The Great Oil Fallacy (repost)

the economic and strategic significance of oil is greatly overrated.

An assertion that the economic and strategic significance of oil is wrongly rated in some critical way for foreign policy purposes could have been an intriguing thesis. On the other pivots of American Middle East policy — the incredibility of insistence on playing an “honest broker” between Israel and the Arabs, and the casting of Iran as a supremely dangerous and necessarily hostile power — I thought you right, though far too mild in your characterizations. But, I don’t see how to unpack the economic importance of petroleum in a way that leaves the conventional assessment an overrating.

If anything, the conventional assessment today underrates oil, proclaiming a new energy independence based on poisoning the ground water (now there’s an economically underrated resource!), denying the significance of peak oil or the urgency of climate change. Be that as it may, the administration of George W Bush was clearly dominated by oil industry interests, and acted accordingly, if not wisely. One can question how well an oligarchic faction’s interests align with the interests of the country as a whole, but that faction did not become a ruling power based on the triviality of oil in the political economy of the country or the world.

Leo Panitch

But beyond this those resources were critical to Europe and Japan as they were remade as capitalist societies. The United States guarantees access, above all in the Middle East, to oil as part of rebuilding of Japan and Germany and Britain and France. A lot of people tend to think of American military interventions, or CIA interventions, in terms of ‘what they’re trying to do is secure oil for the United States.’ No. On the contrary they’re playing the role of the global state in the absence of an international global state. They are guaranteeing, to those countries they are rebuilding as capitalist states, access to resources that they otherwise would have had from Eastern Europe and that portion of Soviet Asia that is now closed to them.

You can’t understand US interest in natural resources outside of the context of a global trade system of oil (etc) to commodity producing countries who send their profits to the asset-inflating finance countries. It never was about the direct use of oil for domestic consumption and production.

How do you square this hypothesis with the fact that the median Western standard of living slammed into a wall in 1973, when OPEC imposed an oil embargo (and thereafter dramatically increased prices)? It also seems relevant that during the late 1990s, which was the only time since the Embargo that American workers have seen any real wage increase, oil was incredibly cheap, much more so than 1973-1995 or 2000-present.

@ Josh G. , re: 1973.

the OPEC embargo was certainly a major geopolitical event, but i would imagine that OP’s line of argument would contend that its significance is similarly over-dramatized. if we are to take the OP seriously, we would have to re-evaluate touch-tone events for this line of political economy, like the oil embargo.

for starters, the economic consequences of the slog through the Vietnam war were coming to a head in the early 1970’s. it was the war that was at the root of the inflation problem, oil prices just made that worse.

The logic why an aggressive military posture in the middle east does make oil supplies more secure for anyone escapes me. It is rather hard to get oil out of a warzone. The simplest guirlla tactics can disrupt oil supply – which becomes all the more interesting the more a western nation meddles there due to interest on oil. Another path, most consequent gone by Denmark is much cheaper and has a chance to work. There government policy strongly discourages oil use. Use of big cars is discouraged by heavy taxation. Oil and gas heating is nowadays banned in new constructed homes and insulation requirements are high. Heat is either supplied by cogeneration, typically from coal powerplants or heat pumps.

Also this from the NYTimes, June 2, 2013:

Since the American-led invasion of 2003, Iraq has become one of the world’s top oil producers, and China is now its biggest customer.
China already buys nearly half the oil that Iraq produces, nearly 1.5 million barrels a day, and is angling for an even bigger share, bidding for a stake now owned by Exxon Mobil in one of Iraq’s largest oil fields.

The logic why an aggressive military posture in the middle east does make oil supplies more secure for anyone escapes me. It is rather hard to get oil out of a warzone.

The political economy of resource extraction tends to favor government by thug. Their thugs form a military and financial symbiosis with our thugs.

American foreign policy does not make a lot of sense, unless you see who it tends to make powerful domestically as well as abroad, and see them for what they are.

I like Chris Warren’s post – but at the same time I wonder where some of the challenges to John Quiggin’s piece are coming from. I don’t mean “from a Marxist” angle; I mean what in the post itself is seen as explicitly ruling out some of the comments made here.

I agree that society has various considerations – but you are going to get those no matter what fuel source you go after.

If one had to choose an energy source to be fundamentalist about, I could understand fundamental opposition to nuclear energy. But fundamentalist opposition (I hope the term doesn’t sound terribly severe and judgmental) to oil is a bit strange, given the reality we live in. I would be all for massive interventions in favor of alternative energy – we may yet be forced into it. But given where people are emotionally on the issue, and given that hydrocarbons are still “easy to do,” it’s quite obvious that many people still feel they have the luxury of treating them as any other commodity.

I don’t think that calling them “a commodity like any other” really does get to the differences between fossil fuels and other sources – but that’s partly beyond the scope of the article, and it’s simultaneously precisely the point. Energy sources are uniquely revealing of issues of scarcity and entropy that many other commodities simply are not.

In short, I think that anybody who is basically conversant in energy policy issues should know that even if you accept the proposition that we are riding off the cliff (which I am more or less convinced of, and have been for many years), there is no simple way to fix that by swearing off easy energy now.

A couple thoughts which might be interesting questions:
– How much ground do we gain in development towards a more sustainable future by using easy energy now? Obviously I think we can agree that completely failing to prioritize implementing alternative energy sources is going to leave us far short of where we should be, but by the same token shutting down hydrocarbons entirely is likely to have a cost not only to society but also to the entire alternative energy program, especially if people are reduced to a subsistence level and cutting logs instead of engaging with the modern economy.

– Hopefully a straightforward answer exists to this one: About how much economic impact is seen by most economists after people withdraw economic investment due to fuel shocks? I’m thinking of people making conscious choices to drive less. Even in the case where somebody just arranges their trips more efficiently (though there’s a lot more that can be done in this area – the vast majority of drivers commute by themselves every day) this will at least impact gas providers. It’s also clear that there is in practice a variety of other activities that are reached by driving – and foreswearing driving leads to staying at home, and even if this leads to alternative economic choices, they don’t seem to me to put as much back into the economy.

Previous experience with the preview function that existed for a while suggested architectural issues prevent it from being implemented effectively: HTML post-processing changes the content of the post subsequent to the “submit”, which seems to be at the heart of the blockquote thing as well. I don’t know whether the tag-recursion issues have been fixed, because I avoid them now. (I assume, possibly falsely, that CT has some kind of part-time but dedicated staff who have been working hard on these problems and doing the best they can, and try not to insult them.)

It seems to me that it is always the assumption of economic rationality that leads economic analysis astray. JQs argument might be sound in a world governed by rationality. It has little relevance for the real world. Let me just point out one thought from George Monbiot about the macho image of extractive industries (http://www.monbiot.com/2013/08/20/resource-testeria/). You simply cannot understand this from the point of view of rationality. Any rational energy policy anywhere in the world (whether USA, Iran, China) would promote conservation, conservation, and more conservation, and then renewable energy. If such rational policies had been in place let’s say since the first oil shock, we wouldn’t be having any of this discussion now.

