Joined: 28 Dec 2005
|Posted: Thu Jan 03, 2008 11:14 pm Post subject: Debate on Peak Oil
|This article is insane. Read about the oil peak issue. Google “peak oil”.
Global oil production will start to decline steadily and globally within a few years from now. Keeping that information away from citizens and businessmen, which is what oil companies and most governments are doing presently, and also is what this article is doing, will maintain citizens in their dream that their lifestyle will continue, that growth will continue, and that their businesses don’t have to adapt. Continuing to ‘not fear an oil shock’ will sure boost the economy temporarily, but it will also make the shock more bitter and brutal when it comes. The situation is similar to that of The Cicada and the Ant from La Fontaine. We need to prepare for a ‘winter’, like the ants are doing.
Businesses have to adapt now, when there is still some cheap oil to invest in their adaptation. Countries have to gradually set taxes on oil and on any ‘big oil consumer’ products and companies, to simulate the post peak oil economic environment. Local commerce has to re-appear now.
A late adaptation of businesses will trigger a bigger depression. Act now in your country; it's a state of emergency.
Posted by: Nicolas Chausseau | Wednesday, September 19, 2007 at 03:53 PM
Nicolas, the paper makes perfect sense, supported by sound economic theory, mathematics, and data. The shock took place slowly. So, shifts into alternative energy took place smoothly. I think, it's well-known oil is a limited resource that's being depleted. The U.S. economy has already adapted, e.g. shifting some production of heavy goods offshore and producing more lighter goods. Energy has become a smaller proportion of U.S. input costs. On the consumption side, however, Americans continue to use high levels of energy for their homes and autos (i.e. larger homes and autos). However, prices for other goods, including the heavy goods offshored, have fallen. Increased immigration of low-skilled workers also lowered prices for some goods. The higher price of oil is a tax, particularly for the U.S., since the world price of oil is priced in dollars and the dollar has depreciated substantially.
Posted by: Arthur Eckart | Thursday, September 20, 2007 at 01:26 AM
I'm sorry but this article is misleading information on oil issues today. Maths and data we all know it, can be used to produce very misleading articles, it’s not the first time this happens (!).
Of course the ‘shock’ was slow. But that is not the point. The point is that the notion of shock (temporary shortage of oil) isn't appropriate for nowadays situation. Talking about oil nowadays without mentioning explicitly the notion of the oil peak is automatically misleading. If you think that most people know that oil is finite resource in theory, you may be right, but they don’t know that this ‘peak’ is happening right now, or about to happen within a decade max, and they don’t know about the dramatic implications on the economy. People don’t know how serious the situation is. In effect, hey are not afraid of a big bad oil ‘shock’ (… ‘shock, forever’), and that’s the reason the economy is still running pretty well, due to that ‘confidence’ of the markets (because ppl are not well informed). This is like sending troops in a dangerous territory without telling them about the danger. It’s like saying to the cicada that it’s going to be alright.. Who’s afraid of winter?
Ask any expert about the oil situation if we can talk about ‘a shift towards renewables sources of energy’. There is not. We consume more oil than ever, and more and more every day and the steady increase will not stop. Ask any expert if there is any simple alternative to oil, that could eventually replace oil. There is not. Our whole lifestyle and economy is based on oil, and there’s no way we can change that easily. The amazing improvements of quality of life in the last decades is mostly due to oil. this situation is completely unsustainable, all our businesses, and public/urban/businness infrastructures (especially here in north America : highways, suburbs, no trains, most neighbourhoods almost inaccessible by walk or bicycle, AND the need of businesses for transporting goods on long distances) are going to be inadapted to the ‘expensive oil’ post peak oil environment.
You are saying that the shock 2002 2007 was slow, so that we shouldn’t worry. I’m sorry but you couldn’t be more wrong, even if you are using ‘real data’ to ‘show’ that. Some people say that we have to worry, but that we will overcome the challenge of such huge adaptation if the price increase is slow enough. In other words some people say that since the price of oil will increase slowly, that the economy, the businesses, will have time to adapt. That’s not what it is doing right now. On the contrary: oil consumption is boosted more than ever. Check your data. We, and our whole economy, are like junkies on oil. Even if we technically know were doomed, we’re still persisting, because there a huge machine at work now: the pursuit of immediate comfort and happiness (by consumers and by some big companies stockholders), and it’s hard to redirect that pursuit of happiness towards sustainability. On the medium term, the pursuit of individual happiness requires the development of a sustainable economy. The biggest obstacle to that delayed happiness, is the ‘short term pursuit of happiness’.
