"There is always a philosophy for lack of courage."—Albert Camus

Tuesday, September 13, 2005

Are FT Reporters Well-Oiled?

I declare, I don't know what the Financial Times will come up with next.

Search for Oil Stepped Up as Prices Rise

I am all astonishment. Whoever would have thought that if petroleum prices rose, oil producers would locate, pump, and refine more oil? I suppose next they'll be spinning some fairy-story about consumers buying less gasoline when prices rise, or gas prices falling when consumers reduce their demand. How gullible do they think we are?

60 comments:

Tlaloc said...

"I am all astonishment. Whoever would have thought that if petroleum prices rose, oil producers would locate, pump, and refine more oil?"

They will certainly try to. The problem is that they are almost certainly going to fail. There comes a point at which there is no more of a resource to harvest. If you don't believe me ask the Easter Island forestry department.

I'm sure the Rapa Nui spent a lot of effort looking for more trees after they'd cut down the last one.



"How gullible do they think we are?"

Apparently gullible enough never to have figured out the concept of limited resources.

The Classic Liberal Anonymous said...

Tlaloc ...

How much time do you spend scraping peanut butter out of your old jar before tossing it (recycling it) and buying a new one?

I would bet that even for the most frugal, there is *SOME* peanut butter remaining in the jar when it it put aside.

If you're anything like me (no jokes here please :) ) you open a fresh jar and use a knife until about 90% or so of the PB is gone.

Then, because of the stuff stuck under the rim, you reach for the "rubber scraper" (or spatula) for the next couple sandwiches.

In the end, you barely get enough for a sandwich before deciding to give up.


Now there are parallels to PB extraction and oil extraction.

1) The "easy" (ie, cheap) resource will be the first to be used. This is a no brainer. If you walk by an apple tree and see an apple within reach you eat it, not the one that requires climbing the tree.

2) There is no point in getting the "hard-to-get" resource if the current supply can meet demand. Why even look under the rim when a knife down the middle will stille get you a sandwich?

3) As the current demand outstrips supply, the price rises and more exploration is done. This is akin to looking under the rim of the PB jar.


Here is where the analogy ends and differences appear:

With the PB jar, we have a very precise idea of how much PB is in the jar; with crude we do not.

With the PB jar, we know where to look; with crude we do not.

While you may be a prophet, I am not. History is not on the side of the prophets either, as there have been claims that we are "running out of oil" for close to a century, and all of them have been bogus.


As to the concept of limited resources, economists understand it completely.

Tlaloc said...

CLA,

I understand the economics part of the theory however here are the more important differences between oil and peanut butter:

1) Peanut butter doesn't take millions of years to form and cannot be sped up.
2) If I run out of peanut butter I have no issues going to the store to buy more. Nor is my knife dependent on peanut butter in order to work extracting more peanut butter. Peanut butter is not a critical part of every part of the economy and so a shortage of it is a minor inconvenience which I can try to ameliorate by scraping more out of the jar.


There is shale oil which is the equivilent of your peanut butter scrapings. It's a cruddy source of oil that requires much more energy and money in which to extract an inferior grade of oil. It is the resource of last resort and when we start seriously depending on it it'll be an indication that the system is in critical condition.

Beyond that your contention that we don't know how much oil there is is flawed. Geology has been a very good predictor of where and how much oil we have.

The Classic Liberal Anonymous said...

"Beyond that your contention that we don't know how much oil there is is flawed. Geology has been a very good predictor of where and how much oil we have."


You read this blog ... right? If we already know where all the oil is, how can you explain this?

Why are the greedy capitlists looking for more oil?

As usual, your argument holds no water.

Tlaloc said...

For instance processing shale oil requires at least 40% of the energy contained within it and thats assuming that you have the sizable quantitites of water you need on hand. In places like hina where they have shale oil but are looking at a water crunch (what with the disappearing tibetian glaciers that currently feed the main rivers) they will hve to either transport the shale to water or vice versa which is of course an expensive proposition.

Furthermore those costs are only once the facilities are up and running which needless to say they are not built as of yet.

The production of shale oil is also much more ecologically damaging than regular oil production (it has to be strip mined as opposed to simply pumped) and the process produces far more green house gases to feed that global warming that some still deny exists.

There's an estimated 1.6 trillion barrels worth of oil in shale oil. After figuring the efficiency we get 960 billion barrels of oil at the very best and if we managed to scrape all of it out of the earth. SOunds like a lot huh? Well at 2002 usage rates it'd last 33 years. And of course we aren't even today still at 2002's usage rates. India and china with their close to three billion combined population is getting a positively american style appetite for oil. SO even after we go to the expense of building all the refineries needed and of stripmining vast portions of the earth and releasing far more green house gasses we'll have, what, fifteen years worth?
Maybe twenty at the outside.

That's not a plan that does anything but delay the crash.

Tlaloc said...

"You read this blog ... right? If we already know where all the oil is, how can you explain this?"

That supply has been known about for along time CLA the study was just an attempt to assess just how big it was.


"As usual, your argument holds no water."

Not surprisingly that's because you have no idea what you are talking about.

Matt Huisman said...

"There comes a point at which there is no more of a resource to harvest."

Apparently that point is always thirty years in the future. If you consult your 'Liberal Manual of Doom' you'll find that 'today + thirty years' has been scientifically proven by numerous repeatable experiments (see 'destruction from global cooling'; 'end to racial quotas'; 'overpopulation of the planet'; 'destruction from global warming') to be close enough to enable you to sell a few books, yet far enough away make hyperbole plausible without the risk of ever being held accountable.

[LOL...I wrote this prior to seeing tlaloc's post calculating that we had 33 years left...I must not have factored inflation into the equation.]

Tlaloc said...

"[LOL...I wrote this prior to seeing tlaloc's post calculating that we had 33 years left...I must not have factored inflation into the equation.]"

