked! Therefore, it was oil prices!” Please explain, and provide supporting evidence, maybe even links to graphs how this recession and let’s say all others where not the result of high oil prices.
I’m not saying that oil prices are not A cause. They certainly have contributed. I’m saying we live in a multivariate world where single variable explanations just don’t suffice. Yes, oil contributed to this current recession, but it’s only a proximate explanation for it. The most important factors were the housing bubble and the extreme leveraging on the parts of banks. Even if oil had not increased in price (which is in part due to banks in the first place), the housing bubble would have burst eventually.
And saying that “all” recessions are due to oil prices is absurd. 1929, 1953, 1957, 1960, 1991, and 2001 are all fairly independent of oil prices. Unless you think that the dot-com bubble was caused by peak oil as well? Here’s what I think you don’t get, the high prices themselves do not cause the recessions, it’s the effects these high prices have on other parts of the economy, in this case it was the banking industry. Let’s examine the argument that greed was the cause of the recession. Let’s say the decisions made had less of a ‘greed’ factor in them. The banks would have larger buffers (increased restrictions on loan availability) to account for potential inflation. The way I see it, the recession would have still occurred, simply at a different oil price point, say $250 instead of $150. I can’t name the exact prices, but I’m willing to bet the every consumer will start to default on loans at a specific price point.
I dare say I know more about microeconomic behavior than you do, and I can say this much: you’re pretty much wrong. The problem with your argument is that you assume that there’s no elasticity of demand. Demand for it falls at a certain price, and had banks not been too heavily leveraged (as well as homeowners), failing mortgages could have been absorbed more easily. When you have leverage several magnitudes greater than your assets, you’re going to hit a brick wall at some point. The greed argument, I my mind simply means that mortgage defaults starting rising sharply at prices above $80. Take away the ‘greedy’ bankers and place conservative bankers and you still have the same problem, simply at a different price point.
Again, demand for oil is not perfectly inelastic. We see this worldwide. Oil is not some super special good that people will buy the same amount at any price. I realize this is not stated as eloquently as you yourself would put it Ari. I fully admit you do appear to be well educated and communicate well on economics, but that does not necessarily make you right, does it?
No, and you are correct in that point. I am fully capable of being incorrect, and have admitted to it in the past. However, I think you make some problematic assumptions in your argument, and need to consider that oil is not the only commodity in the world, and its cost to the economy relative to GDP is actually lower today than it was in 1979. The problem with this recession was not oil primarily-- it was banks lending far too much money at absurd rates and letting models guide their decisions instead of goddamned common sense. The point, I believe there is strong causation however because of the enormity of the topic no one can claim it 100%. That however does not imply that it must be correlation by default.
I’m not saying it’s only correlated, but again: life is multivariate.
I think I’ll do a post on statistical inference at some point...
"How is importing a good immoral? Are you honestly saying that the Japanese should stop importing oil, lest they commit acts of immorality?"
Importing a good becomes immoral when the supply line for that commodity costs 100s of thousands of lives and trillions in borrowed capital to operate and maintain.
No, I don't expect anyone who now depends upon imported oil to suddenly stop. That would be economic suicide. About the best that can be hoped for is a collective realization of how expensive, deadly and untenable oil dependence really is, and then re-tooling the regional economies to prosper in post-oil. In post-oil, I suspect all the countries who depend on oil imports now to become more like they were 150 years ago in terms of their major economic activities.
Importing a good becomes immoral when the supply line for that commodity costs 100s of thousands of lives and trillions in borrowed capital to operate and maintain.
How about exporting? Is exporting okay? Because the US spent, in adjusted dollars, billions (or trillions) exporting its ideals. I, for one, find that far worse than the oil situation.
No, I don't expect anyone who now depends upon imported oil to suddenly stop. That would be economic suicide. About the best that can be hoped for is a collective realization of how expensive, deadly and untenable oil dependence really is, and then re-tooling the regional economies to prosper in post-oil. In post-oil, I suspect all the countries who depend on oil imports now to become more like they were 150 years ago in terms of their major economic activities.
And this is somehow... better?
You would rather watch people die of diseases like polio, measles, mumps, rubella, etc. instead of committing the act of trade? Because that's what it was like 150 years ago.
You'd rather see people at subsistence levels of living than trading based on competitive and comparative advantages?
This makes sense to you?! WHA?
You would really rather see a world of North Koreas than what we have today?
"How about exporting? Is exporting okay? Because the US spent, in adjusted dollars, billions (or trillions) exporting its ideals. I, for one, find that far worse than the oil situation."
It all depends on the good or service being exported and how the export process is implemented. If it's done the same way oil is imported, requiring an enormous naval presence in the Persian Gulf to insure stability and 100s of thousands of troops on the ground to protect the oil fields, then no, it's not "OK."
"You would rather watch people die of diseases..."
Ari, why are you so willfully obtuse? I said nothing about watching people die. Read what I write before you engage the debunker hyperbolic equivocator device. I said I SUSPECT that the countries who NOW rely on oil imports to look very different post-oil in terms of ECONOMIC ACTIVITY. What I 'suspect' has nothing to do with what I'd rather see.
I SUSPECT that in a post-oil world the economy will have a much higher percentage of agricultural and barter activity than it does now. The preponderance of banking and finance will fade as will heavy manufacturing, shipping, leisure travel, NASCAR, etc.
It has nothing to do with what I'd "rather" see and everything to do with what I believe is a logical extension of the issues we're dealing with today.
I know this doesn't jive with getting your pizza via hybrid scooters, but it has nothing to do with wanting to see death and disease. I think that must be your own projection. In many ways, this whole debunker mentality is a lot more apocalyptic than anything the high-profile doomers are shilling.
It all depends on the good or service being exported and how the export process is implemented. If it's done the same way oil is imported, requiring an enormous naval presence in the Persian Gulf to insure stability and 100s of thousands of troops on the ground to protect the oil fields, then no, it's not "OK."
So then all East Asian trade must not be okay as well, seeing as the 7th Fleet patrols the Strait of Malacca to combat pirates!
Damn, who knew?
I guess we had better stop trade with Japan and China, then, as well!
Ari, why are you so willfully obtuse? I said nothing about watching people die. Read what I write before you engage the debunker hyperbolic equivocator device. I said I SUSPECT that the countries who NOW rely on oil imports to look very different post-oil in terms of ECONOMIC ACTIVITY. What I 'suspect' has nothing to do with what I'd rather see.