You have to know that a lot of companies don’t have interest in us shifting to renewables. They are making a shitload of money and they want to boost those profits until the end of oil, and they have a lot of influence. Why do you think the electric car project was aborted? Why do you think the US is in Iraq instead of investing in new sustainable technologies and infrastructures? …Because of militaro industrial pressures and lobbies, etc etc. I’m sorry! These companies that are allegedly misleading and omitting some infos. Governments too. I don’t know who you work for, but what you’re giving here is misleading. Maybe you weren’t well informed yourself. All these wrong/misleading infos are not helping the imminent crisis that people are so eager to refuse and ignore, because it seems so unreal. How could progess stop?? …progress has until today been based on increasing consumption of resources—no more resources, no progress (and eventually an economic depression)!!!
It’s hard to overcome the power of all the companies who were making money during the oil economy. It’s hard to overcome the eagerness of people to forget and diminish the idea and importance of a permanent oil shock. It’s hard to change our everyday habits (cars, buying products from china etc). it’s a big machine (our whole economy) that’s hard to convert. But if people are well informed it’s still possible to make rational choices, and to gradually adapt to a ‘more expensive oil’ context (like not going in iraq, buying local, getting new laws and new forms of taxes (like in Portland), invest in new infrastructures in your communities, start local businnesses). The key word now is power down. Stop the ideology of conquest, because there is nothing more to conquer (and because anyways it’s immoral to conquer). Instead, start the ideology of a new form of conquest: sustainability. Conquer the optimisation of energy. We have to be inventive. Adapt.
Posted by: Nicolas Chausseau | Friday, September 21, 2007 at 03:32 PM
Nicolas, the paper above is based on solid economics and data, unlike your peak oil theory (that the world economy is doomed). Free markets allocate the optimal combination of energy to where aggregate costs are lowest, and shifts between various energy sources take place efficiently. Consequently, price is lower or profit is higher. So, the economy can expand. Too often, government intervention causes costs to rise and profits to shrink, or even worse creates shortgages. Oil is still a relatively cheap source of energy. When it becomes too expensive, more alternative energy will be used, e.g. electric cars or ethanol, alternative forms of transportation will be taken, e.g. rail or bus, more fuel efficient cars will be bought, less driving (e.g. distance), car pooling, etc. The big danger is government adopting inferior energy policies, because of its ignorance and arrogance. However, government is capable of adopting energy policies that actually improve society.
Posted by: Arthur Eckart | Friday, September 21, 2007 at 10:25 PM
Also, I may add, sometimes it's moral to conquer, e.g. conquering absolute poverty. Unfortunately, too many (developed) countries are selfish and wrongheaded. The key word is power up and make less ignorant choices.
Posted by: Arthur Eckart | Saturday, September 22, 2007 at 01:34 AM
Moreover, I may add, supply and demand tends to move toward equilibrium in free markets. When oil becomes relatively expensive, compared to other energy sources, more drilling may take place in Alaska, off the coast of California, in small parcels of national forests or parks in Western states, etc., where there are large oil reserves. Russia and the Middle East may become politically stable to supply more oil. Furthermore, technology will increase oil supply, etc. Also, there will be more hybrid cars (gasoline and electricity), greater use of ethanol, less driving, smaller cars, car pooling, greater use of other forms of transportation, etc. Oil may continue to dominant over the next hundred years.
Posted by: Arthur Eckart | Saturday, September 22, 2007 at 08:19 AM
You wrote: “(…) unlike your peak oil theory (that the world economy is doomed).”
You’re trying to make me look like an extremist! I used the word “doomed” to express the urge of switching to other forms of energy. There seems to really be an urge, according to the data I’ve seen so far. Your article misses that important aspect of nowaday’s economics of oil. Our economies do have to switch towards renewables and nuclear energy, and that’s not as easy as you think; switching away from oil does have some dramatic implication on the economy in general.