Just to be clear that was 33 years worth of shale oil at 2002 usage rates, assuming peak efficiency and already existant refineries. It had nothing to do with current liquid oil supplies.

However to address your point: yes it's not at all difficult to point out various prognosticators and by virtue of their mistakes to deny any attempt to predict the future by mathematical model.

You're welcome to do so but we also have ample evidence that populations (human and otherwise) do indeed exceed their environmental limitations and suffer population crashes. There's nothing hypothetical about that. History is full of examples including the Rapa Nui I mentioned earlier. Biology is similary awash with data about boom and bust population cycles amongst some animals (deer being one example).

Ultimately though if you deny any attempt to see what is coming that's up to you but if that's your position hopefully you recuse yourself from any form of public policy decision making since you've demonstrated a nihilistic approach to the future.

Matt Huisman said...

"Ultimately though if you deny any attempt to see what is coming that's up to you but if that's your position hopefully you recuse yourself from any form of public policy decision making since you've demonstrated a nihilistic approach to the future."

Nihilist? Far from it. I'm all in favor of making informed decisions based on the facts.

You say oil is a limited resource, and we're bound to run out one of these days. The earth is this size x, known supplies are y, demand is z. But guys like CLA tell me that they've got info that counters yours.

So how do I determine who knows what they're talking about. You're both working from very limited perspectives, with very limited sets of data. However, when I look at the PRICE of oil, I've got access to millions of perspectives and data sets. And what they're telling me right now is that we're going to have oil for the forseeable future (at least long enough to make a transition to an alternative).

Could they be wrong? Sure, but it won't be because they're a bunch of nihilists.

Matt Huisman said...

The other reason I side with the CLA's of the world is that their responses to potential problems are a little less drastic. Why is it that the solution to everything involves 'thinning the herd' and riding bicycles.

Never mind that Europe needs more people, not less...or that modern farming techniques save land and forests...or that everyone's quality of life would suffer by orders of magnitude if we were to implement some of their proposals. At least we will have been pro-active. Let's destroy the place before things get bad.

I'm not a nihilist, more like an anti-annihilist.

Tlaloc said...

"So how do I determine who knows what they're talking about."

Feel free to consult the people who study these things. Beyond that you can also educate yourself in the process of how it works. It's really not that complicated any reasonable intelligent person can pretty quickly come up to speed on the nature of oil formation and production.



"However, when I look at the PRICE of oil, I've got access to millions of perspectives and data sets. And what they're telling me right now is that we're going to have oil for the forseeable future (at least long enough to make a transition to an alternative)."

First of all looking at the price of oil involves millions of PERCEPTIONS which really means nothing ultimately. Hopefully I don't have to bring up the dutch bulb based economy to prove that economic data isn't worth the paper it's printed on.

Secondly looking at the price of oil how do ou possibly conclude it shows that we have oil for the forseeable future? The price per barrel has gone up 300% in the last 7 years which outstrips inflation by, oh, a hell of a lot.



"Never mind that Europe needs more people, not less"

Uh no. If there's anything the planet does not need it's more people...ANYWHERE.



"or that modern farming techniques save land and forests"

That's funny last time I checked we were still losing forests worldwide.


"or that everyone's quality of life would suffer by orders of magnitude if we were to implement some of their proposals."

Yeah, except that the loss in quality of life from a worldwide economic meltdown is going to hurt substantially more.

Here's why the solutions always sound so drastic: because nobody does a damn thing until it's too late for anything but drastic solutions.

Take the oil issues. Back in the day Carter mandated changes that would have helped us wean off of oil. Back then we could have gotten by with some relatively slow moving and painless changes. But Reagan of course gutted all of it. Now 25 years later conditions are a little more critical.

You see the same pattern everytime. People deny and obfuscate any issue they don't want to deal with. That's precisely why you believe we have a problem with a lack of population in Europe. The information is all out there about the population problems, believe me I already had to prove it once to Kathy who is a firm denier of anything that might make her all frowny.

Personally I'm a sicentist. I have a great deal of trust in the scientific method to predict physical changes in the world because frankly it has a track record of accuracy that utterly dominates any other field you care to think of. When the best arguments against scientifically predicted events are economics then I'll take the field that gets things right over the field that has a worse record than the weather forecast every time.

Hunter Baker said...

Contra Tlaloc, geologists have not been good at predicting how much oil remains. I still remember my child encyclopedias that predicted Saudi would run out of oil in 1998. You can also see various authorities predicting the end of oil for several decades now.

I tend to agree with the people who say we will never run out. Why? Elementary. As soon as oil becomes too scarce, people will gravitate to alternate technologies, whether they be electric cars, hybrids, or just a simple combo of bicycles and living near one's workplace. At some point, supply and demand will rightly price oil out of attractiveness and every other option that is now priceworthy (in both dollars and opportunity cost) will move into the market.

Tlaloc said...

"At some point, supply and demand will rightly price oil out of attractiveness and every other option that is now priceworthy (in both dollars and opportunity cost) will move into the market."

The problem with that line of thought is that it drastically underestimates how critical oil is to the moden world. There are exactly zero sources of energy that can take oil's place. Nuclear has a shortage of fuel. Solar, wind, tidal, and biomass require far more land area than we have available.

So yes when oil rises to too costly to be of use anymore people will stop using the problem is they won't be able to replae it with anything, hence glbal economic meltdown.



"Contra Tlaloc, geologists have not been good at predicting how much oil remains. I still remember my child encyclopedias that predicted Saudi would run out of oil in 1998."

Are you sure your child encyclopedia was really based on the best scientific knowledge of the time and that that knowledge was widely agreed upon throughout the geologist community?

Hunter Baker said...

No, but they were World Book for Children or something similarly reputable and they were probably reporting from some respected almanac. In fact, I think my memory was too charitable. I think they had the middle east going dry even earlier.

You also have to remember that we aren't hearing anything about running out. We aren't getting reports about shortages. It's more about things like a lack of refinery capacity.