US FP towards the Middle East as just a collection of sectional interests and policy agendas (and regional actors imo) interacting and giving the impression of a coherent policy seems very true. I’d assume thats largely what most countries long term ‘foreign policy’ plans are, in general. It doesn’t give much hope for a change though, except in an ‘allow events run their course’ sort of way, which isn’t ideal.
By extension you could also say, I guess, that three events – the founding of Israel, the capturing of oil rents by revolutionary regimes and the Iranian Revolution – have combined to destablish the region for the past 70 years.
Could you also say that to some extent (with different causes) about Europe leading up to 1914, Latin America in the early/mid and late 20th century, and Central Africa since the 90s (?) ?
I’m only getting back to reading John Darwins The Empire Project after a long break and his argument is basically that the British Empire was a self replicating system beyond any control or coherent plan. I’m sure that’s obvious to experts on the topic, but nonetheless interesting, I thought.

Cursory search returns a rough 70% of petroleum used for transportation, a little under half that for gasoline and around 17% for diesel and fuel oil, and 5% air travel.
Given the red carbon ppm warning light is rapidly blinking, and the dog’s suspiciously stopped howling from his crate up on the roof of the car, maybe we could go a little further toward why and how we got where we are, besides or in addition to how we can get to somewhere else. Because how we got here may hold the main obstacle to getting elsewhere. Who’s driving?
The users? Tiny soft things surrounded by a ton and a half of plate-steel armor, going 80 mph down a road shank’s mare can only take at around 4mph.
Maybe that’s the addiction? The feelings of that. Not the fuel itself.
Sensible folks say don’t be an addict. Addicts respond you just don’t know.
The shallower response to the drug war(s) is “Demand! It’s all about demand!” Which is sort of true in a mechanical sense, but the real human economy of it, which is why the bullets and bombs of it are flying around, is feeding itself off the illegality. There to keep the prices up and the big money moving.
Similarly the tacit assumptions by the naive about societal en masse tobacco addiction are it was poor choices by users. But the history says there was a serious long-term enterprise of coercive subliminal influence, using role-models and massive presentation of positive smoker imagery.
An economy of addiction. Tobacco goes out of acceptance, the price goes up and the money’s still coming in, reduced, but there.
The same players would now make gas illegal if there was a way to do it. There isn’t, because it would be too obvious who was using. Putt putt putt.
But the initial processes of addiction – surge of euphoria, sense of personal power gained without any exertion, all the chemical thrill, it’s there in the car.
I don’t think you can discount that toward some purely rational reaction to the uh-oh of anthropogenic climate forcing.
And I don’t think you can ignore the possibility that the same skulking entrepeneurs of darknesss are operating in-between the addicts and their substance of choice.

The comments about anti-rationality are interesting, but I simply don’t believe that it’s meaningless to look at overall energy policy as being totally non-rational. The method of energy exploration which moves towards sources which are harder to extract – it’s easy to see how that falls out of a rational (at least with respect to short-term objectives) plan, and hard to see how that falls out of a “macho” view of self-interest (not sure what this means really – simple self-interest seems to explain enough).

Rather I think that the rationality only extends so far, as people are more interested in what seems more real to them.

Unfortunately this doesn’t translate into a clear view of where we should go as a society. Should people carpool more? Of course, but with carpooling come a whole new set of inconveniences and time penalties. Calling it “macho” or whatever just obscures that there is a tradeoff there. It would be nice if more people could take a bird’s-eye view of these tradeoffs – so carpooling isn’t quite so bad (at least in some cases) as the needless waste of energy. However, given the normal set of consideration your average driver has to face, some of those considerations (saving the environment) barely register most of the time, if ever, while others aren’t nearly as powerful as they are supposed to be (having extra time in the morning and making a meeting on time versus saving a few dollars in gas money).

“I simply don’t believe that it’s meaningless to look at overall energy policy as being totally non-rational.”

Might one of the negations be a typo?

The prosaic reality is that oil is a commodity much like any other. As with every major commodity, oil markets have some special features that affect supply, demand and prices. But oil is no more special or critical than coal, gas or metals—let alone food.

That is a pretty stupid thing to say. Oil is a cheap source of energy, and there is nothing comparable. Its price influences the price of everything else, because it always appears in the cost of freight transport. There is almost no transport without oil, and if it were ever to run out (ha ha!) I reckon our civilization will have to look quite a lot different just because of that. (To the nuclear fanbois: guess what the construction machines used for building nuclear plants need to burn to function).

It does not look so critical because it is so cheap. But it is an absolutely critical component of modern civilization.

This is a real howler, btw:

Since oil is essentially untraceable, the boycott would have been purely symbolic if the Nixon Administration had allowed gasoline prices to rise, so that supply met demand.

You simply have no idea what you are talking about, and are embarrassing yourself. Oil producers are big operations controlled by national governments, not mom-and-pop shops adapting to supply and demand.

See: http://archive.is/mV3wv

The political economy of resource extraction tends to favor government by thug.

Is this really true? I am not sure which actor(s) are named by “the political economy of resource extraction.” Australia, Brazil, Canada, Chile, China, Democratic Republic of the Congo, Indonesia, Iran, Iraq, Norway, Nigeria, Russia, Saudi Arabia, South Africa, Syria, Venezuela — and many more — have large resource extraction and export sectors. It’s not clear to me that the nations with more thuggish governments generally produce commodities more cheaply, produce them more reliably, offer more opportunities for foreign investment, or otherwise are better for foreign businesses and nations that rely on their exports. It feels like one of those “with notably rare exceptions” assertions, maybe based on observing benefits of thug rulers offering sweetheart deals to foreigners and neglecting the costs attached to arbitrary demands, coups, wars, and revolutions that appear more often under government by thug.

‘The Great Oil Fallacy’ is actually the one Quiggin repeats here again – the infinite substitutability of resources. Energy is not the same as food, or bathroom widgets, or gravel – it’s the driver of social and technological complexity (a recognition that got Prigogine his Nobel Prize).

A little awareness of thermodynamics might also help – the essential disconnect is summarised beautifully in a well-known (depending on what fields you move in of course!) blog post entitled ‘Exponential Economist Meets Finite Physicist’: http://physics.ucsd.edu/do-the-math/2012/04/economist-meets-physicist/

Well worth a read.

Or there’s:

Brown, J., Burnside, W., Davidson, A., DeLong, J. Dunn, W., Hamilton, M., Mercado-Silva, N., Nekola, J., Okie, J., Woodruff, W. and Zuo, W. (2011) ‘Energetic Limits to Economic Growth’, BioScience, 61: 1, pp. 19-26

or:

Proops, J. (1983) ‘Organisation and dissipation in Economic Systems’, Journal of Social Biological Structure, 6, pp. 353-366

Honestly, I like Quiggin’s work but his work on oil depletion merely shows how much of an economist he is.

“Hydrocarbons from biofuel cause no net increase in atmospheric CO^2”.

Gott im Himmel!

floopmeister

‘Exponential Economist Meets Finite Physicist

It may be simpler than you think:

Finite physicist “1 + 1 = 2”

Exponential economist “1 + 1 = 3”

‘The Great Oil Fallacy’ is actually the one Quiggin repeats here again – the infinite substitutability of resources. Energy is not the same as food, or bathroom widgets, or gravel – it’s the driver of social and technological complexity (a recognition that got Prigogine his Nobel Prize).

A little awareness of thermodynamics might also help – the essential disconnect is summarised beautifully in a well-known (depending on what fields you move in of course!) blog post entitled ‘Exponential Economist Meets Finite Physicist’: http://physics.ucsd.edu/do-the-math/2012/04/economist-meets-physicist/

Thermodynamics doesn’t have anything to say about oil being special or not-special relative to other sources or carriers of energy. Resource substitutability is not infinite but it is considerably greater than zero. Only a wilful mistranslation of substitution into infinite substitution turns Quiggin’s thesis into a fallacy.