The problem with your view is that you assume that the oil prices will increase gradually, slowly enough to let the economy adapt and allow the sustainable products and businesses to be developed. That’s very unlikely to happen, because the economy is driven by immediate profits. Therefore what’s happening right now is that our daily oil consumption increases year after year, which means the depletion will be abrupt and that it will leave no time for a gradual adaption of the economy. The oil depletion issue is not something that the capitalist/ individualist way of acting can solve alone. Individualist capitalism is great by the way and has until now led to great inventions and societies, I’m not questioning that at all, I’m just telling you that governments should plan for post-peak oil.
This is from Wikipedia on peak oil
“To avoid the serious social and economic implications a global decline in oil production could have, the Hirsch report emphasized the need to find alternatives at least 10-20 years before the peak, and to phase out the use of petroleum over that time, similar to the plan Sweden announced in 2005. Such mitigation could include energy conservation, fuel substitution, and the use of non-conventional oil. Because mitigation can reduce the consumption of traditional petroleum sources, it can also affect the timing of peak oil and the shape of the Hubbert curve.”
…It requires investments, scientific research, adaptation of a lot of people’s lifestyle, and also time (at least a decade).
Here are the 2005 predictions from the US department of Energy.
In 2005, the US Department of Energy published a report titled Peaking of World Oil Production: Impacts, Mitigation, & Risk Management. Known as the Hirsch report, it stated, "The peaking of world oil production presents the U.S. and the world with an unprecedented risk management problem. As peaking is approached, liquid fuel prices and price volatility will increase dramatically, and, without timely mitigation, the economic, social, and political costs will be unprecedented. Viable mitigation options exist on both the supply and demand sides, but to have substantial impact, they must be initiated more than a decade in advance of peaking."
 Conclusions from the Hirsch Report and three scenarios
• World oil peaking is going to happen, and will likely be abrupt.
• Oil peaking will adversely affect global economies, particularly those most dependent on oil.
• Oil peaking presents a unique challenge (“it will be abrupt and revolutionary”).
• The problem is liquid fuels (growth in demand mainly from the transportation sector).
• Mitigation efforts will require substantial time.
o 20 years is required to transition without substantial impacts
o A 10 year rush transition with moderate impacts is possible with extraordinary efforts from governments, industry, and consumers
o Late initiation of mitigation may result in severe consequences.
• Both supply and demand will require attention.
• It is a matter of risk management (mitigating action must come before the peak).
• Government intervention will be required.
• Economic upheaval is not inevitable (“given enough lead-time, the problems are soluble with existing technologies.”)
• More information is needed to more precisely determine the peak time frame.
Switching from “wood fire/ animals/ mills” to coal, and then to oil wasn’t very difficult for our civilization, and didn’t happen because of shortages; it was in fact a series of fun upgrades that gave people more easy comfort. These upgrades were triggered by the natural social force of individualism and capitalism. Conversely, switching away from oil is not something that will be triggered by individualism alone, because it’s not profitable on the short term. Waiting for the oil peak without mitigating is dangerous because we have built a complex technologic economy on which billions of people are now dependant—and it can very well collapse. It’s like a big beast that has to be fed, and we’re kind of sleeping right now thinking that everything is ok-- until we hit the oil peak.
Here is an article about nuclear power which seems, realistically, to be the most promising avenue for energy—to ‘feed the beast’
A lot of people say we have to ‘power down’ and re-stimulate local economies, because oil based transports will be too expensive soon. I hope nuclear can provide enough energy to allow us to use cars like we do today. But we have to develop the electric car very fast, among other technologies.
Posted by: Nicolas Chausseau | Thursday, December 27, 2007 at 10:04 AM
Nicolas, market forces, and government intervention, should slow global oil demand and add to global oil supply, which will postpone "Peak Oil" and smooth the transition to other energy sources. A lot of respectable people turned out to be wrong about Y2K. It's possible, they can also be wrong about Peak Oil.
Global economic growth has been strong, in part, because of a long-wave boom phase that began in 1982. I suspect, global economic growth will slow in the long-wave bust phase in the 2020s or 2030s. Rising prices, alternative energy, technology, efficiencies, conservation, new supply sources, etc. can slow oil demand and add to oil supply. So, a catastrophe is not inevitable.