Matt Huisman said...

"Feel free to consult the people who study these things."

I have consulted these people, and you can find opinion on both sides. But when it comes time to put their money where their mouth is, the money says there will be oil.

"It's really not that complicated any reasonable intelligent person can pretty quickly come up to speed on the nature of oil formation and production."

That's why reasonably intelligent people (and I'll include scientists here) have been completely wrong for the last 100 years with regards to the world's oil reserves.

"First of all looking at the price of oil involves millions of PERCEPTIONS which really means nothing ultimately."

Of course it does. What do you think those perceptions are based on...coin flips? Those perceptions represent the sum total of the knowledge of all of your reasonably intelligent people. But I suppose you have special knowledge.

"The price per barrel has gone up 300% in the last 7 years which outstrips inflation by, oh, a hell of a lot."

And inflation adjusted prices are about half what they were 25 years ago (like you, I can pick my spots). But even with the influence of the cartel, the inflation adjusted price of oil has been very low over time.

"Uh no. If there's anything the planet does not need it's more people...ANYWHERE."

Ahh yes. Shrinking your way to greatness. Works every time.

"That's funny last time I checked we were still losing forests worldwide."

Let's see...we've been gaining forest land in the US over the last 50 years...the amount of agricultural land we need to support our population has been dramatically reduced.

Once again, you could solve the world's problems by killing us off (OK, fine, lowering the growth rate), or you could just show people how to use fertilizer.

Which one would you choose?

[BTW...Did you really intend to use a(ny) Jimmy Carter policy as a supporting argument? Wow.]

Kathy Hutchins said...

The price per barrel has gone up 300% in the last 7 years which outstrips inflation by, oh, a hell of a lot.

I don't know where you're getting your information from, but it's simply incorrect. The inflation adjusted peak oil price occurred in December 1979, when the monthly average oil price was almost $97 per bbl. averaged over the entire month. Spot prices during that month spiked much higher than that.

If you're going to act like an expert, you should at least make yourself familiar with the Energy Information Agency.

Today's spot oil prices, depending on location and grade, were about $62 to $63.50. Inflation adjusted, prices higher than this were seen for the entire period 1978 to 1983.

The prices we are experiencing today are not in any way outside historical experience. Considering we have just come off a massive supply disruption, in a world where our refineries are running at 90-95% capacity at the best of times, the fact that gasoline and crude oil prices have declined so quickly in the past week is quite astonishing. Unless, of course, you believe in markets and human ingenuity, in which case you're not surprised at all.

ChETHB said...

I find all the comments very interesting. Point of view is, apparently, everything. Personally, I find it difficult to substantiate many of the claims made on both sides of the arguments. There is always the question of interpretation or "spin" that one gives to the data. In my case, I can tell you exactly what I have done through the years. In the late 60's, I had a souped-up Chevelle that used premium gasoline to the tune of 6-11 miles per gallon. Gas was $0.40 per gallon. As prices have gone up I have gravitated to an Acura TL which provides gas mileage of 24-32 mpg. At the time I purchased the car, gas was $1.50 or less so I was clearly doing much better, especially if you use the "inflation-adjusted" figures that are frequently quoted. You might say that I have made no progress but wait - my annual income is probably more than 10 times what it was in the 1960's, so my gas bill is a significantly lower percentage of my overall income than it was thirty-odd years ago. What will I do if prices continue to rise? First, I will combine trips and reduce consumption, then I will start carpooling, and finally, I will obtain a hybrid automobile. And hopefully, by then, if I am still living, I will convert to whatever is the alternative at the time.

Unfortunately, I believe that the U.S. could have done a much better job of reducing our dependence on oil (at least for transportation). Energy conservation projects were easy to justify in the late 70's and early 80's because of the cost of crude oil. I know that many blame Reagan but my recollection is that OPEC dropped the price of crude to the extent that, almost overnight, it became economically infeasible to pursue energy conservation. Shortsighted, yes, but that's how industry approaches project justification. If the cheaper alternative is to keep consuming instead of designing projects that conserve, then that's what occurs. I know because I spent 36 years in the chemical process industry. Even the petrochemical-based products like synthetic fibers, resins and polymers (nylon, polyester, acrylic, etc) can be synthesized from other starting materials (such as plant sources) although the economics are currently very unattractive. These alternatives will never be pursued to any degree until we either run out of oil or it becomes so expensive that the other approaches are feasible. Do we have any competent government programs (that are not restricted by the profit/loss constraints of private industry) to develop alternative feedstocks/energy sources (not that I am advocating more government programs)?

I suspect that as long as crude oil prices stay high, the more undesirable sources (oil shale, oil sands) will receive a lot more attention. However, just like in the early 80's, if OPEC and other crude suppliers, drop the crude prices sufficiently, then the oil that is tougher to get will stay in the ground until it again become economically feasible to go after it. I haven't researched the oil shale and oil sands processes yet but I intend to, mainly from the standpoint of investment opportunities. If you believe all the folks selling stock picking newsletters, there are fortunes to be made in oil shale and oil sands. We'll see.

Tlaloc said...

"You also have to remember that we aren't hearing anything about running out. We aren't getting reports about shortages. It's more about things like a lack of refinery capacity."

We most certainly are hearing about running out, it's called peak oil. It means we've hit the top of the supply curve and are facing the downward side. But yes RIGHT NOW we are also having issues of refining capacity.

We aren't limited to having just one problem at a time. Mores the pity.

Tlaloc said...

"I have consulted these people, and you can find opinion on both sides."

Can you direct me to the credible scientists who say we have no shortage of oil? I seem to have missed them.



"But when it comes time to put their money where their mouth is, the money says there will be oil."

Are you sure that's what they are saying? Or is it "Oil is still profitable and we've never had much in the way of foresight anyway"?



"That's why reasonably intelligent people (and I'll include scientists here) have been completely wrong for the last 100 years with regards to the world's oil reserves."