Why does the US consume more oil per capita than the rest of the developed world save Canada? Defenders of the status quo like to point to the US having a low population density or having a higher GDP per capita. But developed nations with lower population density (Australia, Sweden, Finland, New Zealand, Norway, Iceland), higher GDP per capita (Australia, Denmark, Sweden, Switzerland, Norway), or both (Australia, Sweden, Norway) consume considerably less oil per capita than the US.

A quick glance at oil consumption per capita: http://www.indexmundi.com/map/?v=91000

High oil consumption per capita is neither necessary nor sufficient to achieve a high Human Development Index score or any other metric of goodness. If the US could cut its oil consumption per capita to that of a benighted backwater like Switzerland or France, it would actually be a net oil exporter rather than importer. If that lower consumption were driven by higher fuel taxes like most of the reset of the developed world it would additionally shrink budget deficits and trade deficits by hundreds of billions of dollars annually. For 40+ years US politicians of every stripe have loved to talk about cutting trade deficits, budget deficits, and foreign oil dependency but few dare suggest the simple and proven fix that helps all 3: raise fuel taxes.

Michael Ross’ book on the resource (oil) curse is pretty convincing. He show that (under specific circumstances) oil producing countries are more likely to be authoritarian, more likely to succumb to civil war and more likely to have greater gender inequality. So the specific context is obviously important. (There’s more research showing the effect oil has played in encouraging agressive foreign policies in *revolutionary* regimes in the Middle East and North Africa)

“(There’s more research showing the effect oil has played in encouraging agressive foreign policies in *revolutionary* regimes in the Middle East and North Africa)”

So what then do you make of Saudi Arabia?

@46:

“Redacted”.

Matt: Only a wilful mistranslation of substitution into infinite substitution turns Quiggin’s thesis into a fallacy.

Fair point – I stand corrected (been reading too much Julian Simon recently – he wields ‘infinite’ a little too easily).

Thermodynamics doesn’t have anything to say about oil being special or not-special relative to other sources or carriers of energy.

Well oil is certainly a higher grade energy source in terms of EROI than say burning cow dung – but you are correct that this is a social and economic distinction, rather than a purely thermodynamic one. If you look at energy as the driver of system complexity then what counts is the continual availability of energy to both maintain (let alone increase) the complexity of far from equilibrium systems – and oil is a much more useful energy source for us (socially and economically) in terms of its portability, storage and high EROI than most other sources. We’ve built our complex technological society around oil and it’s particular characteristics – it cannot be simply or easuily substituted by another source (especially one with a lower EROI) without some pretty significant difficulties and costs.

but few dare suggest the simple and proven fix that helps all 3: raise fuel taxes

Yes, but the US is hampered by the path dependency of its car-reliant model of social/urban organisation – countries like Switzerland or France have followed a more public-transport reliant model (based partly I think on the contraints of land availability – they haven’t been ables to just keep building exurbs like Canada, the US or Australia). Australia does have a higher per capita GDP than the US and a lower population density but I would surmise (no evidence at hand) that this might be due to our lower use of heating oil in winter and a reliance on coal as an energy source?

By all means raise taxes on fuel – but then watch the economic (and social) pain hit.

Hard.
.

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Thermodynamics doesn’t have anything to say about oil being special or not-special relative to other sources or carriers of energy.

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The revolutionary states identified were Iraq Libya and Algeria in Luis Martinez’ ‘The Violence of Petro-Dollar Regimes’ and then in his book Jeff Colgan threw in Iran (though I havent read the book so not sure how he shows that. It seems less obvious)
Here’s the paper the book came from though

http://www.editorialmanager.com/io/accounts/Colgan.pdf

I’m not hanging my hat on this, obviously, it’s interesting though Im sure debatable

@Ronan 50,

No nation on earth has instigated more wars than the US in recent times. And that’s been the case for decades.

And pretty much every single war the US has started has been to protect, defend or expand capitalist markets, one way or another. I can’t think of a single war in the last 200 years, with the exception of WWII, that was defensible.

Oil, of course, has been a big motivator, especially in recent times. Not only does our addiction to oil create unsustainable pollution and climate change, it is a spur to endless wars and terrorism.

It’s long past time for America to evolve and put aside childish, ugly, reactionary things.

And before anyone says: But aren’t the Saudis using aggressive foreign policy in Syria?

It’s somewhat frustrating to hear arguments about energy commodity substitutability/energy services sustainability in which the contestants ignore the basic merits of substitutability and seemingly evident concerns about the correlation between material growth, population, and sustainable primary energy services demand.

Will oil someday be replaced as a primary transportation fuel? I’m optimistic that it will, and, as others have suggested, there’s much to be valued from gains in efficiency in the mean time. Have we thus *sustainably* decoupled global primary energy services demand growth or global population growth from global gdp growth? I’m still waiting to see evidence of that development, but the way many resource (and AGW policy) arguments proceed, you might be led to believe that the burgeoning Ethiopian and Bangladeshi populations will very soon gorge their stomachs on gross domestic happiness.

@floopmeister:

Agreed that EROI is an important measure, but photovoltaics have better EROI than marginal oil sources currently in production and good onshore wind has vastly better EROI: in the neighborhood of 5:1 for e.g. oil sands, 8:1 for PV in Spain, and 40:1 for wind. I believe that PV EROI of 8:1 is actually a lowball number though in line with published estimates. Published PV EROI is too low because it lags the rapid changes in industry: continued optimization of wafering, cell efficiency, module durability, and purified silicon production have been aggressive, while most PV EROI calculations rely on input figures at least 6 years in the past and some use data as old as the 1990s. Doubling useful module lifetime nearly doubles EROI (not quite, since cells slowly degrade in output even without overt failures) and field trials dating back to the 1980s show that the median module has an expected useful life greater than 30 years. Yet PV EROI calculations still commonly use too-conservative estimates of 30, 25, or even 20 year useful lifetime. Based on 30+ year field trials I would expect that well-encapsulated modules can muster 70% of original rated output after 70 years of use, making them a long lived energy asset comparable to a hydroelectric dam.

It is only very recently that there has been enough installation of intermittent renewables to start raising the question of how to address variability: some combination of overbuilding, storage, demand response, and long distance transmission seems likely. That’s the next great challenge but it’s a nice problem to have, compared to 10 years ago.

I also agree that the US suffers path dependencies that other nations don’t when it comes to car-centric life. I wouldn’t propose to raise US fuel taxes to British levels overnight. But I think they should start gradually rising and keep rising until they’re at least roughly in line with the rest of the developed world. Mass transit and transport electrification should be subsidized with part of the increased tax revenue. Battery electric vehicles with dispatchable charging demand are a great match to wind and solar with their non-dispatchable supply. If it is painful to taper off of oil on a planned schedule it will be more painful to do so on a geologically imposed schedule after world liquid fuel production peaks.

If it is painful to taper off of oil on a planned schedule it will be more painful to do so on a geologically imposed schedule after world liquid fuel production peaks.

Couldn’t agree with you more. I’m all for change now – but my personal bugbear is the belief that changing our energy mix will be either simple, cheap, or will not involve huge social and cultural changes (not saying you argue this – but it’s there in Quiggin’s article). It does everyone a disservice.