Pardon me to hell. Considering that you can't even be bothered to read half the things I say, I'm allowed to miss one small qualifier.
So you suspect that we're also going to forget how to produce nuclear power, wind power, hydro power, natural gas power, and coal power?
Huh.
I mean, seeing as we had coal in 1900, I'd think we could at least keep 1900-era living. 1850 seems a bit of a big step back. So does oil also manage to drain our libraries and brains of the knowledge with which to build other energy production plants and factories?
Damn, oil is some pretty powerful juju!
I SUSPECT that in a post-oil world the economy will have a much higher percentage of agricultural and barter activity than it does now. The preponderance of banking and finance will fade as will heavy manufacturing, shipping, leisure travel, NASCAR, etc.
Considering that oil has lost share as a source of energy every year since the 1970s, I would have thought it would have started already...
It has nothing to do with what I'd "rather" see and everything to do with what I believe is a logical extension of the issues we're dealing with today.
I know this doesn't jive with getting your pizza via hybrid scooters, but it has nothing to do with wanting to see death and disease. I think that must be your own projection. In many ways, this whole debunker mentality is a lot more apocalyptic than anything the high-profile doomers are shilling.
Logical... extension? How on Earth is it remotely logical to assume that we're going to go back to 1850's living? And are we talking about these events transpiring sometime soon? A couple of years? 2050? 2100? Besides... seeing as most industrial production has little to do directly with oil, why will we go back to ye olde barter system? I mean, are we going to have the town computersmith?
Seeing as we have stuff like this: http://www.smithelectricvehicles.com/, and most energy needs can be substituted with the panoply of options... I don't see how your "suspected future" plays out. Therefore, I think you WANT this, and are letting your idea of a "consumerism-free future" get in the way of the facts at hand. You've made it perfectly clear that you hate consumerism, and it makes sense that you would bias your predictions in favor of the agrarian future.
It just doesn't make sense when you consider how economies can respond to oil scarcity.
What the hell does "debunker hyperbolic equivocator device" even mean, by the way? Then again, I don't find the term "debunker" insulting. I'd rather be a debunker than plenty of other alternatives.
Ari,
Just wanted to say that I appreciate your style on here. Someone had mentioned that they didn't like the way you parsed out people's comments to attack them. I think you do a great job. You take it point by point. It's not like you just chop it up to get things out of context in order to discredit the poster. You take their points, as a whole, but break the post into segments just to keep everything straight and it makes it easier to read and easier to follow.
NOTICE: If you want your points dismantled, don't post stupid shit that has no backing.
DoctorJJ
I wanna share my thoughts. I came accross peak oil about a year ago and it depressed me somewhat; it did seem that without closer inspection there was no way out of the oil dependence situation - and that if oil supply was to become restricted in any way we would see the apocalypse.
I'd now say im optimistic, at least about energy. This site's content and others have lead me to believe that within the next 30 years we are going to see massive changes to how we generate and approach energy; its going to be a little messy but at the end of the day successful. Lets face it: there are enough people working and thinking about the problem for there not to be at least some sort of solution. Even doomers are helping by refining arguments and ideas, so don't 'be hatin' them too much.
Something tells me that we are going to see some sort of doom this century though, but in a form that is less predictable than the economics of supply and demand. Environmental issues, disease or a less sexy resource depletion issue will come up (enough land to grow food for the increasing population? (I don't think food towers are ever going to work(I love nested parentheses))) :)
"Therefore, I think you WANT this, and are letting your idea of a "consumerism-free future" get in the way of the facts at hand."
And therefore you are wrong and this has been another colossal waste of time.
I suppose I used to think there was some point in trying to debate oil issues here. It's plain to me now that the underlying premise of this blog is that oil production and consumption poses no problem at all to modern culture, and therefore anyone who suggests that dependence on imported oil is a problem is simply misinformed or uninformed.
The fact that the US spends trillions of dollars and thousands of lives importing oil apparently means nothing to "debunkers." Lives, capital, oil - its all fungible stuff. A few thousand lives here, a trillion dollars there, it's all just another day, just BAU. I'm guessing none of the "debunkers" on this blog have ever served in the armed forces or sacrificed any personal pleasure.
Be a good American and order a pizza. Save the planet.
I’m going to take a step sideways from this debate and leave something for both debunkers and peakniks.
When I started reading about peak oil about 3-4 years ago some of the sites led to stuff like dieoff.com, quite honestly, this stuff freaked me out. Prior to reading PO I was an optimist, and argued technology and some star trek future was inevitable. The PO literature that appealed most to me was the stuff that explained a lot about where we came from in terms of the history of energy consumption. Our climb up the hydrocarbon ladder (lumber, coal, oil, natural gas, and to some extent hydrogen) to more efficient and ‘cleaner’ forms of fuel appealed to me. I followed a lot of literature that pointed out we were at the top of the chain with natural gas, hydrogen was possible however it had to be produced using other forms of energy; this lead me to the EROEI (Energy Returned on Energy Invested) arguments and the fact that we are have continuously been exploiting the highest EROEI energy because it was the most economical. Then the punch line for peaksters, if we’re exploiting the highest EROEI then all else is downhill as these high EROEI sources run out. This of course followed with all the predictions of when that would be. Some books were good and gave broad ranges and attempted to justify the ‘best’ dates, other books/articles were black and white and predicted hard and fast dates. The data points started to add up, and eventually I built a map in my own mind with the most referenced dates being somewhere between 2008-12.
Although I was not certain when PO would strike, I took action based on my gut feel after reading years of literature and sold all my investments back in the fall of 2007 in anticipation of some unknown threat that may ‘likely’ happen. At this point that action looks brilliant; however in all honesty the timing was lucky. I’ll also fully admit that anyone following other forms of literature, there own pet interest(s), may have come to similar conclusions and taken action on their investments accordingly i.e. economists worried about debt ratios and all the fun jazz.
The point on this first section: although everyone may not agree with everyone else’s vision, taking their arguments into consideration when planning for the future can have large payoffs.
I personally don’t subscribe to extreme points of views at either end of the spectrum which I perceive to be Dieoff at one end and continued or accelerated hyper-growth at the other. The good news is that I see the majority of people on this post arguing about middle ground. I see very few people (if any) arguing we’ll see hyper-growth for the medium term (25-50 years), nor do I see many people (if any) arguing dieoff on here.
What I see, is a lot off people arguing either side of the middle ground and the reasons for how we got here and where we are going. What I find interesting however; is that the positions have shifted recently from continued hyper-growth to a moderate contraction short term future or small growth at best. It’s hard to refute that a shift in perception has occurred, largely in part because of the recession. That’s rather obvious.