The technology and the theory has gotten a hell of a lot better. A hundred years ago there was no satellite mapping for instance. It's like saying "well people a hundred years ago died of disease a lot!" Well yeah, that's part of the nature of science, it gets better as it goes.



"Of course it does. What do you think those perceptions are based on...coin flips? Those perceptions represent the sum total of the knowledge of all of your reasonably intelligent people. But I suppose you have special knowledge."

Good lord. No it most emphatically does not represent the sum total of knowledge on the subject. Perceptions are not knowledge. They may be influenced by knowledge but they also include a great amount of suspicion, emotion, and sheer guesstimates. Have you ever looked at the behavior of markets and how incredibly sensitive they are to rumor and innuendo? Notice how many times the oil market has spiked based on an expectation of low stocks or terrorist attacks that hasn't actually happened? That's proof positive that it is not reflective of reality but of what people think reality is, which is never a good bet.



"And inflation adjusted prices are about half what they were 25 years ago (like you, I can pick my spots)."

25 years ago the people holding virtually all the oil were trying to strangle us. Today they are happy to sell to us so why are we seeing the same pattern? In both cases is a constriction. Partly its due to refining capability. Partly it's due to the depletion of the oil fields making the development of new refineries a losing proposition. Even the major oil companies are finally starting to admit it.



"Ahh yes. Shrinking your way to greatness. Works every time."

As opposed to having a population boom and then bust? Yes striving toward a sustainable population is far more desirable.



"Let's see...we've been gaining forest land in the US over the last 50 years...the amount of agricultural land we need to support our population has been dramatically reduced."

You'd have to provide proof of both these contentions before I'd accept them.



"Once again, you could solve the world's problems by killing us off (OK, fine, lowering the growth rate), or you could just show people how to use fertilizer.
Which one would you choose?"

Fertilizers are based on petroleum products. Whoops! So what you are suggesting is that we keep growing and then have a massive die out when we no longer have oil to provide food, power and transportation. Great solution.



"[BTW...Did you really intend to use a(ny) Jimmy Carter policy as a supporting argument? Wow.]"

Carter certainly had his share of screw ups but with regards to energy policy his solution would have lead us to be in a vastly better place now. Reagan screwed it up royally and we are all paying the price (literally) now.

Tlaloc said...

"I don't know where you're getting your information from, but it's simply incorrect. The inflation adjusted peak oil price occurred in December 1979, when the monthly average oil price was almost $97 per bbl. averaged over the entire month. Spot prices during that month spiked much higher than that."

Kathy surely in econ classes they taught you to read. Did I say that this was the peak price? No. What I said is that in the last 7 years the price has gone up about 300% which is true. In 1998 the price per barrel of crude was ~$12. Today its ~$36 That's 300% for the math disinclined.

See here if you don't believe me:
Crude barrel prices

As before the period during the embargo is just a wee bit different. Again I would have thought you'd know not to try and compare apples to oranges.


"If you're going to act like an expert, you should at least make yourself familiar with the Energy Information Agency."

It cracks me up when you get something completely wrong and then act all high and mighty about it. Try parsing the sentences correctly first and building up self righteousness second, 'kay?

Tlaloc said...

"I know that many blame Reagan but my recollection is that OPEC dropped the price of crude to the extent that, almost overnight, it became economically infeasible to pursue energy conservation. Shortsighted, yes, but that's how industry approaches project justification."

Which is exactly why no important decision should ever be left to industry and the mythical free market: they can't see past their own nose.

The Classic Liberal Anonymous said...

"Can you direct me to the credible scientists who say we have no shortage of oil? I seem to have missed them."


Shortage is a price driven phenomenon and has nothing to do with the amount of oil in planet earth.

ChETHB said...

tlaloc said..."Which is exactly why no important decision should ever be left to industry and the mythical free market: they can't see past their own nose."

Are you implying that government should make these decisions? I think not - especially with all the pork, special interests, and lobbyists that part of every venture undertaken by government. So, if you don't believe that the free market is the answer, what are you proposing? I don't have the impression that you are suggesting a government solution.

ChETHB said...

I left out a word. Should read "lobbyists that are part..."

Tlaloc said...

"Shortage is a price driven phenomenon and has nothing to do with the amount of oil in planet earth."

So CLA you believe that there never has and never will be a resource that has been exhausted, by which I mean that the absolute amount of it has been used up with no more ever forthcoming?

Cause if so you are startlingly wrong. And I'm only to happy to give you examples ranging from Rapa Nui lumber to Quagga pelts by way of example.

If however you mean that the curent price spike is caused by caused by economic factors then you are partially right. The price is to a fair degree so high due to lack of refining capacity (which has been mentioned several times now). But only part. Behind that is a continuing rise in price due to the decline of the existing sources. After you rech the peak each barrel is more expensive to pump than the one before it (they fill the volumes that the oil occupied with water to make it possible to pump out more, however this has the effect of making it harder and harder as you go along to get a barrel of oil of the same quality).

Tlaloc said...

"Are you implying that government should make these decisions? I think not - especially with all the pork, special interests, and lobbyists that part of every venture undertaken by government. So, if you don't believe that the free market is the answer, what are you proposing? I don't have the impression that you are suggesting a government solution."

In the short term these decisions should be made by government bodies heavily advised by the scientific community. While government certainly has many problems it has a much better track record than business when it come to hurtling off of cliffs.

Kathy Hutchins said...

What I said is that in the last 7 years the price has gone up about 300% which is true. In 1998 the price per barrel of crude was ~$12. Today its ~$36 That's 300% for the math disinclined.

Pardon me. I forgot in my post to call you either a nincompoop or a fraud for choosing 1998 as your base year, and so didn't make clear that I was rejecting your argument completely, not just taking exception to the specific numbers you cited. When I said "you are incorrect" I meant you are globally incorrect, not just incorrect on one point. I agree that when attempting to wave a fact in front of you, I should attach it to a very, very big flag which cannot possibly be missed, as your eyesight seems to be pretty dim.