What’s interesting has been the fall in car ownership across the developed industrial countries – even here in Australia car ownership is falling (bicycles have been outselling cars for a number of years now). It might orginally have been due to rational cost-benefit analysis (the costs of owning and running a car) but now it’s become a cultural change – inner urbanites in a city like Melbourne (with its extensive bus, train and tram network) are increasingly not owning or driving cars. Compare that to Auckland in NZ (a city I actually really like) where an abysmal PT system means cars aren’t going anywhere fast.

Floopmeister #60 “my personal bugbear is the belief that changing our energy mix will be either simple, cheap, or will not involve huge social and cultural changes”

My personal bugbear is that most people appear to think that it must be complicated and costly and involving huge changes. This strikes me as unnecessary and false.

The example of fuel taxes (#49) is apt. Increased petro taxes could, and should, be combined with offsetting subsidies for the poor who will still need fuel for their cars to get to work, as well as offsetting subsidies to other energy sources for innovation and job growth in those new sectors. This would work as a market mechanism design to shift both demand and supply away from petro fuels quite naturally.

I don’t think that is all that is required, but it is a mistake to dismiss petro taxes as a useful, substantial, and gentle way to proceed on carbon policy.

It wasn’t clear to me whether some of the above discussion is premised upon the idea that the production of a good or a service is always thermodynamically the same. Anyway that idea is false. We see emergence of innovations, and some of those innovations reconfigure matter to use less spacetime to perform the required task. So absolute energy consumption can be reduced.

I would not argue with the idea that this may not be good enough, however. The observed rate of innovations may not be able to outpace the exponential growth of total resource consumption (including “consumption” of the “resource” of the atmosphere, considered as a CO2-sink).

In which case we are all going to be cooked.

But I see two problems in PROVING the observation that a crash is imminent. (1) Predictions of environmental (and climate) futures will remain statistical, and (2) we don’t have a good historical measure of the rate of spacetime-saving innovation. The sense of whether genuine innovation (not the number of new consumer baubles) is speeding up or slowing down is personal and anecdotal.

I once proposed calculating the rate of the appearance of new job classifications, as a proxy measure of innovations for #2. Since you would still be up against #1, however, I didn’t bother to pursue it.

I think the way to go is to start from the fact that mathematical science will never be able to precisely predict complex natural systems, because n-compartment models give you something akin to n-body computation problems. The predictions will remain statistical.

Scientists for some reason do not like to lead with this; they seem to want to hold on to the chance that someday things will be predictable. Consequently, students aren’t taught it from the beginning, and since that it as far as many of them get, they don’t learn it at all. Yet the fact that natural systems like wildlife areas and the climate will never be precisely predictable means that the primary task now is political agreement.

Lee Arnold: I’m with you on the possibility that changing our energy mix doesn’t necessarily have to be costly and expensive. Your comments about statistical predictibility are jarring, however. I don’t think anybody expects perfect predictability, but certainly we can get something almost as good at the quantum level – and the macro level isn’t necessarily useless either. More to the point I don’t think anybody needs perfect predictability to have a usefully accurate and precise model of technological improvements. There isn’t anything so far that suggests that technological innovation can pass certain limits, and in some areas these limits might interfere forcefully with the pace of progress sooner than is realized – alternative energy or no. From that angle, we can point to some definite limits on progress, with the real ceiling likely being lower (although how low is up to debate).

How far we can push from the other direction also isn’t clear. Many of the “easy” solutions might not be acceptable to some or a majority of persons – like increasing carpooling, instituting rationing/scheduling for more dense distribution of resources, or changing the human animal or reducing population. Certainly any one of these things alone could take energy use back some years. The problem, as you know, is that politically many of these won’t sell at all.

So some of the most dramatic solutions appear off the table. What’s left is still quite promising and powerful, so we’re down to a matter of some percentages. Importantly, a period of some years, economic improvement on the one hand and resource strain and global warming on the other collide to shorten the actual range of flexibility we will have in dealing with the problem.

This is very far from saying whether the room in the middle between the extremes of too-harsh and too-liberal measures is on the right path, and whether we can walk that narrowing corridor with policy and technology down through the years. Personally I would like to think you’re right – that it can be done. On the other hand, I’ve known people to say we will just find a way to escape the universe when it’s translated too much energy into heat to sustain a thinking process. So it goes.

The economic models I see (and I am not taking a fling at economics in general) are curiously flat. The societies they model are variegated – there are all sorts of specialists – but there are none of the elaborate hierarchies that characterise actual complex cultures. If exchange were all there were too it, one resource would be much like another. But different resources allow or encourage different sorts of social structure.

To compress a complex argument, activities with high cash flow (that is, a low labour input and a high cash output) seem historically to be critical to elaborate social structures, whether they be extraction, long-distance trade in luxuries, conquest or plantation labour. This is the relevance of oil: as it becomes more expensive to extract, the remaining pockets of easy money become more critical to the societies dependent on it unless, of course, there are alternatives. It’s hard to see an alternative source of cash flow. One consequence is that elites turn to greater extraction of surplus from the lower levels – something we have seen in the west over the last three decades. This, again, is a well-documented historical trend. I expect it to continue until some balance is struck between extraction, the costs of coercion and the (often hidden) costs of resistance.

It’s not the percentage of GDP that counts, nor the energy – it’s the surplus and the ability to turn it into social power and cascade it through the hierarchies.

Plume: In WWI, the kill rate was very low. It was quite common for most soldiers to do a tour and never actually shoot to kill an enemy combatant.

I think you may have been somewhat misinformed about WWI.

Calling John Quiggin a rightwing economist is ridiculous.

Pete

Re-interpreting an explicit statement that:

Quiggin is a relatively a rightwing economist, compared to …

in false terms and out of context – as you have done – is juvenille and abhorrent.

What nonsense. John Quiggin has not argued for a Tobin Tax? I remember that he did.

mattski

Where did I say I didn’t :

want to be interpreted as saying that Quiggin is a relatively rightwing economist

The opposite is true. You are trolling.

In another context, relative to the Liberal Party, he is Left-ish.

John Quiggin

Good to see some support for a foreign financial transactions tax. I have been aware of your position, so please do not try to imply otherwise. As I wrote in 2010:

A Tobin-type tax (TTT) is probably the most useful thing social democratic capitalists, socialists, trade unionists, labourites and environmentalists can all agree on.

Only capitalists and their allies within the capitalist economists fraternity tremble at the thought of a TTT.

Left unions published “Back On Track” some time ago calling for a Tobin Tax.

More recently the SEARCH Foundation included a Tobin Tax in its waffle. Quiggin and Stilwell are due to spruik at their Conference on 29 May. I think I have heard Stilwell support a TTT.

Some ALP parliamentarians have tried to pursue a TTT, but the Keatingesque rightwing elements in the ALP Parliamentary Caucus stymied these efforts. In this case the TTT was sought for international issues. we now need it for domestic reasons.

Gareth Evans and John Langmore have supported a TTT but without any real vigour.

The issue is covered in “The Tobin Tax: Coping with financial volatility” ed ul Haq, Kaul, Grunberg.

I assume some church groups and ACOSS would support a TTT.

We just have to kick our ill-bred economists out of the way.

Presumably you did not even bother to use Google before your post – or even review your own blog!

It is certainly preferable to negative interest rates, so-called stimulus that has pushed global debt up to 3 times global GDP, austerity and over 20% unemployment in the more suffering zones.

Chris Warren,

As mentioned earlier, I used to be there. A liberal. Then a left liberal. Then, finally, it dawned on me how absurd it was to try to temper or mitigate for the destructive aspects of an ugly, immoral economic system, rather than find one that doesn’t need tempering or mitigating, etc. One with social justice and equality built in from the start.