What I’m tempted to say is that I’m perceiving that PODs are actually PO moderates that what nothing to do with the PO label. What I’ve also noticed about this POD community, is that there does not appear to be much room for PO believers that do not believe in dieoff, this community appears to take glee in lumping the two together yet they themselves appear to support the moderate concerns of Peakniks, those being: times of easy energy are over, we have to put more effort and thought and cash on exploiting future energy sources, and because we’ve taken all the easy stuff we will have to contract our standard of living (the unknown is if this contraction is a temporary effect or permanent effect with a new standard of living baseline) at this point I personally believe it’s to early to tell.
My take, many people are arguing semantics on this post (myself included, not a bad thing, PO posts are guilt of it as well) in order to fit or not fit into specific labels. Putting that aside, I honestly believe, the majority of the arguments here point to a short-medium term (25-50 years) of limited or no growth at best down to moderate economic contraction. Step back a couple years and even this post may have been seen as extremely negative for the perpetual growth believers.
This is a harsh analogy (I can’t think of a softer one at the moment) however I see this community as ‘tame’ wolves in sheep’s clothing.
New Guy,
And therefore you are wrong and this has been another colossal waste of time.
Pot, meet kettle. You aren't exactly explaining why I'm wrong. You aren't refuting the fact that there are many other ways to produce energy that can keep us from going into an "1850s devolution." You are insisting that I'm wrong without actually explaining why I'm wrong. You're begging the question and finding names to call me.
I suppose I used to think there was some point in trying to debate oil issues here. It's plain to me now that the underlying premise of this blog is that oil production and consumption poses no problem at all to modern culture, and therefore anyone who suggests that dependence on imported oil is a problem is simply misinformed or uninformed.
I don't think that's it at all-- the underlying premise of this blog is that oil IS a challenge, BUT that optimism and forward thinking can take us to the next level, despite the cries of the peak oil doom faction. They see problems and see walls. We see problems and see ways to scale walls. They find problems where they are none, and we shine light on those phantoms.
The fact that the US spends trillions of dollars and thousands of lives importing oil apparently means nothing to "debunkers." Lives, capital, oil - its all fungible stuff. A few thousand lives here, a trillion dollars there, it's all just another day, just BAU.
I'm not saying that it's "nothing." You're misrepresenting my argument. However, let's dissect this for a second and look at it a bit more closely.
You seem to think it's bad to spend money on buying oil (or am I incorrect in this assumption?) I look at it another way: we get more utility out of the oil than we do out of the money itself. The oil lets us do some really good things that the money alone cannot. And that's basically the point of money: it's a fungible resource that allows you to trade for less fungible resources to increase your utility. Nothing new or fancy there.
Lives, however, are NOT fungible. I did not agree with the Iraq War, and despite its potential for "success," I may never look at it as a worthwhile endeavor. Nonetheless, I don't wear rose-tinted glasses when it comes to foreign policy. If the US had not gone to war in Iraq, it may still have spent hundreds, if not thousands, in Afghanistan and possibly Pakistan. Is only war fought over oil bad? I don't know. I do know, however, that we spent tens of thousands of lives in Vietnam and tens of thousands more in Korea to fight the "scourge of communism." Are Americans better for it? Korea, maybe. Vietnam? Doesn't seem like it.
Nonetheless, are you suggesting that if oil weren't in the picture we wouldn't have wars? I trust in human ingenuity and its ability to find new stupid reasons to shoot at neighbors. But unfortunately, that's an issue that is independent of oil-- even if we rid ourselves of all the petroleum in the world, we'll still have the capacity to commit war over water, land, ideology, religion, the ears of merchant captains, and beautiful women.
So yes, it is BAU. Alack that we live in a finite world with infinite desire. Neither you, nor I, can change that. I will say this much, however: offering solutions and possibilities for overcoming future problems
I'm guessing none of the "debunkers" on this blog have ever served in the armed forces or sacrificed any personal pleasure.
I love the implications here:
1. If we had served in the armed forces (which, by the way, I soon may) then we most likely will agree with you
2. We are hedonists who cannot imagine sacrificing pleasure
The truth of the matter is that I'm at a point in my life where I sacrifice a great deal of personal pleasure to support someone, but I do it gladly and with pride. I also spent most of my youth either helping to care for my sick mother or now deceased grandfather. Want to talk about sacrificing personal pleasure? Talk about the only 9th grader who has to go to the nursing home three times a week instead of doing a club activity.
You don't know us. You don't know our personal lives. Don't presume that you do. I've lived far above and below the poverty line. I know what "rationing" means in a way that most Americans never will.
Be a good American and order a pizza. Save the planet.
Would you get over that already? You're being facile. The argument was never that.
"You seem to think it's bad to spend money on buying oil (or am I incorrect in this assumption?)"
Like I said earlier, it's not just the act of importing itself that's immoral, its importing 'when the supply line for that commodity costs 100s of thousands of lives and trillions in borrowed capital to operate and maintain.' If the US could produce all the oil it needed as it did only a few decades ago, and it didn't require a few thousand human lives and trillions in borrowed money every year to operate and protect, then I would say we had an ethically sound system. And I am completely aware that total energy independence is certainly not possible in the short term. I maintain that energy independence should be a long term goal. We will be energy independent eventually, there's no avoiding that. Making the case for energy independence now would go a long way to eliminating or mitigating the effects of disastrous foreign and domestic policies driven by the monstrous cost of our oil dependence."
"I look at it another way: we get more utility out of the oil than we do out of the money itself."
That's because oil has been artificially cheap. When you start adding in all the external costs that are not paid at the pump - the human cost of policing Iraq and the Persian Gulf, the utility of that oil is quickly called into question if you have any sense of ethics at all.
HDT
Oil price is artificial, electric cars are artificial, conservation is artificial. What else is artificial? Nice word that, artificial.
"Nice word that, artificial."
I'm glad you like it. Enjoy it now, while you can. When you understand the real price you're paying for oil, you might think differently about the cost to operate and maintain long, complicated supply lines policed by thousands of soldiers and sailors.
Another peak oiler begins to doubt the oil bull, Tom Whipple:
"In a deep depression, supply constraints would no longer be a problem. If annual world oil production were reduced from the current 30 billion barrels per year to 25 or less, geological, and "above ground" constraints on production would likely be delayed for many years. Those individuals and institutions who could still afford oil would likely have available all they can use and probably at moderate prices.