Yes, 1979 was an embargo period. But every single data point before and after December 1998 is higher than the 1998 level. You seem to have no explanation for why real prices dropped from $84 to $12 per barrel between 1979 and 1998, so I don't think your "peak oil" theory deserves much attention.

ChETHB said...

"In the short term these decisions should be made by government bodies heavily advised by the scientific community."

Are you suggesting that politicians might listen to the scientific community? Good thought if it could work but I think we are trapped in an environment where politics (and politicians) rule so the chance of legitimate scientific input is virtually nil. Then we still have to sort out all the crackpot scientists, questionable data, and shameless self-promotion that a venture of this nature would attract.

The Classic Liberal Anonymous said...

Tlaloc ... Look at Wikipedia's definitions of shortage and scarcity.

I'm not sure what you mean when you say "shortage"...

Hunter Baker said...

We go right back to the invincible superiority of market forces to any elite opinion. The communist nations tried to centrally plan and couldn't get anything right. You read about their attempts at industry and have to laugh.

The invisible hand works and works stupendously well. It's been demonstrated for a long time now. The nations that embrace that fact prosper while others stagnate. I'll trust it over any blue ribbon commission any day of the week.

Tlaloc said...

"Yes, 1979 was an embargo period. But every single data point before and after December 1998 is higher than the 1998 level. You seem to have no explanation for why real prices dropped from $84 to $12 per barrel between 1979 and 1998, so I don't think your "peak oil" theory deserves much attention."

I chose 1998 for the very simple reason that it exaggerates the point so that even you might actually see the big picture, I've gotten the impression nuances really aren't your thing.

Besides which I wasn't using gas prices to prove my point I was questioning another poster's assertion that the gas prices provce HIS point.

I thought I had made it clear that I'm painfully aware how shoddy arguments based on economics are.



"You seem to have no explanation for why real prices dropped from $84 to $12 per barrel between 1979 and 1998, so I don't think your "peak oil" theory deserves much attention."

That's fine, lets just say your attention isn't one I'm overly concerned with. However the answer to your amazingly hard question is: it hadn't hit peak oil yet. Estimates are that we are reaching the peak in the last few years or in the next few.

Should I add "the concept of causality" to the list of things that you just don't get?

Tlaloc said...

"Are you suggesting that politicians might listen to the scientific community? Good thought if it could work but I think we are trapped in an environment where politics (and politicians) rule so the chance of legitimate scientific input is virtually nil. Then we still have to sort out all the crackpot scientists, questionable data, and shameless self-promotion that a venture of this nature would attract."

Oh certainly. The difference is that government could work, it has the possibility even though it faces a slew of challenges. "Market" decisions on the other hand can't work because they inevitably maximize short term gain in favor of long term sustainability.

It's the choice between a slim chance and none.

Tlaloc said...

CLA, try the dictionary:

short·age ( P ) Pronunciation Key (sh├┤rtj)
n.
A deficiency in amount; an insufficiency.

i.e. "not enough"

that's the most basic and common use of the word so I didn't think it'd be hard to decipher.

Tlaloc said...

"The invisible hand works and works stupendously well. It's been demonstrated for a long time now. "

No it hasn't Hunter. The invisible hand first of all is a myth that doesn't exist because there is always a real flesh and blood hand manipulating the markets to their gain.

The "invisible" hand is what brought us Enron and the california black outs. The "invisible" hand is what brought us three mile island.

As before business is absolutely fine so long as it is only ever allowed to deal with the production of luxury items and non-essential services. in that one role it does quite well. Allowing greedy shortsighted bussiness executives control over anything else is suicidal.

Let me ask you this Hunter, why do we have a military? Why not simply subcontract the whole thing to the lowest bidder? That's the free market answer, and yet unless you are totally ignorant of history you'll pause before turning over protection of our country to mercenaries. Why is that?

It's because in the important issues business has a record of unmitigated failure. They cannot be trusted to do anything that matters.

The Classic Liberal Anonymous said...

"i.e. "not enough"

that's the most basic and common use of the word so I didn't think it'd be hard to decipher."


Not enough oil. Got it.

Because you made this conjecture, the onus is on you to tell us what you mean by enough.

Tlaloc said...

"Because you made this conjecture, the onus is on you to tell us what you mean by enough."

First of all I didn't "make up this conjecture" I'm just informing you of it. See for example
here
here
here
here
and here

A mixture of websites, journal and book references. There's plenty more out there, frankly I don't think it's possible to study energy matters and not have come across peak oil (and peak natural gas) concepts.

"Enough" then means enough to maintain our current way of life or to accomodate our ever increasing appetite for fossil fuels.

Tom Van Dyke said...

Once again, it is pointless to argue with a caricature, in this case of Adam Smith. In The Wealth of Nations, he clearly points out that monopoly is the enemy of the "invisible hand."

He also embraces an obligation to provide for the needy (ibid.).

However, to know these things requires that one actually read him.

Tlaloc said...

"In The Wealth of Nations, he clearly points out that monopoly is the enemy of the "invisible hand.""

It is also the inevitable result of the invisible hand. Un regulated markets are quickly dominated either by one company or by collusion between a few companies. There is quite simply no reason for them not to since you have precluded the possibility of an outside regulating force.

What use then is it to wax poetic about the glory of the invisible hand when you know FOR A FACT that it self destructs instantly when put into practice?

Hunter Baker said...

The invisible hand is why you have toilet paper available to wipe your a$$. That's worth something.

Tlaloc said...

"The invisible hand is why you have toilet paper available to wipe your a$$. That's worth something."

Really? So then in countries with highly regulated economies like, say China, they have no toilet paper?

The Classic Liberal Anonymous said...

For every link you gave, I could give you one That does not make either fact.


Was riding horses and/or having horse-drawn carriages "maintainable"?