In the Damned Hippy thread, I used the metaphor of cigarettes. Capitalism equaling those cigarettes. Finally dawned on me that getting rid of the cigarettes entirely made far more sense than trying to lessen their damage. That’s when I moved from liberal to anti-capitalist leftist.

I’m in my 50s, and have taken an unusual trajectory, politically. Further left as I’ve aged.

plume

I agree with that, but it is capitalism that has aged as well. It is now in decline.

Our supposed economists, have not kept pace with changing circumstances.

I would like to return to Belmont’s mind-blowing offering. When confronted by my wife about the speed at which I drove, I always replied that I took driving to be a sport of sorts. Belmont suggests that it may in fact be an addiction, perhaps a real sort of addiction to adrenalin. The reality of this as it applies to my particular situation floored me. We can all learn to improve ourselves first and foremost and thereby make this a better world and adding to that pass the message on and hope that it catches in a mind ready to receive it. Hats off to Belmont.

also, since its partly relevant, interested to see what people make of this

http://mondediplo.com/openpage/are-we-falling-off-the-climate-precipice

Certainly there is a lot to argue about in the case of climate science’s grasp of realistic outcomes, but surely the baseline isn’t debatable – the situation gets no better overall if current trends are followed. People sounding the climate alarm have not been entirely tone-deaf to the political issue, with some people advocating spreading the most alarmist picture, and others suggesting downplaying what they consider an apocalyptic scenario merely to help make solutions easier to sell. Ultimately it is a question of educating the public and encouraging whatever measures are possible to push back against this trend. Personally I feel that softpedaling the issue just breeds complacency. As the saying goes: “never waste a crisis.”

Peak oil (or some other kind of resource scarcity model), however, is much easier to understand and much less open to unforeseeability objections (no energy = nothing moves; constrained resources = scarcity and the choices that follow), so I don’t really get the objection here. It’s why I suggest alternative methods. We will never, for example, get much more than 30% efficiency out of an internal combustion engine. Maybe we could switch to rocket cars and get closer to 70% efficiency, but you should see the problems by now – there’s not unlimited potential for improvements here. At the very least we can hold up 100% efficiency as an absolute limit (barring some revolution concerning the understanding of physical systems).

You also don’t seem to be giving the practice of statistics credit. The public message from the climate scientists has been that we can expect more severe weather overall, and greater fluctuation in weather patterns. No competent climate scientist denies that the systems are complex and that you can’t guarantee what the weather will do on a particular day. The public message isn’t splitting percentages or trying to give a precise analysis of what happens in a complex system – they already understand your objections in light of the science and practice of statistics. So I think it is time to drop this “objection” to climate science and statistics, because it has been an issue they have gotten fairly well around.

At the same time, there definitely are some areas where the statistical model gives at least a picture of increasing harm to the environment – rather than “harm sometimes but good other times because it’s chaotic.” Two areas are related to water: Increase in ocean levels and the spread of drought. For people who live along coastal areas or in areas that will likely be harmed by water scarcity, the problems should crop up soon enough anyway.

Nice analysis – though many End Times folk might end up seeing it as easier than provoking judgement day in I/P, and their own Pascal’s Wager would be something like “stuck on earth vs. judgement day. WOOHOO JUDGEMENT DAY!” That’s a totally different brand of insulation from reality, though.

I’m not so sure that the human economy is all that “strong and resilient”, and the strategic creativity in our distributed decision-making may not be humanity’s friend.

The propaganda war of statistics is probably going as well as can be expected, especially given the relative hiatus in warming the earth has experienced over the last decade. It is hard to sort out all the claims in detail, but most of the speculation regards identifying the myriad consequences of elevated levels of greenhouse gases in the atmosphere, not whether there will be consequences. And, now every record-breaking weather event is another occasion for reinforcing the story line — even the scientists stuck in record Antarctic sea ice cover or the record cold weather in the American midwest over the next few days will be related to global warming, as, of course, will be the gale flooding the British Isles or the next super Typhoon in the Pacific. It isn’t necessary for any of this to make a lot of logical sense, or scientific sense — the narrative is in place, and will be reinforced, bit by bit.

Here’s the thing about chaos: the lesson isn’t “it’s complicated; anything can happen”; the lesson is that asserting human control requires sorting things out into nice, regular distributions, transmuting uncertainty into risk, by parsing the processes and their associated problems. Humans are going to want to adapt and meliorate. Creatively, to be sure. And, semi-independently, with some loose central control or conventions emerging as the various efforts to adapt and meliorate jostle against one another.

In this endeavor, it would be nice if mainstream economics had something to field, other than an army of zombie concepts. Everything we need from economics crosses the grain of the traditional analysis of the “market economy”. Worrying about whether constraining greenhouse gas emissions will harm economic growth exemplifies the complete cluelessness that the ready-made linear frames of mainstream economics create, when applied to this set of dynamic problems: climate change, peak oil, overpopulation, ecological collapse. Lee says the economic pessimists are wrong about growth; I say, they aren’t even wrong, and that’s going to be a serious problem, because it indicates the extent to which elite expertise is unprepared to be responsive and creative. It indicates the scary possibility that this civilization has grown brittle, and having created these problems out of its industrial habits, will be unable to break those habits in the effort to adapt to the consequences of its own will and character.

Bruce Wilder,

It’s not just right-libertarians like Cowen who believe things have slowed down along the tech innovation scale. Lefties like David Graeber make a good case for this as well.

This article is well worth the time:

http://www.thebaffler.com/past/of_flying_cars

I remember going to camp when I was a kid, and watching movies in the 60s about the amazing things that would happen in the 70s. A Jetson-like future was ours for the taking. Flying cars, robots, sustainable living, etc. etc.

It didn’t happen. Graeber shows why.

Also: ever notice how Sci-Fi is pretty terrible when it comes to predictions? Overly optimistic as far as tech innovation, pretty much always. They can envision things happening, can often show how to make them happen, so they can’t see any good reason why they don’t happen within their time frame. But they’re generally at least a generation too soon in their prophecies.

In many ways, innovation is slowing down, and most of it has to do with neoliberalism and the shrinking Commons, IMO.

fOil doesnt look (to me) like an overly convincing explanation, id still take the neo-cons at their word as the main reason
okay but then? isn’t it like one of the consp.theories about jfk? where the guys that did it got away with it? so the thing about redirection of energy usages would be resting on what are they doing now?
as far as clearing the path for change I mean.
have to run it by them first? or don’t they care about rising temps and consequences? or did they just get what they wanted and go home?
we’re talking about people who engineered the whole american shebang into a futile engagement based on lies. if they’re still able to bring that much power to bear on things US, and by extension global…rational argument’s probably not the first weapon of choice.
in plainer english: the nature of it, the depth of it, you can’t reasonably chalk that up to “mistake”, it’s too big and too ghastly. but that seems to be the general default.
uh-oh we set the world on fire and broke the sky. whoops. now what?

humility.remorse. things like that.
–
plume-
algys budrys michaelmas
cordwainer smith, almost anything
there’s more, they’re exceptions to your generally apt comment, but they deserve recognition for their accuracy.
it’s like they’re not so much extrapolating as looking through some lens into what’s coming toward them.

I still think the counter-arguments in the original thread, and a couple of new ones in this thread, show that oil continues to be of strategic significance (though not the most significant).