Posted by: Arthur Eckart | Friday, December 28, 2007 at 05:13 AM
I don’t really understand if you’re denying peak oil or if you are just trying to diminish its importance or both—anyway your argumentation is fairly poor and your point is unclear. In particular, I have trouble understanding your last sentence in relation with its context. I think you should be a bit more realistic!
There are no phases or ‘cycles’ in economics. Just processes and accidents. Interaction between humans and the environment. When a boom starts or a recession hits, it’s because of various practical reasons—because for some reason, the technologic society, the big ‘beast’ was not well fed and something went wrong somewhere in the chain. It can go into a recession for many reasons, and shortage of resources (like the oil peak) is one evident reason, burst of speculative bubble is another, and bad weather for agriculture is yet another (even though it doesn’t affect us as much today). There is no way you can say that there is no danger because a boom cycle started in 1982—that is not rational. Economy is not alchemy. If you cannot rationally explain cycle theories then it does not exist. Cycles are obviously an impression that you get when you watch the different curves. But a recession arrives for some reason, not because it matches with an esotheric cycle theory. If there is a rational reason for the alternation of booms and recessions, it may be because people get over-optimistic and enthusiastic during booms and make mistakes. Bad management -- refuse to think that things could go bad. Exactly like what you’re falling into right now. It may also be because population and demand (our ‘standarts’) expand during a boom, so the previous ‘good’ conditions are stressed and have to be constantly ameliorated to avoid a recession. But that’s another question.
Y2K turned out not to happen, even if some feared it, because very few people could actually evaluate the validity of the Y2K theory, and it was obviously amplified by the media. For most people in 1999, believing in Y2K was more a matter of opinion than a rational decision. Conversely, for peak oil, everyone knows that oil is a finite resource, that there will be as oil peak. To this I can add that most experts and governements and oil companies, like in the report I just showed you, are not denying it is imminent (certainly less than 15 years). They are not denying that, even though most of them don’t have interest in stating that the oil peak is imminent (most governments and oil companies)! Secondly, I have to specify that the subject is under-treated in the media probably because of the influence of some big companies. But still, we do know, scientifically, that the oil peak is imminent and that we have to adapt and mitigate. It’s there. It’s in Wikipedia. You can go modify it if you think it’s not true.
You say that rising prices can delay the date of the oil peak. True. You also say that different ecological strategies can reduce oil consumption and delay the oil peak. Well, that is not happening. That’s precisely what’s called mitigation, and it’s not happening. The only way to make it happen is by governmental action.
Posted by: Nicolas Chausseau | Friday, December 28, 2007 at 08:45 AM
Nicolas, I wouldn't ignore long-wave business cycles, while underestimating market forces and overestimating government intervention. Long-wave business cycles parallel labor supply. For example, there was a long-wave economic boom in the U.S. from 1946-64 that coincided with the Baby-Boom generation (born between 1946-64). Also, from 1965-82, there was a baby-bust (Generation X, born between 1965-82) that paralleled the beginning of a bear market (from 1965-82) and four recessions (two severe one moderate, and one mild, although the mild recession lasted almost a whole year, in 1970, 1973-74, 1980, and 1981-82), in a period of inflation (since the Fed prevented a deep depression).
The initial cause of uneven U.S. labor supply may be the Civil War (where a large proportion of the U.S. population died). After Reconstruction, the completion of the major railroads, and the Depression of 1873-79, the U.S. Industrial Revolution accelerated, which created an era of strong deflationary growth, until 1914 (the beginning of WWI). The U.S. was in a similar era, beginning in 1982, i.e. strong disinflationary growth. Also, I may add, there was another baby-bust generation born during the Great Depression and WWII. Moreover, U.S. immigration policy during the height of the U.S. Industrial Revolution (where large numbers of immigrants had similar skills compared to domestic workers) and U.S. trade policy during the height of the U.S. Information Revolution (which lowered domestic output) had major impacts. I'll explain why some of your other assumptions are false at a later time (one assumption at a time will often make it clear).