One could easily argue that too many horses could have resulted in a "Rapa nui" like disaster, but it didn't happen. Why?

What is it that is fundamentally different about oil (or is there a difference at all) that causes the chicken little syndrome?

Kathy Hutchins said...

So then in countries with highly regulated economies like, say China, they have no toilet paper?

You're joking, right? You don't know anyone who travelled to Eastern Europe before 1990? When you went in a public restroom there was an attendant standing there who handed you two pieces of toilet paper. That's all you were allowed. And they were like sandpaper.

A economy so vercockt that the best activity they can assign a human being is to stand in a public loo handing out scraps of Bulgarian sandpaper as a$$wipes. This was the system known as scientific socialism, or, as someone recently said, "government bodies heavily advised by the scientific community."

Tlaloc said...

"For every link you gave, I could give you one That does not make either fact."

as a side note the author of the piece you linked to is an economist and not a geologist.



"Was riding horses and/or having horse-drawn carriages "maintainable"?"

It depends at what level of usage you mean. Unlike fuel fed cars horses naturally are a biomass fueled conveyance and so not restricted to a finite volume of oil but rather a finite area for growing foodstuffs.



"One could easily argue that too many horses could have resulted in a "Rapa nui" like disaster, but it didn't happen. Why?"

Well for one thing horses don't breed nearly fast enough to keep up with our car obsession. For another horses require a substantial amount of care which would make maintaining such huge numbers of them difficult. And of course horses were replaced by autos just when our population went into overdrive.



"What is it that is fundamentally different about oil (or is there a difference at all) that causes the chicken little syndrome?"

For that to be a valid question we'd have to establish that this is a chicken little syndrome. Since we haven't done so the question is meaningless.

Here's some examples of people who are warning about Peak Oil:

American Association of Petroleum Geologists

Kenneth Deffeyes, Princton Geology professor emiritus and former Shell Oil Researcher

Matthew Simmons, Chairman and Chief Executive Officer of Simmons &
Company International, a specialized energy investment banking firm. Also a former energy advisor to Bush. (yeah an economist but hey I figure if you think they are worth listening to then I might as well play along)

Tlaloc said...

"You're joking, right? You don't know anyone who travelled to Eastern Europe before 1990? When you went in a public restroom there was an attendant standing there who handed you two pieces of toilet paper. That's all you were allowed. And they were like sandpaper."

But Kathy according to Hunter's theory you'd have to show that in every case of a regulated economy there is no toilet paper, a single counter examples disproves the claim that invisible hands cause toilet paper. Again I present you with China. Third largest country in the world. Most people of any country in the world. Highly regulated economy due to system of soft communism. And yet no shortage of toilet paper as far as I'm aware.

I'm getting the distinct impression that basic logical construction wasn't on the syllabus at the old alma mater, eh?



"This was the system known as scientific socialism, or, as someone recently said, "government bodies heavily advised by the scientific community.""

Once again your toungue would have a lot more sting if you didn't warm it up by making boneheaded errors.

Hunter Baker said...

T, China hasn't been doing it the communist way for a long time. They've been cheating to the right economically and continue to do so BECAUSE they figured out there was a reason Hong Kong was so frickin' cool and Shanghai sucked.

James Elliott said...

According to an uncle who's been going there for over twenty years, Shanghai rocks.

Perhaps we could ask the Irish of the Potato Famine era what they thought of the invisible hand? I think they might reply, "If I could find it, I'd eat it." It was, after all, faith in the invisible hand that ended the crucial grain subsidies.

For the invisible hand to actually "work" as theorized, you would have to remove human action within the economic system. Such an act is impossible. The action of one country or business can skew the system, forcing others to act, setting into motion a cascade of so-called "corrective" actions. Quite a fragile beast, this invisible hand of yours, if she is so easily knocked aside.

The invisible hand served a further need of interjecting the holy into political economy and to mask the inherent inequality of the system. It's about as tangible and demonstrable as "Don't worry about all the bad crap happening, God has a plan and it'll all work out!"

Of course, economics itself was merely the attempt to legitimize the art of screwing each other over by adding math to it and taking out the all-important "political" part. Back when it was called "political economy" things were just a tad more honest.

James Elliott said...

The U.S. oil reserve contains enough oil for 45 days of use at current levels. ANWR holds 10.8 billion barrels - roughly 22 months worth at current consumption levels. As Bush advisor and CEO of Simmons & Company Int'l Matt Simmons said, "I don't think there is a solution. The solution is to pray." Or, as the Saudis say: "My father rode a camel. I drive a car. My son rides in a jet. His son will ride a camel."

Synthetic oil production (shale, coal, Canadian tar) is expensive to "gasify," and would last two decades under current DoE projections. 0 new oil fields were discovered in 2003, the first time since the 1850s, despite new technology.

All of the "magic bullets" of energy production (wind, coal, tar, nuclear, biodiesel, hydrogen, fusion, solar arrays, etc.) have failed due to fiscal, environmental, or technological difficulties. They also depend upon oil for their production at at least one stage in their production cycles.

As Tlaloc has pointed out, our economic infrastructure is massively dependent upon oil, and switching over to alternative "basket" sources will require a multibillion dollar overhaul - relying upon our massive oil-burning infrastructure.

Given that Big Oil hasn't changed its business practices since 1859, and now owns (via contracts and grants) most university departments that conduct energy research, and Big Oil's short-term profit myopia at the expense of long-term solvency, only a massive federal program will accomplish the restructuring. Of course, this is exactly the kind of massive federal program that free-market wunderkinds despise on principal. As a quick example, wind power researchers get to play with about $50 million annually, from all sources of grants. Oil and gas researchers get about $2 billion. Basically, unless a whole bunch of universities wake up, or energy companies decide to sacrifice profit margins in favor of solvency (HAH!), we'll have to keep waiting for a miracle.

Kathy Hutchins said...