What the global economy would look like under this scenario is another thing altogether. It would obviously be bad, very bad, but the details of the suffering are simply unknowable - there are too many variables.
It appears there are least two possible scenarios that could play out in the months ahead. Either demand holds up to a level at which OPEC can control the situation and we have higher prices, or the Great Recession causes demand for oil to simply melt due to lack of economic activity and declining incomes."
Phew, interesting place.
I likely classify as a `doomer` so I`ll not say much other than:
As for peak oil, it has always been my belief that Peak Freshwater would be a major issue before Peak Oil. Lo and behold, I would still say that this seems to be so.
And I would say the issue looms near. But then, I`m a doomer.
Btw, Ari, I admire your demeanor and effort to communicate.
SoapBoxTech,
I'm not a doomer (can you tell?), but I agree with you 100% that fresh water is a greater issue than oil in most cases. I don't think the problem is, or really will be, physical scarcity, but rather poor management policies and the strange human desire to live in arid places.
In the end, I tend to believe it'll work itself out, though, through a lot of capital and slow migrations toward water abundant locales-- but it will suck!
Alack that most people who are "doomers" are more concerned about oil than the more pressing issues.
Can you guys say stimulus packages?
Most industrial countries are floating them right now.
Do you think these counries can build/rebuild their infrastructure without oil?
Do you think the stimulus packages will affect demand at all?
As is the case in many other posts on this blog most of the things in this post were predicted as consequences of peak oil 30 or more years ago.
"As is the case in many other posts on this blog most of the things in this post were predicted as consequences of peak oil 30 or more years ago."
And the same people who predicted these things have been predicting for 20 straight years that "this is the year" that we hit peak oil. Yet it never happened and still hasn't. So how can you act like they've been right all along? If I keep predicting that the sun is going to supernova, sooner or later, I'll be right. LOL!
DoctorJJ
JD,
And the same people who predicted these things have been predicting for 20 straight years that "this is the year" that we hit peak oil. Yet it never happened and still hasn't.
Please use another line of reasoning to discredit PO predictions as this one could lead to inaccurate conclusions i.e. I have not died for the past x thousands of days therefore I can’t possibly die going forward as any prediction of death in the past has been wrong…
As I mentioned earlier, there are two lessons to the boy crying wolf fable. First the obvious one we teach our children, don’t lie because it reduces your credibility going forward and secondly, I think this one is more subtle and few people pick up on it, no matter how many times you hear someone cry wolf, the fact that someone cried wolf numerous times when there was no wolf does not imply the wolf will never come. There really is no way to discern whether or not the wolf is really there unless you invest the time to go investigate once more, or in the PO case, when we cross that bridge.
This by no means is and excuse for the people that ‘cried wolf’ on PO in the past, but remember these were in essence ‘best guesses’ based on their own formulas and data collected from past experience and projected future data. You labelled these PO predictors as liars in an earlier post, that’s harsh, although there is no way to prove this I suspect you’d be hard pressed to find anyone of these past or future PO date predictors willing to stake their lives on their predictions. They’d likely say, and often do, that those predictions are their own best guesses using the data they had at the moment, that does not translate to liars in my book.
Keep in mind, one could also make similar arguments for overly optimistic projections, which by the way have been done every bit as often as PO date ‘best-guesses’ i.e. IEA recently reduced its 2030 oil production forecasts from 118 mbpd to 106 mbpd and originally had the world producing in the low 90s mbpd by now. This was not the first time they’ve readjusted their numbers, nor is it the first time they were off on the estimates.
The point is, using your hard and fast logic that past estimates were wrong therefore no credibility should be given to any future estimates; we would have very few if any sources to believe going forward, including few of your own posts… food for thought. Very few topics are ever black or white.
I’d also be interesting in seeing your evidence of what I consider to be a gross exaggeration on your claim of: “And the same people who predicted these things have been predicting for 20 straight years that "this is the year" that we hit peak oil…
Looks to me like the other side cries wolf every bit as often yet your logic in discrediting PO ‘best guesses’ is rarely (if ever) applied to information that suits your cause.
New Guy
New Guy,
While i agree on some level with your general argument regarding the line of reasoning
here, I don't really think it strengthens the original argument. The original argument by Shiner (seemingly) insinuated that current world events had been predicted 30 or more years ago, and that they would be some kind of proof for the peaking of oil
production. Well the fact is that there are a lot of other explanations for these events
than the peaking of oil production. Because of the cyclical nature of the oil business
and its link with the economy, these effects that Shiner mentions are also naturally a part of a smaller boom/bust cycle. In my opinion that means Shiner's opinion is nothing but ill-informed speculation (without further arguments at least).
Then there's of course the issue whether the timing of the peak even actually matters so much.
I'd say the arguments are pretty strong that they won't be affecting us too much, at least on a short-term basis. And long-term is always more about pure speculation than actual knowledge and reasonable prediction. But I know the average doomer mind is set on that the date is important, and always seeking evidence to support a near future -peak. What i would like a doomer to contemplate about, is that the
nature of peaking affects the importance of the date a lot. Have you ever given a second thought to this?
It would also be interesting to hear how a doomer has interpreted the major events of the past year from rising prices to a price spike to really low prices. I believe it was a strong argument for the genious of economists' predictions regarding the issue. But what does a doomer think? And why? This is coming from a guy
that only perhaps a year and a half ago was everything but convinced about economists' views and pretty much a downer on the issue. The peak oil -media really does a lot to discredit economists and seems to try and create
as much prejudice as possible against them. That was probably why it all felt so alien and the minute i saw any economists' argument i frowned upon it. Having witnessed the last year of oil business cyclicality, I must say
I believe last year should have been an eye-opener for many. I suppose the doomer crowd has been deprived of a lot of non-chronically-depressed people.
babun
What i would like a doomer to contemplate about, is that the
nature of peaking affects the importance of the date a lot. Have you ever given a second thought to this?
Is this directed at me or at doomers? I hope your not implying I'm a doomer.
New Guy
Is this directed at me or at doomers? I hope your not implying I'm a doomer.
Sorry about the labeling, but even if you're not a "doomer", there's clearly something shining through that makes me believe this is also a question for you. It was however directed both at you and at doomers in general.
Babun,
Thanks for the clarification, I should also have asked you at the same time was what you meant by the following: is that the nature of peaking affects the importance of the date a lot.
