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?
Tlaloc ...
ReplyDeleteHow 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.
"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."
ReplyDeleteYou 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.
"There comes a point at which there is no more of a resource to harvest."
ReplyDeleteApparently 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.]
"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."
ReplyDeleteNihilist? 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.
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.
ReplyDeleteNever 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.
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.
ReplyDeleteI 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.
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.
ReplyDeleteYou 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.
"Feel free to consult the people who study these things."
ReplyDeleteI 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.]
The price per barrel has gone up 300% in the last 7 years which outstrips inflation by, oh, a hell of a lot.
ReplyDeleteI 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.
"Can you direct me to the credible scientists who say we have no shortage of oil? I seem to have missed them."
ReplyDeleteShortage is a price driven phenomenon and has nothing to do with the amount of oil in planet earth.
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.
ReplyDeletePardon 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.
Tlaloc ... Look at Wikipedia's definitions of shortage and scarcity.
ReplyDeleteI'm not sure what you mean when you say "shortage"...
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.
ReplyDeleteThe 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.
"i.e. "not enough"
ReplyDeletethat'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.
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."
ReplyDeleteHe also embraces an obligation to provide for the needy (ibid.).
However, to know these things requires that one actually read him.
The invisible hand is why you have toilet paper available to wipe your a$$. That's worth something.
ReplyDeleteFor every link you gave, I could give you one That does not make either fact.
ReplyDeleteWas riding horses and/or having horse-drawn carriages "maintainable"?
One could easily argue that too many horses could have resulted in a "Rapa nui" like disaster, but it didn't happen. Why?
What is it that is fundamentally different about oil (or is there a difference at all) that causes the chicken little syndrome?
So then in countries with highly regulated economies like, say China, they have no toilet paper?
ReplyDeleteYou're joking, right? You don't know anyone who travelled to Eastern Europe before 1990? When you went in a public restroom there was an attendant standing there who handed you two pieces of toilet paper. That's all you were allowed. And they were like sandpaper.
A economy so vercockt that the best activity they can assign a human being is to stand in a public loo handing out scraps of Bulgarian sandpaper as a$$wipes. This was the system known as scientific socialism, or, as someone recently said, "government bodies heavily advised by the scientific community."
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.
ReplyDeleteAccording to an uncle who's been going there for over twenty years, Shanghai rocks.
ReplyDeletePerhaps 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.
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."
ReplyDeleteSynthetic 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.
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.
ReplyDeleteIt 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.
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.
ReplyDelete"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."
ReplyDeleteWorkhouses 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.
Actually, I believe I wrote I might be able to hang with you on that one, James.
ReplyDeleteBut 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.)
James,
ReplyDeleteThere 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.
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.
ReplyDeleteOh, 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.
ReplyDeleteCapitalism 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.
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.
ReplyDeleteJames,
ReplyDeleteNo 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.
"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."
ReplyDeleteKathy, 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.