Posted by: Arthur Eckart | Saturday, December 29, 2007 at 12:19 AM
Also, I may add, my statement above is incomplete, since there are other factors. The fact that a generation is roughly 18 years. So, for example, the birth of the Baby-Boom generation in 1946-64 not only coincided with the economic boom of 1946-64, but when those Baby-Boomers reached "prime-age" (i.e. 35-54) in 1982-00, the cycles were reinforced. However, abortion has an impact, a supply shock, e.g. an oil shock, has a more powerful effect on a weaker economy, etc.
Posted by: Arthur Eckart | Saturday, December 29, 2007 at 12:48 AM
Nicolas, moreover, I may add, at the micro level, there will always be bad management and good management, at least relatively. In an economic boom, there may be more bad management, because there may be more firms. However, those firms will be relatively small. So bad management may not be a significant factor. It seems more likely expectations on growth is a significant factor that causes short-run business cycles. Also, sustainable growth is optimal growth, because strain or slack on inputs is minimal. So, resources are utilized more efficiently.
If experts can't "actually evaluate the validity" of Y2K, Peak Oil, Global Warming, etc., why do they anyway? Y2K actually happened. However, the consequences didn't. I stated above "Rising prices, alternative energy, technology, efficiencies, conservation, new supply sources, etc. can slow oil demand and add to oil supply." Adaptation and mitigation are already taking place.
You conclude government action is the only way to make it happen. However, both the benefits and consequences are important. Government action for higher mileage standards and greater use of ethanol can lead to lower domestic auto production and higher food prices. U.S. automakers produce higher quality SUVs, trucks, and vans than smaller autos, while the type of ethanol fuel produced today is inefficient. Also, government intervention in California created rolling blackouts, bankruptcies, and the state paying the highest prices in history for out-of-state energy (along with lawsuits against energy firms when the blackouts were over).
Posted by: Arthur Eckart | Saturday, December 29, 2007 at 11:32 PM
You think that your series of facts and details explain the causes for economic cycles?
You didn’t explain anything. How are the phases caused? You think that the baby boomers generation caused the post war boom? No their demography was a consequence of the growth. Why was the cycle reinforced when the baby boomers were 35-54, and not 27-48? Can you apply this theory to other cycles? Your text is a parody of explanation. Because of people like you, economics is nothing more than a pseudo-science.
You’re also wrong on 2 important points:
1/ You say “I wouldn't ignore long-wave business cycles, while underestimating market forces and overestimating government intervention. “
Here you insinuate that being for a government-driven mitigation means being against free market and/or in favour of what people usually refer to as ‘leftist policies’. No. People in favour of mitigation come from all backgrounds leftist or rightist. Mitigation is not a politically or ideologically biased theory. It is a set of rational solutions to a concrete problem. Propose other solutions if you can! Moreover, I’m not “underestimating” or “overestimating” anything when I say that market forces accelerate oil consumption and that government intervention is the only way to mitigate that accelerating consumption of oil. These are just facts that you can verify everywhere.
2/ You say “Adaptation and mitigation are already taking place.”
That is obviously a joke. Give me examples, please! Did you see the curve of daily oil consumption? http://www.med.govt.nz/upload/36478/consumption.JPG, and here are pretty much all the curves needed to tell whether mitigation is happening anywhere in the world http://www.oilcrisis.com/nations/2004/ ...So, do you call that mitigation? Maybe you call the 70s, 90s and nowadays recessions mitigation? Aborting the electric car project, is that mitigation?
If I didn’t convince you of the imminence of the oil peak, of the dramatic implications that it will have on the economy, and of the importance and urge of mitigating, well, at least people who read these comments, I hope, will see the weakness of your gibberish argumentation.
Posted by: Nicolas Chausseau | Sunday, December 30, 2007 at 01:33 AM
Nicolas, my statements are rational explanations, based on orthodox economics. Labor economists refer to the 35-54 age group as "prime-age," because of education, experience, and training. The 55-64 age group is the second most productive group, perhaps because it's less healthy and some retire early. The empirical evidence shows an increase in the 16-24 age group actually lowers GDP. Obviously, without people, there wouldn't be economic growth.
