The Great Oil Fallacy (repost)

by John Quiggin on January 1, 2014

Traditionally, in Australia at least, January is, or was, the time for reruns on TV. Keeping that tradition alive, I thought I would rerun some posts on topics that never seem to lose the interest of commenters. Interestingly, the discussion seems to change quite a bit from one posting to the next, though it rarely reaches a conclusion. Anyway, here’s one from last year, linking to a piece I published in The National Interest:

Update Probably worth reading the TNI article before commenting, as lots of points commonly made in comments are anticipated there.

The Great Oil Fallacy

That’s the headline for a piece I published in The National Interest last week. Opening paras

Among the unchallenged verities of U.S. politics, the most universally accepted is that of the crucial strategic and economic significance of oil, and particularly Middle Eastern oil. On the right, the need for oil is seen as justifying an expanded and assertive military posture, as well as the removal of restrictions on domestic drilling. On the left, U.S. foreign-policy is seen through the prism of “War for Oil,” while the specter of Peak Oil threatens to bring the whole system down in ruins.
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.

This piece expands on my earlier argument that the US has no national interest at stake in the Middle East, just a set of mutually inconsistent sectional interests and policy agendas. I don’t talk about climate change explicitly, but we’ll never have a sensible debate about climate change until oil is demystified.

{ 152 comments }

1

Bruce Wilder 01.01.14 at 7:38 pm

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.

2

ifthethunderdontgetya™³²®© 01.01.14 at 8:17 pm

Be that as it may, the administration of George W Bush was clearly dominated by oil industry interests, and acted accordingly, if not wisely.

I think we can enlarge that statement quite a bit by going back to Operation Ajax and including all subsequent administrations.
~

3

bob mcmanus 01.01.14 at 8:29 pm

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.

4

P O'Neill 01.01.14 at 10:08 pm

An interesting and seemingly unpaywalled WSJ article on the USA-China Gulf oil trade security angle.

5

Josh G. 01.01.14 at 10:54 pm

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.

6

PlutoniumKun 01.01.14 at 11:12 pm

I think there are three issues involved in underestimating the US national interest involved in Middle Eastern Oil:

1. Even if the US does not directly need Middle Eastern Oil, both allies and potential enemies in Europe and Asia do depend on it. If you control Middle Eastern Oil, you also have a stranglehold on most of Europe and Japan and increasingly China (as China’s domestic reserves are dwindling).

2. Related to the above, if the US were to withdraw from military engagement in the Middle East, then Europe (either collectively or as individual nations) and Japan would have little option but to try to fill the vacuum (realistically, nobody is going to sit back and assume the owners will trade it as a normal market product). This would inevitably result in these countries developing blue water navies and long range strike capabilities. This would threaten the US’s self proclaimed role as the ‘protector’ of those regions.

3. Unrelated to the above, it must be remembered that crude oil is not as fungible a product as is often assumed. You cannot replace one grade of oil with oil from another source without problems. Most refineries are designed to deal with specific grades of oil. It is not as easy to substitute oil from source A with source B if your refineries are designed to only cope with oil from source A. For this reason, long term trading arrangements are more important than most analysts assume.

7

SoU 01.02.14 at 2:05 am

@ 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.

8

aussie sunshine 01.02.14 at 2:08 am

“we’ll never have a sensible debate about climate change until oil is demystified.”

thats a good reason to do some demystification .It would help if we didnt act like we need to maximise growth either .

9

hix 01.02.14 at 2:14 am

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.

10

roy belmont 01.02.14 at 3:42 am

I’m actually afraid to use the singular html formatting for blockquotes here, because without the preview function, one just never knows exactly what’s going to happen.
From Rob Wile, Business Insider, March 29, 2013:
Ten years after the invasion of Baghdad, major American oil companies are staying away from investing in Iraq’s oil resources, McClatchy’s Sean Cockerham reports.
Instead, many of Iraq’s newest oil fields are now controlled by Chinese.
Iraq possesses the second-largest oil deposit in the world, in the West Qurna region. Forbes says the country could easily become the second-largest oil producer in the world after Saudi Arabia.[...] one third of all future Iraqi oil production is expected to come from Chinese-owned fields.[...]This does not mean the U.S. is not receiving zero oil from Iraq. We still import more than 173 million barrels of oil from there a year.
But that’s actually not all that much — about 4.4 percent of our entire import base, according to EIA data.

Not an economist, not a poli-sci whiz, but I remember over and over the second-layer cynicism pegging Bush’s invasion and occupation as a “war for oil”. As opposed to stated aims of democracy etc.
The article says straightforwardly that the big US oil guys are hanging back because the country’s “too unstable”.
But wait. The invasion! The occupation! Blackwater!
So, wtf? Serious question.

11

roy belmont 01.02.14 at 3:45 am

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.