If you intend to say that as oil approaches peak many factors will affect both supply and demand making it even harder to pin down an exact date, I agree wholeheartedly. At the same time, this might also explain all the dates floating around as ‘best guess’ PO date, meaning everyone making educated guess may take into account differing variables.
If on the other hand you’re making reference the extremists that view everything as black and white and have made hard and fast predictions on exact dates with little to support their conclusion, well I discard those types of prophecies on both sides of the argument.
For my own benefit however, I’m glad many people took a stab at the dates, I personally don’t believe anyone will be 100% right (unless there’s an estimated PO date for every date within the next 50 years, in which case there would be one lucky winner). The reason I’m glad many PO experts took stabs at the dates is because it provides me with a general vicinity of when events are likely to occur, and more importantly these dates should be used as guidelines to take political action.
Imagine PO definitions and/or PO articles without dates or speculation as to when events may transpire. It would not be much different then discussing giant asteroid collisions with earth; it could happen tomorrow, generations, or even millennia from now. Without a sense of timing, the urgency with which the PO event should be treated is lost and catalogued with other ‘freak’ anomalies. Personally, I forgive the scientists, geologists, and economists that attempt to convey a sense of urgency by making a best guess and providing plausible dates. The bottom line, I’d rather have a general idea as to when these events are likely to transpire than to blindly walk into them
I find it extremely short sighted for those that are so dismissive of legitimate PO date estimates or even those that lump all estimates together treating them all as equals. As for extremists with little evidence to support how they came to a specific PO date conclusion, well, feel free to beat them up as much as you’d like. Although the extremists have a slim chance of being right, it’s only because they were lucky as opposed to by design.
This is a link to Friddie Hutter's website where he talks about the peaksters predicting peak for 20 years now.http://www.trendlines.ca/peakoilcomment.htm#aspodm
I totally agree with you about both lessons from the Boy Who Cried Wolf story. That being said, I think a lot of the peaksters are liars. And I think they have made their claims based on something other than the best data available and their best guess for actual peak. A lot of these peaksters are in it for the money. They create the hype for that reason. Not because they truly think this year is the peak. I think that is the basis for this website. Oil will peak. When it does, there may be consequences, most of which are manageable quite easily. However, there is a bunch of hype and BS oil there that needs to be debunked. That's how I see it, at least.
I also think this website address the second lesson in the story. The wolf is real. We all believe that. But, with many of the advances that are being made, we can endure the wolf when he comes. I enjoy the discussion of all the potential solutions.
DoctorJJ
Doctor JJ,
The wolf is real. We all believe that.
You and I have a common understanding on PO / the wolf being real; however I do not believe that to be the case for everyone on this post, JD’s wording leads me to believe otherwise…
From JD: And the same people who predicted these things have been predicting for 20 straight years that "this is the year" that we hit peak oil. Yet it never happened and still hasn't.
Much of my previous two post were directed at JD on the above quote. I see many thing wrong with his statement:
Frist: “the same people” implying that it’s a few people reworking their same estimates year after year because each new year they realized they were wrong. The reality: many people have taken a stab at these numbers, some with better source data than others. As I indicated earlier, there is no way to predict world events that may affect supply or demand a few years in either direction..
Second: “for 20 straight years” implying that we’ve had 20 consecutive years were PO was supposed to have happened, meaning the earliest PO estimate was 1988-89. The reality: the earliest world PO estimate I saw was from M King Hubbert for 1999 predicted in the 70’s. Yes I’ve seen many prediction from that point onward; however, many estimates were calculated (prior to 1999 I might add), and took into account the effects of the late 70s early 80s recession.
JD leaves the impression that peaksters are simply moving the PO markers ahead by one year, year after year, until they are correct. That could not be further from the truth in my opinion. I mentioned this earlier, people take educated guesses based on the information they have, then attempt to ‘dumb down’ all this data and math through the use of a graph that the average person can read and understand.
I respectfully do not agree with you Doctor JJ, when you call these people liars. When your boss (or anyone for that matter) asks you for an estimate on when you can get a particular task done and you provide one, are you a liar if you do not finish on the exact minute of the estimate you provided them? No, estimates are just that, ballparks, otherwise they would be called ‘exacts’.
Remember folks, these are estimates! No one said they were gospel. If anyone did/does claim gospel, they’re simply extremists and should be dismissed. Remember, your side also has there own group of extremists (flying car anyone?, +90 mbpd day estimates – not extremist but wrong non-the-less , greater alternatives penetration than what we see today) and the same tactic could be made to discredit your arguments, personally I don’t think discrediting someone by association is a fair argument.
The bottom line, and I’ve said this before, this site should be PO Doomer debunked. You all do a great job debunking doomers; however PO has nothing to do with being a doomer. I’m of the opinion that if you were to transplant this post five years in the past, the vast majority of you would be labelled as peaksters for even stating that you believe oil will peak and have modest effects on society. Five years ago many people believed the Russians and the ambiotic oil theory and were still arguing oil itself would not peak.
"The bottom line, and I’ve said this before, this site should be PO Doomer debunked."
I guess in mind that's what it's always been. Like it says in the disclaimer, this isn't about the physical peaking of oil. I've always considered it a debunking of the hype, agenda, and doom associated with the peak oil movement.
DoctorJJ
Doctor JJ
I've always considered it a debunking of the hype, agenda, and doom associated with the peak oil movement.
That’s fair, I on the other hand personally believe there is much more “hype and agenda” associated with the perpetual growth believers – or the folks that peddle the “don’t worry solution x and y will provide the same benefits at little to no cost to the lifestyle your used to.”
Seems to me there is more to be gained by peddling drugs (alternatives) than there is by peddling the lack of drugs…
Guys, I’m not trying to be smart here but what is stopping many of the nations worldwide from implementing many of the alternatives that have been presented here?
Seems to me if you were to plot all the nations of the world on a spectrum from rich/developed to poor/not developed we would be able to find at least a few nations on that scale that would have similar fossil fuel consumption rates per capita as any scenario you’d like to pick post PO.
A simple but loaded question: what is stopping those nations from implementing the alternatives and conservation methods described here? And just as importantly, if they are implementing ‘some’ of these alternatives, how’s that working out for them?
For many poorer nations, they’ve already seen the market signals that should have forced them to a ‘better’ standard of living using alternatives and conservation. Instead, these nations appear to be the ones with the riot and starvation headlines…
Instead, these nations appear to be the ones with the riot and starvation headlines…
Lol have no fear, economic supply and demand babble will save debunkers from this interesting point
As for switching to alternatives, IMO, truly viable alternatives (fully electric vehicles with lithium batteries, PHEV's, etc) are only just now becoming available. There is also still somewhat of a premium attached to these vehicles. Therefore, it would be economically unreasonable to switch right now. The technology is available, but at a financial penalty.