Re-reading the article, and coming across the little tidbit comparing US spending on oil annually (700bn) to US spending on food and accommodations services annually (around 700bn), I asked myself how much the ultimate users of electricity in the US spend on electricity.

The answer is a mere 363bn in 2012. Source

However, I doubt this expenditure tells us much about how important electricity is to the US economy.

A few other interesting numbers:

Percentage of transportation powered by petroleum: 93%
Percentage of transportation powered by natural gas: 3%
Percentage of transportation powered by renewables (inc. blended biofuels): 4%

Transportation accounted for 28% of America’s 95 quadrillion Btu consumption in 2012.

Source

It’s not just right-libertarians like Cowen who believe things have slowed down along the tech innovation scale. Lefties like David Graeber make a good case for this as well.

This article is well worth the time:

http://www.thebaffler.com/past/of_flying_cars

I read this when it was first published and I just re-read it to see if my initial hair-pulling reaction was unjustified. I don’t think it was.

It’s something that might have been written by the more wild eyed Extropian/Libertarian believers in the 1990s, but putting the blame on capitalism instead of government. It treats science like technology’s servant instead of its master: if we don’t have teleporters, force fields, or antigravity, it can’t possibly be that humans desire more than nature allows. Somebody screwed up the acquisition of knowledge that could have and should have provided these marvels.

That’s not how science works. Science doesn’t just provide ever expanding vistas of the possible to be exploited technologically. It also sets hard limits on what any technology can ever accomplish, regardless of desire, effort, or systems of social organization. Things like the Carnot limit, Landauer limit, Shannon limit, light speed limit set upper bounds on the possible and are just as much the fruit of science as discoveries that revealed previously unknown opportunities.

Electromagnetism, radioactivity, nuclear reactions, special relativity, general relativity, quantum mechanics: all were fairly mature theoretically and experimentally before 1950. There have been no great physical revolutions since. We know that there are still great cosmological mysteries and that physics is incomplete, but there is no particular reason to think that even unification will yield marvelous new technologies for use on Earth. New discoveries are likely to be more relevant to extremes of scale and energy that are incompatible with terrestrial humanity: processes in stellar cores, or near-Big Bang conditions, or orderings visible on the scale of galaxies rather than cities.

Even Graeber’s more reasonable “where are the robots?” question has an at least half-faulty assumption. He implies that productive automation came to a standstill when rich corporations moved manufacturing to low-wage regions overseas. But automation continued. According to the US Bureau of Labor Statistics, Chinese manufacturing employment reached a local peak of 98 million in 1995, fell until 2001, then rose again until reaching 99 million in 2009. Chinese manufacturing output rose tremendously across 14 years while growing employment by only 1 percent.

If you could bring a US textile plant that saw its jobs offshored in 1984 back to life — and in some cases that is happening — it will provide maybe 1/5 as many jobs now as 30 years ago. Production per worker in textiles, mining, chemical plants, vehicle manufacturing, and so on has continued to increase faster than total production/consumption even in the globalized, containerized, race to the lowest wages era. If Graeber’s unrealized post-1970 timeline with much better robots had come about earlier, there is no particular reason to think it would have strengthened the hand of capital less than the actual-history combination of incremental automation plus offshoring.

Graeber mixes a bunch of stuff indiscriminately:

-Moon colonies, Mars colonies, better robots, tricorders*: known to be possible, may well have developed faster on a path not dominated by capitalism.

-Jet packs, flying cars, hovering vehicles: possible since the 1960s, but more dangerous, more expensive, and more energy intensive than conventional cars (which are already excessively dangerous, expensive, and energy intensive IMO — a society not ruled by capital should favor more mundane transport like buses and rail).

-Pocket fusion reactors, immortality drugs, cures for cancer and the common cold, computers that can make intelligent conversation: not yet ruled out by science, but much more difficult than early researchers expected. The USSR and its allies did better than capitalist countries in some scientific and technical areas, but not any of these.

-Force fields, tractor beams, teleportation pods, antigravity sleds, rapid interstellar travel, telekinetic mind reading, phasers: no experimental or observational evidence that they are possible even in principle, no relation to societal structure.

All the chaff mixed with the wheat makes me wonder about the trustworthiness of his perceptions and ability to reason about them. It reminds me of the infamous garbled capsule history of Apple that appeared in Debt.

*Not with all the technobabble features of Star Trek of course, but a handheld multi-purpose analytical instrument with wide utility would be close enough.

Umm, you do know that cars can run on LNG, biofuels, liquefied coal, electricity etc.

Sure, and they can also be pulled by horses. But none of this works out at the scales involved. These alternatives only look reasonable as long as you do not try to deploy them on scale. The efficiency improvements you mention are nice, but due to limitations imposed by the laws of physics this just postpones the inevitable. It seems you do not understand the technological challenges, and for some reason you are unable to even consider that they might ruin your argument.

Peter T may have inadvertently hit the nail on the head.

Resolving these issues and dealing with climate change, will involve:

“a decline in quality of life.”

Primarily in the West. This fact should not be used to stymie consideration of these energy/social/sustainability issues.

@Chris Warren 113,

There is no logical reason to believe it will involve a “decline in quality of life.” None. Zero. Zilch. Unless by “quality of life” one means the greatest access to the greatest number of consumer goods and services, regardless of their pollution, waste and environmental impact. But that definition seems incredibly superficial, at best. It doesn’t describe “quality of life” in any meaningful way.

I think it’s far more likely to assume that “quality of life” skyrockets if we slash pollution and waste. We will all live longer, healthier lives, and the planet will teem with abundant flora and fauna. The earth will be more beautiful, more diverse and we will all reap the benefits of that — aesthetically, biologically, intellectually.

Pollutants have been directly linked to a host of diseases, including cancer, and many toxic contaminants have been linked with violence and aggression — especially lead. Cognitive dysfunction, especially with children, stems from pollution and poor nutrition — the latter being impacted by that pollution.

To me, “going green” is a slam dunk necessity, and it also means much higher quality of life.

These alternatives only look reasonable as long as you do not try to deploy them on scale. The efficiency improvements you mention are nice, but due to limitations imposed by the laws of physics this just postpones the inevitable. It seems you do not understand the technological challenges, and for some reason you are unable to even consider that they might ruin your argument.

Ships, aircraft, and long haul trucks will eventually need synthetic fuels, e.g. methanol or compressed or liquefied methane produced from water, carbon dioxide, and electricity. But a lot of long haul trucking could be replaced by electrified rail; the holdouts against electrification represent only a small portion of present transport fuel consumption.

I don’t think it is necessary or desirable to replace ICE passenger vehicles one-to-one with battery electric vehicles, but it is far from physically impossible. The Tesla Model S consumes 35 kilowatt hours per 100 miles traveled. In the United States about 2.2 trillion passenger vehicle miles were travelled in the last 12 months, equivalent to 770 terawatt hours driven in Model S vehicles.

The National Renewable Energy Laboratory estimated in 2012 that in the US rooftop solar power alone could provide 800 TWh annually: http://www.nrel.gov/docs/fy12osti/51946.pdf

The NREL study is predicates 800 TWh potential on 13.5% module efficiency. That’s on the low side compared to currently available rooftop modules.