12

Tim Chambers 01.02.14 at 3:58 am

Much of what China needs that oil for is to supply energy to American multinationals doing all their production there.

13

Bruce Wilder 01.02.14 at 4:34 am

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.

14

Chris Warren 01.02.14 at 7:10 am

Ye gods… can’t anyone save us from this “econorat” nonsense.

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.

While capitalists like to see things in such terms, society has different fundamental considerations.

Fossil fuels are not, morally, ethically, or humanely ‘commodities much like any other’. Fossil fuels are commodities akin to tobacco, alcohol, and heroin. They create a short-term fix at the cost of long-term catastrophe. Fossil fuels can be monopolised to a greater degree than other commodities such as food.

As Keynes said – in the long run we are all dead – so why do some, like Quiggin, want to cheer the process on?

Now that CO2 is over 400ppm, our economists need to reoriente themselves quick smart or else be thrown onto the scrap heap of history with all their Ptolmaic fellows.

We need specific policies to target fossil fuels, and to counter the anti-climate advantage some states (such as the US) obtain from essentially the corruptioin they have engendered in the Middle East and Gulf States. If oil is “a commodity much like any other” why did the US provoke Iraq and kiss and cuddle with the Shah of Iran in the 70′s and with Saudi Arabia today?

15

Ed Herdman 01.02.14 at 9:26 am

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.

16

sanbikinoraion 01.02.14 at 12:26 pm

Re: the preview function – if any of the owners of CT wish, I will happily implement such a function here, at no cost. Drop me a line if you are interested.

17

bianca steele 01.02.14 at 3:14 pm

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.)

18

mpowell 01.02.14 at 4:13 pm

Your argument seems to be that since the US doesn’t import a ton of oil from the ME, it doesn’t matter that much. And since it only accounts for 4% of GDP, it’s not a big deal. You already know that the percentage of oil the US imports from the ME is almost totally irrelevant. The far more relevant number is ME oil production as a percentage of global total. The other question is how does 4% of GDP compare to other commodities if we are supposed to believe that oil is just another commodity? You have trotted out this line of argument in the past and you have always relied on the same illegitimate arguments. I don’t understand why. There is plenty to critique in US ME policy without using bogus arguments to attempt the very unlikely to succeed play of convincing people that oil is not very important.

19

TM 01.02.14 at 5:12 pm

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.

20

Bruce Wilder 01.02.14 at 5:21 pm

there is no simple way to fix that by swearing off easy energy now

There’s apparently no “simple way to fix things”, be nice about it, and make “nice” stick as policy.

Speaking personally, I want policy to be “nice”: humane and egalitarian and far-sighted and wise. It is a common sentiment. I daresay it is the unspoken assumption behind much of common economic analysis, from right and left. Fatuous critics of conventional economics sometimes attack the assumption of rationality, but, really, it is the assumption of “niceness” that causes the most serious deceptions, including self-deceptions.

But, lots of people are not “nice” — maybe everyone in some times and circumstances; “nice” is neither a reliable personal quality nor a tribal identifier, and it requires social support. People with power are especially likely to be “not nice”, and to feel that responsibility and necessity require them to be “not nice”, or license them to be “not nice”. “Nice” requires self-restraint, and self-restraint has a way of obscuring “simple fixes”, while “not nice” often seems to identify simple fixes by the dozen. Also, self-restraint can be experienced by Power as impotence and frustration.

American foreign policy is an arena in which the “not nice” are given unusual scope and justification. Maybe “unusual” is an exaggeration, since economic policy in general has been giving increasing scope to “not nice”, though still dressing “not nice” in the robes of hypocrisy, aka neoliberal rhetoric.

This is where it gets confusing: “nice” wants simple fixes, too, and “nice”, to be effective in enforcing the restraint which is the supporting edifice of “nice”, has to do some, arguably, “not nice” things — to be “tough” in common parlance. More precisely, “nice” needs enlightened righteousness.

“Tough” can be the form without the substance, a convenient excuse for “not nice”, when “not nice” has rejected enlightenment and tired of righteousness, but still wants what it wants. “Not nice” rarely does us the favor of entirely dispensing with the rhetoric of enlightened righteousness, even when it has ditched intelligence and abandoned justice, entirely. Demagogues will use fear to motivate stupidity and cruelty, but still claim to champion of the Good of the People and the commonwealth.

Righteousness is, apparently, in short supply, in the twilight of Empire. The previous Administration’s policy was a series of war crimes, from torture to aggressive war. Any of them in jail? We’re staggering through an economic depression without that name, caused in large part by massive financial fraud, which the present Administration refuses to prosecute, settling for cost-of-doing-business-fines, paid from the ill-gotten proceeds. In Europe, the dream of European Union has come down to destroying the economies of select members (and by swinging the Eurozone strongly to surplus, apparently hapless non-members as well).