All that being said, these poor-ass third world countries don't have their shit together regarding ANYTHING. Why would they be the world leaders in making the switch to new tech??? That doesn't make a lick of sense.
DoctorJJ
Guys, I’m not trying to be smart here but what is stopping many of the nations worldwide from implementing many of the alternatives that have been presented here?
The price isn't high enough. When it is, we will see a cut in demand.
For many poorer nations, they’ve already seen the market signals that should have forced them to a ‘better’ standard of living using alternatives and conservation. Instead, these nations appear to be the ones with the riot and starvation headlines…
A lot of the poorer nations' citizens enjoy subsidized oil. So no - they are not seeing the market signals, far from it. And yes, when they cut subsidies in India there were riots, for understandable reasons. Less people were likely to be able to drive.
One of the common "anti-long run" arguments is the whole, "IF THE ALTERNATIVES ARE THERE WHY AREN'T THEY BEING IMPLEMENTED NOW NOW NOW???"
I think Mills makes a good analogy: implementing "solutions" too early is like dressing a child in adult clothing before the child even grows up! Not only does the "solution" fit poorly now, it may not even fit properly in the future!
Jamlett, it looks like we many have struck a chord here. We have responses from the best (Ari, DoctorJJ, and Babun) all at once, yet no ones appears to be able to supply a solid answer to this very important question/point.
Let’s start of with DoctorJJ:
As for switching to alternatives, IMO, truly viable alternatives (fully electric vehicles with lithium batteries, PHEV's, etc) are only just now becoming available. There is also still somewhat of a premium attached to these vehicles.
Although you make reference to the electric vehicle and it’s attached premium, I was thinking more along the lines of the complete alternatives package. I’ll give you the benefit of the doubt, and assume you did not mean to imply that the only alternatives third world nations could have turned to are PHEV’s…
Therefore, it would be economically unreasonable to switch right now. And when inflation is potentially skyrocketing because of potential sky high oil prices (in the future of course) this would be a better time? Or is it when oil is cheap as dirt (like it is right now) that we’ll see these changes? I’ll tell you right now, there have been more predictions of electric vehicle being our saviour than PO dates published yet nothing has substantively materialized.
All that being said, these poor-ass third world countries don't have their shit together regarding ANYTHING.
Interesting, and the US economy is much better off at the moment with its crippled economy? Don’t get me wrong the states are better off my point is in a time of crisis there is not much difference in terms of addressing the potential oil crisis.
Moving on to Babun:
The price isn't high enough. When it is, we will see a cut in demand.
Hmmm, the price may not be high enough for the average American to cut their demand significantly; however, it has been more than high enough for many years for nations with no little to no oil production. Which is why I posed the question, how are these nations handling their crises?
A lot of the poorer nations' citizens enjoy subsidized oil.
I’ll disagree with your use of ‘a lot’ (the more accurate term should be ‘a few’) until you can provide evidence to this effect.
And yes, when they cut subsidies in India there were riots, for understandable reasons. Less people were likely to be able to drive.
Cut subsidies results in raised prices. The point is, not everyone rushed out to by hybrid scooters, nor invest in the most recent electric vehicle model did they? I’m sure some did (the few that could afford it); however, riots appeared to be the path of least resistance. I’ll also go out on a limb and suggest that the reason everyone did not merrily switch over to more fuel efficient vehicles is simply because they could not afford it. To put into context that the average American can understand, substantially raise the price of fuel in this economy and observe where the masses migrate to, riots will be easier and cheaper than buying limited supplies of more fuel efficient vehicles.
Then there’s always Ari:
Taking things out of context to suite his message:
One of the common "anti-long run" arguments is the whole, "IF THE ALTERNATIVES ARE THERE WHY AREN'T THEY BEING IMPLEMENTED NOW NOW NOW???"
I did not ask why they are not being used now (although that is a very important question). I asked why they are not being turned to now in countries with similar economic conditions to those that you describe as necessary to provoke the required changes.
Do you have any other source than Mills for the majority of your arguments? I can list dozens if not hundreds of sources on my side of the fence. Personally, some argument about ‘dresses and children (with an exclamation point ‘!’ I might add)’ does nothing to state your case, nor does it give me the warm and fuzzies in trusting the market engine to solve our future energy needs.
The question stands unanswered: “what is stopping those nations from implementing the alternatives and conservation methods described here?”
Jamlett, it looks like we many have struck a chord here. We have responses from the best (Ari, DoctorJJ, and Babun) all at once, yet no ones appears to be able to supply a solid answer to this very important question/point.
Well, i think these answers were good arguments, I don't think you've really made a good case against them. JD posted a good analogy by Robin Mills in another comments section describing premature actions as trying to dress up a child in grown-up clothing. It doesn't fit now and you don't really know if it's ever going to fit.
And when inflation is potentially skyrocketing because of potential sky high oil prices (in the future of course) this would be a better time? Or is it when oil is cheap as dirt (like it is right now) that we’ll see these changes? I’ll tell you right now, there have been more predictions of electric vehicle being our saviour than PO dates published yet nothing has substantively materialized.
Your arguments seem to center around the belief that we are headed for disaster and that the economy won't have time to react before things spiral out of hand. That is probably not the view of your opponents here. Please keep that in mind.
Interesting, and the US economy is much better off at the moment with its crippled economy? Don’t get me wrong the states are better off my point is in a time of crisis there is not much difference in terms of addressing the potential oil crisis.
I don't think he meant to speak about the management of crisis situations or the fluctuations of the economy but rather the technological and organizational base of a country. Arguably that is better in 1st world countries.
Hmmm, the price may not be high enough for the average American to cut their demand significantly; however, it has been more than high enough for many years for nations with no little to no oil production. Which is why I posed the question, how are these nations handling their crises?
In some cases yes, but as I said earlier, there are a lot of countries enjoying subsidies. The price signals aren't thoroughly getting through there.
I’ll disagree with your use of ‘a lot’ (the more accurate term should be ‘a few’) until you can provide evidence to this effect.
I had a hard time finding sources for a lot of countries. But a lot of Asian, African, and Middle-eastern nations are subsidizing oil. Saudi-Arabia, Venezuela, Iran, India, China, Chile, South Korea, Mexico, Malaysia, Indonesia, Pakistan, Ghana to name a few. But merely India and China have been causing a lot of the consumption growth lately.