You conclusions, e.g. "governments should plan for post-peak oil" and "the only way to make it happen is by governmental action," along with adaptation and mitigation are "a joke," in spite of adaptations and mitigations actually taking place (which I listed some above) suggest a market failure is inevitable and government action will save the day (perhaps by directing limited resources into expensive alternative energy).
The global economy has been expanding at high rates for years, which may be unsustainable. Also, the long-wave bust phase will slow growth. I wouldn't underestimate the ability of the free market system to keep supply and demand in equilibrium. In a free market system, when demand exceeds supply, prices rise, and there's excess profit (i.e. economic profit). So, new supply is created, until excess profit disappears.
Posted by: Arthur Eckart | Sunday, December 30, 2007 at 04:38 AM
You say: “You conclusions, e.g. "governments should plan for post-peak oil" and "the only way to make it happen is by governmental action," along with adaptation and mitigation are "a joke," “
Saying “a joke” back towards me doesn’t mean you’re right No, in fact "governments should plan for post-peak oil" and "the only way to make it happen is by governmental action," is not a joke, and yes in fact, “Adaptation and mitigation are already taking place.” is. You can look it up.
Do you think Kyoto is a joke? The plan Sweden adopted in 2005 is a joke? The Hirsh report US department of Energy is a joke?
No it’s not. We do have to mitigate to avoid a depression and also a global warming catastrophe. It’s just plain truth even if you don’t want to hear it.
Of course I’m guessing that you don’t really have any interest in taking action towards that mitigation right now. That conflict of interest might be the reason for your quite strange and gibberish argumentation, which changes sides from sentence to sentence. You’re obviously biased and trying to get away with it by blurring your statements in jargon, details and ambiguities, and by invoking that you are based on “orthodox economics”. Since when do “orthodox economics” and your phase predictions have anything to do with the fact that we’re going to face oil shortages in a less than 15 years?
Your argumentation contains many ambiguities. For example, it’s funny to notice that you said
“(…) "the only way to make it happen is by governmental action," along with adaptation and mitigation are "a joke," “
…whereas you stated earlier that “Adaptation and mitigation are already taking place.”
It’s a joke but it’s taking place? Should it really take place then?
Afterwards you say :
“The global economy has been expanding at high rates for years, which may be unsustainable”
…and a sentence later: “I wouldn't underestimate the ability of the free market system to keep supply and demand in equilibrium.”
It may be unsustainable, but the supply and demand will stay in equilibrium. Haha that is total nonsense. Yes we’ll lack oil but we don’t need to worry! we’ll be ok because of your equilibrium ‘law’.
These nice ambiguities show how irrational and incoherent your argumentation is. What a shame for your discipline! Really. And do you really believe in those cycles and phases predictions? That’s wonderful.
Do you know James Burke? He is a historian of science and technology. He occasionally talks about economics in a very pertinent way. His documentary Connections should interest you. He brings in theories and facts about the fluctuations of the economy over history which could certainly complete and refine cycle theories. Here’s a few extracts:
http://www.youtube.com/watch?v=TZEBIPrXeu4 (very interesting: on energy and the economy). And also:
I hope you enjoy this excellent piece of science!
I also have to pinpoint that with the second paragraph of you last comment you use once again that cheap shot of presenting my position as being ‘extreme’—sustainability shouldn’t be taken seriously, and sustainability is for extreme leftists etc. Please use rational arguments instead of evoking clichés.
Finally, you’ll have to agree with me that mitigation is not happening right now, anywhere, no matter what illusory ‘example’ you give me. They sell linen bags at the grocery store to be used instead of plastic bags, but that can in no way be called mitigation. Nor can these be called mitigation: "Rising prices, alternative energy, technology, efficiencies, conservation, new supply sources, etc” ... it’s too vague. Where is all this taking place? Most of it is actually marketing. Mitigation is investing in nuclear power, imposing the electric car on the market with laws, subsidize train, investing in local businesses, taxing transport for certain goods over a period of time, slow down globalisation, stop building houses in suburbs, among others. Mitigation happens when oil consumption diminishes. We indeed have to vote for that to avoid a depression. Hard to believe huh? Well look it up again
Posted by: Nicolas Chausseau | Sunday, December 30, 2007 at 08:02 AM