Two of the most common concern troll arguments against scaling up PV are “it would require despoiling large areas of wilderness” and “it needs rare/toxic elements.” SunPower modules are based on crystalline silicon and do not incorporate any toxic or rare elements: no silver, indium, gallium, tellurium, cadmium, or arsenic. If we assumed deployment of 20% efficiency modules like SunPower has been supplying for a few years now, 1185 TWh are possible from US rooftops. For comparison, in 2012 the US generated 1517 TWh of electricity from coal. In addition to rooftops there is additional enormous potential from deployment as canopies over parking lots and on closed landfills and other low value brownfield space, before even considering using farmland or wilderness.

Plume,

Indeed, if PV becomes cheap enough and achieves fast enough energy payback times it should be stuck on every device that consumes energy and occasionally sees sunlight. I think that parking lot canopies are lower hanging fruit than modules on the cars themselves because they will be exposed to sunlight for more hours of the day on average and provide more usable solar collection area per parked vehicle. If vehicles are fully charged the excess electricity can also go to nearby buildings instead of being wasted.

If you really want to hurt contemplating the counterfactual, imagine that energy efficiency and the development of non-fossil energy remained a US national priority in the 1980s like it was in the late 1970s. It could have been the US that first committed to energiewende. And set an example for the world a couple of decades earlier. And at proportional costs lower than Germany, since the US has considerably better solar and onshore wind resources.

Chris Warren @113, and JQ: “end of western civilisation”

The note that moving to a lower energy source (more expensive to obtain and operate) involves a decline in the quality of life as currently appreciated and measured is quite advertent.

In so far as current western civilisation is largely built around the ideal of ever-improving material standards of living then, yes, moving away from oil, coal, unsustainable agriculture, over-fishing, commercialisation of the environment and the rest is a huge civilisational wrench. It’s one I’m happy with, and not just because the alternatives are worse. But I can see that, for a lot of folk, it challenges some very central notions of why they’re here. So I don’t expect them to be happy, or go quietly. After all, previous similar changes have also been pretty ugly – this sort of change was among the causes of the wave of strife, civil and international, from 1870 to 1945. Perhaps the best we can hope for is that we will manage the transition in as partially civilised as manner as the communist world did post 1980.

Errata:

it shoud read

And Quiggin is being silly when writing that a reduction in oil availability will be “inconvenient”.

Note also that the top speed reached with steel-wheel-on-steel-rail is a sluggard 575km/h, while maglev has reached the breathtaking speeds of 581km/h, a stunning 1% faster.

Peter T is right.

However, there is another aspect to this. Once a certain lifestyle – electrical goods, fine furnishings, medicine, international travel, etc – has been obtained for some, it is entirely appropriate for every other nation or group to demand the same. What may appear a fall in living standard within the OECD may well produce a increase in living conditions for the greater population outside the OECD.

This particularly applies when the highly commodious lifestyle for some, has been obtained using resources from the rest of the world and from future generations.

Oil is emblematic of ecological resources being exhausted (as with water and arable land), but is also emblematic of the problems of fossil fuels generating a all consuming catastrophe.

There is no market mechanism, or insurance model, that can accommodate or deal with all-consuming, runaway, catastrophe. Scientists knew that industrial CO2 emissions were increasing atmospheric CO2 and appeared to change the climate in the 1930’s. Unfortunately they never realised, or were able to say, that this should limit productivity, competition and economic growth.

Why not, they had sufficient facts at hand?

It is an issue of rationality. Just as we get false rationality over Japanese whaling and we saw false rationality over nicotine. It is ‘economic rationality’ linked into the political process that is deliberately refusing to accept the science for the sake of private commercial interests. This is well-illustrated today by Maurice Newman and various funded false think-tanks and false Lords.

As long as this false commercial rationality prevails, we will only have increased oil production, more oil wars, further oil and coal exploration and consequential accelerating increases in CO2 emissions.

The first step, is to reject concepts that oil is a commodity like any other, recognise it’s uniqueness as a fossil fuel, and remove it (and coal) from industry and politics. If the international community can ban genocide and slavery it can theoretically, control greater, scientifically proven, threats to humanity. This only has to occur within 10 or so major industrial economies.

Fossil fuels and the industrial system by which fossil carbon enters the atmosphere, need to be considered separately to commodities that do not increase atmospheric CO2.

The necessary steps to fix the climate have nothing to do with economics that lauds private interests and tries to determine every outcome by commodities and competition. Present economics can only conceive of eliminating CO2 if more efficient energy sources are found and so we get all sorts of Quixotic schemes and dreams that mislead public consciousness into thinking that alternatives exist. All through history, this ‘privatised’ system has always destroyed part of humanity – often on a massive scale. If nothing changes – it is entirely logical that this tendency accumulates within the political-economic social fabric even to the point where they destroy themselves and everyone else for that matter.

That is the real meaning of coal and oil.

Chris Warren:

“Present economics can only conceive of eliminating CO2 if more efficient energy sources are found and so we get all sorts of Quixotic schemes and dreams that mislead public consciousness into thinking that alternatives exist. All through history, this ‘privatised’ system has always destroyed part of humanity – often on a massive scale. If nothing changes – it is entirely logical that this tendency accumulates within the political-economic social fabric even to the point where they destroy themselves and everyone else for that matter.”

Very well put. Peter T is right. But, what Chris Warren points to here is also critical. The industrial revolution was never about a more efficient, market allocation of diverse resources; it was about waste on an enormous scale, and externalizing the costs onto those, who couldn’t fight back. It depended for its success on the timely exploitation of virgin lands and the large-scale use of fossil fuels.

The problem of peak oil in the era of climate change isn’t that we are going to run out, or that the price will soar to $400 a barrel any time soon. The problem is that we are not going to run out, and the price won’t soar to $400 a barrel any time soon. The problem is that the industrial system will drive us toward ever more destructive externalization of costs to keep the system of processing and distribution full and operating, rather than preparing sensibly for an industrial economy that uses a fraction of the energy we now consume. We will resist the rise in price, a rise that would cause the global economic system to sputter into crisis, and the actions we take to resist the rise in price, like poisoning the groundwater in frakking, or poisoning the Gulf of Mexico in deep-sea drilling, will be our undoing.

Our fanciful ideas about gee-whiz technology get in our way. In many ways, we should probably be planning an infrastructure of canals and railroads, which can sustain an economy of extensive specialization at much less energy cost than automobiles and trucks, and an agriculture that doesn’t strip-mine the topsoil for biofuels, but also produces much less meat and more vegetables.

John Q is making an useful point, when he suggests that the whole capital structure has to be renewed and reproduced, regardless, over the time periods we’re considering, of 30 or 40 years. So, replacing the whole capital infrastructure with a completely different architecture doesn’t have to represent a huge incremental cost, relative to a reproduction that will happen anyway. That, unfortunately, doesn’t highlight the very serious political and economic obstacles represented by the vesting of interest (and imagination) in continuing the profitable operation of the existing system, and those are the obstacles we will have to overcome, in ways that don’t sabotage the whole project.

The U.S., at least, has been disinvesting from its capital infrastructure for years, consuming the seed corn, so to speak, its high rates of consumption a driver for the global economy.

Never mind the requirements of climate change, just letting interest rates rise to “normal” levels, and resuming a steady-state rate of reinvestment would trigger a financial crisis and require war-crisis levels of public investment and direction of the economy. Talk about wrenching.

We’ll never know how western society would have developed if oil were still abundant, the global economy was still growing strongly, and the Middle East was insignificant. But it seems to me that a less mobile society is a more conservative one, with all that that means: more xenophobia, less rationality, less innovation, less social mobility, fewer and poorer public goods, and more insistence on conformity and respect for authoritah.