Cut subsidies results in raised prices. The point is, not everyone rushed out to by hybrid scooters, nor invest in the most recent electric vehicle model did they?
Well, i think the Tata Nano is a prime example of what the world, and indeed even Indians are striving for - better energy efficiency. Sometimes you have to take one step back to take two steps forward. But that's just the thing. Sometimes we need to do that to make progress. I think we'll see a lot of see-sawing in the future around these issues. I share the opinion with Doctor JJ that we're only at the beginning though. We can get a whole lot more efficient.
I did not ask why they are not being used now (although that is a very important question). I asked why they are not being turned to now in countries with similar economic conditions to those that you describe as necessary to provoke the required changes.
The question stands unanswered: “what is stopping those nations from implementing the alternatives and conservation methods described here?”
First and foremost, market policies - in the countries where it matters. Second - oil hasn't even been that expensive yet. Third - the technology has only just gotten feasible, so there's a lot of disbelief, as always when any change occurs. The govts of China and India have already taken note of this though, so I believe we're right on track in the countries where it matters the most.
On a more general note regarding the argumentation, you seem to be replying to arguments in such a fashion that often misrepresents them.
Arguments like your reference to the number of sources you have, phrases like "my side of the fence" and starting your post with saying that nobody seems to be able to give you a "solid" answer is just kind of lame. You seem to try to set up a standard that "unless I'm satisfied with your answer, I am correct". Well, in all likelyhood, you will be correct then.
Instead of all that nonsense, you could just in detail describe what you think and feel about the issues, instead of only criticizing others' opinions with more than a hint of bitterness and prejudice.
You know, I actually get the feeling you are a lot like me when I had just arrived at this blog. I tried to present myself like a "moderate" although I was leaned towards the doomer side.
I actually think I first came to this site to see if the stuff on this site was as stupid as had been presented in the discussions on the oil drum. Well, I noticed there was at least a lot of decent facts here, and there was one post that made me question some of the things i had held for rather certain.
I guess I was still kind of bitter at something, I couldn't really say what it was - trying to find stuff to make arguments about, trying to find factual errors while debating on this blog. Especially arguments that involved economics and others that were clearly in contrast with the stuff I had read earlier. I do still think that sometimes there's a bit too much nodding at each other on this blog, but I think I've pretty much gotten rid of the bitterness by now.
Of course, I could be totally wrong about you. I just thought it might be good to know since you appear to think that we are all very sure of our views. Well, I know what I think at the moment, but having done a pretty big change of mind regarding the issue, I try to keep my mind open to all new relevant facts.
Then there’s always Ari:
Taking things out of context to suite his message
I don't think I take anything out of context. Just because I break arguments down into a more "answerable" format doesn't mean that they're out of context.
And I don't do anything to "suit my message." I do it for clarity's sake. Well, I suppose you could say that it's to suit my message, but only because I want my message to be as clear as possible. Isn't that the point of any thesis?
I did not ask why they are not being used now (although that is a very important question). I asked why they are not being turned to now in countries with similar economic conditions to those that you describe as necessary to provoke the required changes.
To be honest, it was hard to get that from what you wrote. Anyway, which countries are you referring to? "Similar economic conditions" is awfully vague. Since you and others are quick to put words in my mouth, I'm curious which countries you think I think are those countries, if that makes sense.
Do you have any other source than Mills for the majority of your arguments?
Sure, years of economic, political, statistical, and scientific training. I just use Mills right now because he's recent, a lot of what he said is poignant, and his arguments make sense to me.
I can list dozens if not hundreds of sources on my side of the fence.
More sources ≠ better argument. If one source is clear, makes logically consistent arguments, and answers the question the best, then giving more sources doesn't make your argument better. Parsimony is a GOOD thing.
Personally, some argument about ‘dresses and children (with an exclamation point ‘!’ I might add)’ does nothing to state your case, nor does it give me the warm and fuzzies in trusting the market engine to solve our future energy needs.
No offense, but then you clearly don't get the analogy. THINK about it.
Would you buy adult clothing for a child because the child will eventually grow up?
Or, in other words, would you buy antibiotics for an infection you don't have yet, even though they are expensive and may not even cure you?
The question stands unanswered: “what is stopping those nations from implementing the alternatives and conservation methods described here?”
Why should they when there's no apparent signs of oil supply declines, oil supply issues in the near or medium-term future, and the development of hybrids and PHEVs is occurring at an already brisk pace?
And now for something slightly different...
Now, let's say that we want to "mitigate" against a future peak oil scenario. What do we do, exactly? Well, we have a number of options, all of which I can't possibly cover.
- we can subsidize the research, production, and purchasing of fuel-efficient vehicles
- we can develop electric infrastructure and build more non-fossil fuel-based power plants
- we can heavily tax vehicles that do not meet certain fuel standards, discouraging their purchase
- we can heavily tax energy, discouraging its use
- we can have public campaigns to encourage carpooling, carpool lanes, etc.
- we can subsidize transit use
To a degree, we do pretty much all of these things in the OECD world. But here's what I feel like a lot of "doomers" lean toward:
- we can force society down a "post-oil" path for its own good
But here's where I get worried. First off, how much do we curtail freedoms? Is economic freedom important? If not, why not? Do we punish people who deviate from the path?
How do we determine a path we can't even see yet? How do we ascertain the needs? Hypothetically, we run the risk of forcing auto makers to build Li-ion EVs a couple of years before something better comes along.
Do we build transit to suburbs, or do we zone urban areas for residential?
Do we go with lithium-based batteries, even though we'll most likely have to import much of the lithium anyway? Or do we just discourage personal autos and focus entirely on transit?
Do we force migrations out of exurbs until EVs are a bit more distance-friendly?
One reason why organic approaches oftentimes have better results is because they are not based on extrapolation, but rather responses to the path right in front of us. By trying to solve a problem that may be 20, 30, 50 years ahead of us we may give ourselves a "solution" that's worse than the problem!
Unfortunately I don’t have the time to address all the points made by Ari and Babun. You’ve both made a lot of good points I may add; however there appears to be some inconsistencies in the arguments either directly or in these particular cases (the following two points I’m about to make) indirectly.