Perhaps we could ask the Irish of the Potato Famine era what they thought of the invisible hand? I think they might reply, "If I could find it, I'd eat it." It was, after all, faith in the invisible hand that ended the crucial grain subsidies.

It wasn't faith in the invisible hand per se, it was the ascendance of the merchant and laboring classes over the English landlord class in Parliament.

The removal of the Corn Laws is often cited as the 'cause' of the famine. It is true that when the Corn Laws were repealed, it caused a large economic dislocation, since Ireland had been forced into a system of absentee landlordism by conquest, in which the English owners planted grain because it was subsidized, were content to let their Irish serfs eke out a subsistence on a little patch of potatoes, and made no capital improvements to the farms. But it was entirely anti-market government action before and after that turned what should have been a gradual readjustment of Irish agriculture to less grain and more pasture, accompanied by a couple of hungry winters due to potato fungus, into the genocide of the Irish people.

Here's just one example: the British government's response to the explosion of indigent Irish, forced off the land where they were no longer needed but with no alternatives since they were under the British boot, was to set up workhouses where the peasants were forced to perform manual labor in exchange for food handouts. Unfortunately, the work was so strenuous that they expended more calories than they were fed. This is the kind of system that could only be thought up by "governments closely advised by scientists" of which Tlaloc is so fond. J.B. Say warned Parliament for years that the Irish economic situation would become untenable. No one listened to him, because of course economists are just shills.

There is a good account of what really happened here. Of course, I'm sure you'll dismiss it since it was written by a free market advocate. Maybe there are others still reading who have a more open mind, though.

Hunter Baker said...

Shanghai's been cheating for that long. AND, your uncle's experience as a tourist is PROBABLY not indicative of the experience of most of the natives who are getting by on a lot less than American minimum wage.

ChETHB said...

t said "The difference is that government could work, it has the possibility even though it faces a slew of challenges. "Market" decisions on the other hand can't work because they inevitably maximize short term gain in favor of long term sustainability."

Government decisions don't work for the very same reasons that you say market decisions don't work - short term thinking. There was a time in this country when corporations focused on long term objectives. My gut feel is that collusion between government and big business (my original comment about pork, special interests, and lobbyists) is the reason that we are driven by the short term thinking of today. Now, it may be that big business started the trend but I know for sure that the government folks who pass the laws all seem to have their hand out - just take a look at the immense wealth and retirement packages that the legislators have. Do you think I can trust those folks to create and administer a program for energy sustainability?

If government is to be involved, then it needs to pass laws that make long term planning more desirable - not create more programs that are 'heavily advised by the scientific community'. Instead, we have to change the culture that we live in that thrives on immediate gratification, including individuals, big business, and government. Only then can we deal with the long term issue of energy sustainabilty.

James Elliott said...

"Here's just one example: the British government's response to the explosion of indigent Irish, forced off the land where they were no longer needed but with no alternatives since they were under the British boot, was to set up workhouses where the peasants were forced to perform manual labor in exchange for food handouts. Unfortunately, the work was so strenuous that they expended more calories than they were fed. This is the kind of system that could only be thought up by "governments closely advised by scientists" of which Tlaloc is so fond."

Workhouses have a long history in England and America. Far from being implemented by "governments advised by scientists," they gained their start and ascendancy at the end of the Elizabethan era and progressed rapidly during the time of Cromwell and the English Revolution. The idea of a workhouse is directly inspired from the "Protestant Work Ethic" your fellow commentators here are so proud of espousing. It descends not from an scientific basis but from the oft-refuted but long-lived meme that the poor are lazy. Most were administered by churches in conjunction with the local tax authorities. (See texts by Ralph Dolgoff and/or Bruce Janssen for good primers.)

The grain subsidies were ended because the new Prime Minister (an Evangelical) felt that they were interfering with the "natural flow" of Ireland's economy. (See Gordon Bigelow, "Let there be markets," Harper's. May, 2005).

I like how y'all keep citing Smith's Wealth and yet blithely ignore that in his first book The Theory of Moral Sentiments, he predicted that free-market capitalism would result in a desire for "trinkets and baubles" and that acquisition brings no happiness (you know, the "capitalism brings materialism" idea that TVD mocked me for? Guess where I got it?). He was, however, also the first trickle-down economist, believing that everyone would be enriched by the wealthy's quest for money.

Of course, by 1820 it was evident he was wrong and offered no solace to free-marketeers, who sought a moral justification for their wealth as the poor continued to suffer and grow poorer. Ricardo offers no help here, being the first Marxist (as we would say today) and a predictor of class-warfare.

Hence the free-market libertarian and Evangelical Protestant all rolled into one: The earthly travails of free-market, do or die, social Darwinian economics as the ultimate crucible in which we pay for our original sin. No wonder y'all love it so much.

Tom Van Dyke said...

Actually, I believe I wrote I might be able to hang with you on that one, James.

But the government, especially in this relativistic age, has no moral standing to attempt to force the people to prefer books and broccoli over plasma TVs and hamburgers.

(The Theory of Moral Sentiments, a sadly overlooked piece of practical wisdom, indeed puts you on firm ground in both vocabulary and language. My compliments.)

Kathy Hutchins said...

James,

There is nothing to be gained from demonizing the entire profession of economics. You profess to want to help the poor. You know what? So do I. Not only do I want to, I am commanded to by my God and my creed. But if you categorically reject any insight from economic science, you are essentially saying that the people you want to help are no more sentient than tree stumps. If economics is entirely wrong, then they do not respond to incentives, they do not act in their own interest, they are incapable of judging what benefits and what harms them. You assume that changes in policy do not change their behavior, and therefore you yourself can design policy with no regard to what changes you might cause.

You cannot wish or assume away unintended consequences of policy. On our side, we cannot pretend that all unintended consequences are worthy of attention. I know that sometimes it sounds like anyone who points out an unintended consequence is doing so to scuttle policy proposals. And maybe there are people who think that way, but I'm not one of them. Sometimes, even though the policy will foreseeably change some behavior for the worse, it's worth doing anyway. But it's necessary to have the political debate, to decide with the best evidence available.