If there is an association between increased car travel and positive societal attributes like those named, it appears to be weak:

http://www.nationmaster.com/graph/tra_roa_pas_car_mil_pas_percap-million-passenger-km-per-capita

Maybe if we add in railways?

http://www.nationmaster.com/graph/tra_rai_pas_car_mil_pas_percap-million-passenger-km-per-capita

No, the magnitude is too small compared with automobiles, and the ordering still doesn’t look anything like “list of nations sorted by descending xenophobia and investment in public goods.”

JQ Writes,

I’m happy to say that this just shows Larry Summers isn’t as smart as he thinks he is. The calculation he derides is actually overly pessimistic, once you take account of the following points:

I’m looking forward to a John Quiggin article talking about how electricity is overrated – after all we could all just use candles. Sure, it would be an inconvenience, but still.

(1) For marginal uses of oil, the economic value is close to the current price, so the cost of not using oil, or using it more efficiently is about equal to the current value. That is, at the margin, the cost of reducing oil use is approximately zero

Given that the price of oil for marginal uses is almost completely determined by the, well, the price of oil in general, this is not even wrong.

And you compared rare earths with oil. Amazing!

Ajay #138: “4 per cent of GDP, that is, plus the cost of replacing all your oil-fired assets with LNG or renewable-electricity-powered assets. The entire vehicle fleet, almost the entire merchant marine and navy, large chunks of the petrochemical industry, and the entire civil and military air fleet, and the fuel handling infrastructure that serves them all.”

That may be the cost, but we cannot calculate the benefits. More jobs will be generated, for one thing. And that may generate incomes to afford the softer energy path. So you can’t know what the net is, but it may be a net benefit of much greater economic growth. (And that is before including the benefit of avoiding the cost of the environmental damage of climate change).

Calculations of the damage to the economy by weaning ourselves off oil and fossil fuels NEVER properly include the jobs and incomes to be generated in the switchover to a climate-friendly society, and the sorts of innovations spurred synergistically by starting along a different energy path. The reason why this is not included properly, is that such “dynamic” effects cannot be predicted precisely. Yet that is in the history of the human economy too. Many economists have been guilty of not mentioning this, from the beginning of the debate years ago. That is starting to change a little, but the phony spectre of economic disaster is still the primary animating motor of the denialists. It is often explicitly inserted into their diatribes.

As I tried to argue above, you cannot KNOW that a lower “quality of life” is necessary to prevent, say, uncontrolled climate change. This puts you at an emotional and rhetorical disadvantage in trying to formulate effective climate change policy. As counterarguments, for example, the eras of nano tech, materials science, and biotech are just beginning. We might find combinations of elements that allow us to greatly increase the efficiency of internal combustion engines, or of photovoltaics. We might engineer a microbe to suck in CO2 and turn itself into gasoline.

Forget the technical arguments and math calculations for a moment. The immediate problem is how to create change in a better direction. In pursuit of that, you put yourself at an extreme disadvantage rhetorically, and you put civilization in even greater danger, by arguing that it cannot be done unless everyone takes a big haircut.

The better way is to say that the climate (i.e. a climate-state that can support modern agricultural civilization) is much more fragile than the human economy, which is more resilient because it contains creative humans who figure out how to do things better. Not only is this far more likely to be the case — i.e., that the human economy is more resilient than the human-friendly state of the the climate — but it also puts us in the position of taking everybody optimistically into sorting-out the technological options in the future.

Not sure if I’m following closely enough, but why the jump between Larry Summer’s “80% of electricity” and “80% of oil?” I thought that one of John Quiggins’ points was that oil is interchangeable. Electricity is not. So, insofar as Summer’s comment can be taken at face value, I think he’s right – but eliminating 80% of electricity is entirely different from replacing oil (as John Quiggin notes in responding to ajay, above).

Huh?

Why would John Quiggin say:

learned to think clearly before making silly pronouncements about oil

when he claimed:

The prosaic reality is that oil is a commodity much like any other.

when the main reason that oil is not a commodity like any other is precisely because it is fossil.

Oils ain’t oils. Middle East oil have provided artificial comfort for American capitalism and, according to Joan Robinson, was one of the means American capitalism recovered from the 70’s slump.

As sugar, tobacco and cotton plantations were once the means of spreading capitalism, so too now do the oil sheiks help global capitalism spread its fists where ever it desires.

It would not surprise me if, on a PPP basis, oil reaches $400 in some Third World country in the near future.

These two aspects – fossil fuel, plus role within global capitalism – demonstrate that oil is one reason why humanity is being denied the right to enjoy a sustainable economy.

Oil – climate change – sustainable economy – all linked, at least for those who spurn simplistic approaches.

But it would be helpful if people learned to think clearly before making silly pronouncements about oil

Indeed, Prof. Quiggin, indeed. For example, using the fact that the (humongous and quite unique) SPR does its job as an argument for why oil is “a commodity much like any other” is an excellent example of an embarrassingly silly and unhelpful pronouncement based on sloppy thinking. (That’s the Katrina passage in your article, btw). The only virtue of that argument is that it has humoristic value.

It’s the “commodity like any other” that gives me pause. Like pork bellies? Cocoa? Plywood? If, as John Quiggin says, oil is like gas or metals or coal, and less important than food, then maybe it’s not just like “any commodity”. Because oil, coal and food are essentials, where cocoa and plywood are not. Calculations of the percentage of GDP any commodity occupies misses this. So, is oil more essential than, say, gas or coal? Well, any prolonged interruption in supply would certainly threaten the welfare of lots of people. Which is why oil supplies are a particular target in wars (along with electricity supply and coal transport). When Germany deprived occupied Europe of all but the most minimal supplies of oil and coal, economic activity dropped by a third or more and cities emptied as people moved closer to food.

Another clue is the current craze for tight oil. This is generally agreed to be economic to produce only if oil prices are above $70 a barrel. At the current $100, there would seem to be a tidy profit, except that the average well depletes in around 5 years (and the costs of impacts on water supplies, quakes and so on is no, of course, factored in). So much effort for so little gain at so much environmental damage would seem to indicate that the substance has something special about it. This something does not have to be economically calculable – it could relate to social structures. But seems hard to put the substance in the same bracket as just another commodity.

I suggest you be a little humbler when you are posting something that is bound to be exposed as nonsense. As I already pointed out, the road fleet turns over every 10 years or so, which means that your alleged addition to costs is unnecessary (leaving aside the fact that existing cars can be retrofitted for LNG at trivial cost). The other uses you mention could be addressed comfortably with 20 per cent of existing oil supplies.

According to the EIA, transportation represents only 66% of US oil burn, not 80%, which leaves 34% (not 20%) of existing non-transport oil consumption to service with 20% of existing oil supplies. Petrol stations do not turn over every 10 years or so. The US military is the largest single consumer of oil in the US, and military hardware does not turn over every 10 years or so, and much military hardware cannot be taken off oil at all – aircraft, for example. LNG-powered ships do exist – LNG tankers, mostly – but it would be extremely costly to refit existing ships to burn LNG. The tanker fleet does not turn over every 10 years or so, nor can a crude carrier be easily or economically refitted as an LNG carrier. Oil terminals cannot be easily refitted as LNG handling terminals – new terminals would need to be constructed to handle the vastly increased demand for LNG. Oil terminals also do not turn over every 10 years or so; neither do petrochemical plants.