First of Babun, you listed a number of nations with subsides on oil prices (thank you), I realize this is not likely a comprehensive list; however it is still a far cry from the 195 nations that exists in the world (not my main point). More importantly, why are those nations subsidizing oil/gas prices? Many of them are now running out of money, like the rest of the world, and now have differing levels of turmoil because of reduced subsidizes. Why oil/gas subsidize (including the US I might add)? My take, because oil/gas subsidies stimulates their economies far greater than any other energy subsidy. If that is the case wouldn’t the reverse of this be true, the less oil/gas available to their economies the worse off they are? They get a lot more growth and bang for their buck subsidizing oil/gas rather than alternatives. Although not stated using the fancy words of an economist, I believe its hard to dispute this last statement.
To Ari’s point using Mill’s dress analogy (and I given it plenty of thought Ari) Mills/Ari are basically implying that the dress won’t fit until there is less oil (i.e. higher oil prices). How did I come to this conclusion, while there is plentiful oil/gas prices will be cheap, energy will be abundant, and the dress will continue to be too large.
Put the economy aside a second and follow the amount energy returned based on the energy/cost invested. You’ll soon find (and I’m sure your already aware of these) that solar and wind produce orders of magnitude lower energy output than fossil fuels (the best fossil fuels being NG, and light crude, followed by the plethora of heavier stuff then coal and finally wood) for the same investment whether it be energy or monetary. To grow economies countries have been subsidizing the energy source with the largest bang for their buck till now oil/gas.
Ari the list of ‘what do we do’ options you provide are EXACTLY the list of policies I’d love to see implemented in full force and the reason I argue so vehemently to take action now. Waiting for the dress to fit does in fact translate to waiting for fossil fuel supplies to begin dwindling so that less energy efficient alternatives become attractive. At this point, WHY WAIT? These two words sum up the reason behind all my posts… why wait to begin implementing policies or taking action when we all know fossil fuels will peak, with many experts suggesting an imminent peak in the near future.
Ari, I respect your knowledge of economics, why do you not respect geologist’s expertise when it comes to oil? You believe PO will likely occur 20, 30 ,40 years out (maybe more); however, at the same time there are large number of geologists, oil producing CEOs, and generally people that know more about oil than you do (this is not a slight at you, I’m not to saying you know little, just pointing out there are many people that know more) that are suggesting PO is near (within 5 years), a select few saying it has already past, and few saying it’s a long way out (10+ years or more).
Your arguments to let the economy self correct the situation and don’t bother taking action because we don’t know precisely which action to take are akin to a speeding driver seeing a curve signal up ahead (PO) on a slippery road (current rough economy) at night (unknown exact PO date) with the foot on the accelerator (oil/gas subsidies) saying to themselves I haven’t seen a curve for a while, nor do I know how far the curve is from here, so I better not change anything and trust the vehicle. The driver may make it through the curve or may not; it’s an unknown, however should we/he not hedge his/our bets in his/our favour for safety’s sake?
I get extremely frustrated when I keep hearing; the economy will take care of it, trust it (oversimplified but the argument nonetheless). That’s an obvious statement and is the equivalent to “the planet will still be here no matter what we do”, when the question really is, will the planet be liveable for all of us? The economy will continue that’s obvious, the real question is what’s the best/safest route with the least amount of impact to the fewest people?
But here's where I get worried. First off, how much do we curtail freedoms? I vote that we collectively, at the very least, take the foot off the gas (remove oil/gas subsidies) and hit the brake slightly (actually tax oil & gas a little more now before the economies does it for a LOT more latter).
Do we punish people who deviate from the path? Let’s at the very least stop rewarding (subsidizing) those (oil & gas producers) on a dead end path that we ALL agree with (timing being the only unknown).
Honestly, I look at the arguments posted by the three of you and perceive a lot more personal agendas than I do from the PO community. It appears to me you either have a personal agenda to see the status quo (don’t worry, it’s all good) or you’re naïve in thinking the transition to lower volumes of readily available energy will be smooth. Craps, the road up the hydrocarbon food chain and constantly increased energy availability was fraught with numerous recessions and depressions. I’m supposed to trust supply and demand (and not take action) economies will provide a transition to lower energy availability (at least in the short to medium term 10- 50 years) relatively seamlessly! If you honestly believe this, you are further out to lunch than even the biggest PO extremist, in my opinion.
Ari, you argue against aggressively taking political action with How do we determine a path we can't even see yet? yet you overlook the fact that we already have collectively taken political action (and continue to) with oil & gas subsidize. We’ve taken ‘paths’ in the past. Why is it ok (not sure you’re saying that?) to have taken action in the past to spur our economies, but not OK to take action to prevent potential calamities?
I’m not convinced…
Not that this is or should be your mandate. Simply that IMHO the PO arguments and mounds of data presented there, that the economies will be hit hard, hold orders of magnitude more credence then the arguments/opinions expressed here to date.
First of Babun, you listed a number of nations with subsides on oil prices (thank you), I realize this is not likely a comprehensive list; however it is still a far cry from the 195 nations that exists in the world (not my main point).
Just because I fail to give you a complete listing I can ensure you that it is a lot of countries. Although I fail to understand why you'd mention this, since what really matters is demand, and that means China and India should be enough.
More importantly, why are those nations subsidizing oil/gas prices?
More importantly, why continue subsidizing if the end result will be better with a bit different policy? Some policies have their place in the past, some in the present, and some in the future.
Many of them are now running out of money, like the rest of the world, and now have differing levels of turmoil because of reduced subsidizes.
As I said, you sometimes have to take one step backwards to take two forward. However, I'm not familiar with any particular turmoil being related to reduced subsidies. You have some sources on this?
Why oil/gas subsidize (including the US I might add)? My take, because oil/gas subsidies stimulates their economies far greater than any other energy subsidy. If that is the case wouldn’t the reverse of this be true, the less oil/gas available to their economies the worse off they are? They get a lot more growth and bang for their buck subsidizing oil/gas rather than alternatives. Although not stated using the fancy words of an economist, I believe its hard to dispute this last statement.
I guess this is a valid concern to some extent, and probably is true to some extent. The least the countries ought to do though, is to revisit their policies and refine the targeting of benefits. But I don't really think oil subsidies are critical for economic growth, at least to the extent they are being implemented today. There are some sad examples, e.g Ghana, which heavily subsidized oil and found that a lot of oil was being illegally taken out of the country and sold in neighboring countries. My guess is there's lots of kinds of unintended receipts of this form of economic aid.
Babun,
not sure what you mean by this since what really matters is demand, and that means China and India should be enough.
What I mean is that considering recent times, countries with subsidized oil have been responsible for most of the demand growth.
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