I long ago got tired of trying to have policy debates with people who assumed that because I insisted on analyzing the possible economic harms from policy proposals, that I am a hateful bigot who wants to grind down the underprivileged so my true masters, the capitalist hegemons of Western decadence, can dance a jig on their broken bodies and then steal their blood to feed to the vampires in Halliburton's basement. When you get tired of being the person who acts like that, maybe we can talk.

James Elliott said...

Thank you for the rebuke in your last paragraph. That I behave like that is a character flaw, and I should be above it. That I am not, well, I'd like to chalk it up to youthful exuberance but it's probably more due to being an ass.

James Elliott said...

Oh, and please, allow me to clarify, since my "fire and forget" writing evidently makes this entirely unclear (and is entirely my fault as a communicator): I do not believe economics as an entire discipline is bereft of value. I find free-market "invisible hand" economics to be bereft of common sense and bound to fail when held before the light of what occurs in reality.

Capitalism is by far the best system we have available, but to allow it to roam unfettered is no better than political anarchy. Unfettered business becomes an oppressive entity that fails to benefit the masses and divorces those masses from one another. Unfettered capitalism, I believe, is no more healthy for the polity than totalitarian communism.

That I am an ass, well, much of that is expressed by my "unwarranted triumphalism" as Hunter would have it, and the rest stems from frustration. I feel that the tendency among the Reform Club writers is to engage in semantic games or seize on ambiguities instead of to engage the facts.

Hunter Baker said...

One of the great problems we have in our political discourse is a difficulty agreeing on what exactly the facts are and when we do agree, we have vastly different interpretations of what they mean. Sadly, that is why it usually comes down to a power move via legislation or court opinions. And it makes for a great deal of unhappiness among those who disagree. We want to be convinced, but we have high barriers against just that.

Kathy Hutchins said...

James,

No one whose first instinct upon being rebuked is to meekly accept it and apologize can possibly be an ass.

I'd like to address some of the objections you have made to the economic reasoning that you see as sophistry and games-playing, but the commenting format puts me off a little. That, and I don't have any napkins to write on. Let me try to explain what 'evidence' means when an economic theory is tested.

Suppose I were a vaccine researcher, interested in whether my brand new Lyme disease vaccine was effective. I would perform a double blind trial of the vaccine, in which I enroll a group of subjects, randomly assign them to treatment and control groups, have physicians administer the vaccine without either patient or doctor knowing which patients received vaccine and which received sterile water, and then carefully monitor the entire group for 24 months, to note which patients did and did not contract Lyme disease. By comparing the experience of these two carefully controlled and monitored groups, I would determine whether the vaccine prevented Lyme disease.

Now suppose that instead of this research protocol, the Lyme disease vaccine were left on a table at a physicians' CME meeting, where it was picked up by doctors anonymously, who then administered it to patients according to any rationale they desired. 24 months pass, and I am expected to determine whether the Lyme vaccine worked by measuring the incidence of Lyme disease in the entire city where this "experiment" took place and comparing it to the incidence of 24 months ago. This is what economists face when attempting to test theories. For some unaccountable reason, general public opinion frowns on letting us run experiments. We're not allowed to make the minimum wage $7 in Arlington and $8.50 in Alexandria, make all workers and employers stay put, follow around everyone who had a job at time X, and find out whether he has a job and how much he's making at time Y, all the while preventing any workers from moving to Alexandria and any employers from moving to Arlington, and holding constant every other damn thing that might affect employment decisions.

This is the situation empirical economists face. We're given the tools of an archaeologist and expected to produce physics-like results.

The Liberal Anonymous said...

I think that the problem is not that economists are expected to produce physics-like results, but rather that economists act as if they do indeed produce them.

Even if you could conduct your proposed minimum-wage experiment, you would still have an ambiguous result. Like sociology, economics has too many independent variables for solid conclusions to be reached about anything.

I see this as perhaps a motivating factor for the economic embrace of theory to such a degree that when facts disagree with the theory the facts are denied or rejected.

Tom Van Dyke said...

"I long ago got tired of trying to have policy debates with people who assumed that because I insisted on analyzing the possible economic harms from policy proposals, that I am a hateful bigot who wants to grind down the underprivileged so my true masters, the capitalist hegemons of Western decadence, can dance a jig on their broken bodies and then steal their blood to feed to the vampires in Halliburton's basement."

Kathy, I must admit that I've become so used to the boilerplate rhetoric from my friends in the reality-based community that questions my very humanity that I honestly don't even notice it anymore.

Any minimal degree of civility (even "phony" civility, haha) or attempt at a lingua franca is sufficient for me to engage and attempt to convince.

You are of course correct to acknowledge the insults as they were intended, as insults. "Turn the other cheek" is actually written "offer the other as well," meaning that the insult is acknowledged, not ignored.

It's just that I've set my standards so low for my lefty friends at this point that I forget that sometimes. Your objection is proper; conservatives (read classical liberals) are people too.

That your arguments are reality-based, that is to say, about what works in humanity's economic equation, not what would work if we were all angels or even reasonable and intelligent Kantian devils, adds to the irony.

As someone or other noted, if socialism actually worked, I'd be a socialist. It's a perfect scheme, except for the obstacle of human nature.

Tlaloc said...

"I think that the problem is not that economists are expected to produce physics-like results, but rather that economists act as if they do indeed produce them."

Bingo. If economists simply admitted they have absolutely no idea why things work the way they do but that they were trying to get a better handle on it that'd be fine. They should still shut up when it comes to policy because as before they don't have anything remotely worthwhile to hang their policy decisions on. When they do they can have a chair at the grown up table. Until then you'd think they'd be busy enough trying to learn their own jobs instead of telling everyone else how to do theirs.