I read Chris Warren’s “fundamentalism” about oil as addictive to be a sensible attempt to get some enlightened righteousness into motion.

Quiggin is a more puzzling case. He sometimes seems to think that if he adopts a morally justified pose, he doesn’t have to know any of the details of the case: righteousness as a strategy for economizing on information. Or, that conflict will just go away, if only people can be brought to see the destructive irrationality of fighting. “Oil is just a commodity like any other” — all a big misunderstanding; not that important — seems like an odd, and unlikely gambit to me, but in a Quiggin tradition of sorts.

That American foreign policy in the Middle East is ill-advised and destructive seems like a given to me. It has some elements of “nice” — some “good intentions” welded onto the rhetorical shell, mostly, but also some elements, which go tellingly wrong in the execution, like the billions wasted on corrupt and ineffective programs for Iraqi reconstruction.

A “nice” policy would have been trying to do something about the development of Egypt, Iraq, Iran, Afganistan, Syria, Pakistan, Saudi Arabia, etc. Do something positive to aid the development of institutions and infrastructure, which would move these countries away from an economics of ruthless extraction and mass poverty. But, we can’t do that, because we are undone by our own (our elites’) demagoguery and corruption. So, we end up with fear and cruelty.

21

Ronan(rf) 01.02.14 at 5:21 pm

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.

22

Z 01.02.14 at 7:24 pm

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

Exactly! What I found was missing from your analysis John is that The US is interested in the Middle East not because it is chockfull of oil but because it is chockfull of rich autocracies. Likewise for France and its former colonial empire and, for the most part, for any powerful country and resource-rich much weaker countries. It doesn’t make any economic or strategic sense, but it allows thugs in the powerful country to get access to a lot of cash. The selling of high-tech military equipment (especially fighter jets) to middle-eastern autocracies is a prime example (just look up how many fighter jets the Saudi Air Force signed for since 2007; hell, just read the whole Wikipedia article on the RSAF ).

23

roy belmont 01.02.14 at 7:30 pm

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.

24

TM 01.02.14 at 8:56 pm

“Fatuous critics of conventional economics sometimes attack the assumption of rationality, but, really, it is the assumption of “niceness” that causes the most serious deceptions, including self-deceptions.”

I assume you are responding to me (I did attack the assumption of rationality) but I’m not sure what to make of your long post. I do make a difference between rationality and niceness. For example, Nazi policies obviously fall in the category of not-niceness but they also on the whole were not rational in the sense of furthering Germany’s political and economic interests. Similarly, when I say that the US for example doesn’t follow a rational energy policy, I am not trying to call an immoral policy irrational. I really mean to say that this policy is in important respects irrational – and may also be immoral but that’s a separate point that I chose not to make.

25

Ed Herdman 01.02.14 at 9:42 pm

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).

26

Bruce Wilder 01.02.14 at 9:47 pm

TM @ 23

I was not specifically targeting your comment — I was in the act of composition when you posted, and did not see your comment until later. I dare say we were both picking up a latent theme in the original post.

Nice is often the rational, long-term policy, and not-nice, self-destructive in the long-term. For our own survival, we have to make it that way; we have to make sure not-nice proves to be self-destructive, or we will be ruled by some very cruel, greedy rationalists. That’s where righteousness comes into it.

27

TM 01.02.14 at 10:32 pm

“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?

28

TM 01.02.14 at 10:38 pm

Btw (in case anybody misread this) I don’t suggest there is no rationality at all in energy policy. It’s way more complicated than that. I’m suggesting we can’t understand it under pure rationality assumptions. Sure there are always tradeoffs but it seems that some tradeoffs are more palatable than others to those in power, and the criteria by which they make those choices are not mainly rational ones. Also, I won’t waste space repeating Monbiot’s argument here, just read the article, it’s worth it.

29

Mario 01.02.14 at 10:46 pm

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.

30

Chris Warren 01.02.14 at 11:01 pm

Who is proposing:

shutting down hydrocarbons entirely

See: Here

So much consideration is jeopardised by such cartoons.

Hydrocarbons are not the problem. The problem is fossil fuels and only because they increase atmospheric CO2 to the point where, scientists have shown, catastrophe looms. We only need to get the carbon cycle into a sustainable balance.

Hydrocarbons from biofuel cause no net increase in atmospheric CO2.

In any case the issue may well be lost as our lazy economists and suborned politicians (and media) have not shown the capacity to take climate change seriously and we are now looking at around 4 degrees C rise for our grandchildren to suffer. See: archive.is/mV3wv.

They will spit on our graves.

31

Chris Warren 01.02.14 at 11:03 pm

32

Ed Herdman 01.02.14 at 11:24 pm

TM @ #27

Good catch.

Chris Warren @ #30:

Heartily agree with this stipulation as well. Unfortunately, from many comments being made about energy policy, it seems as if many people in favor of ramping down hydrocarbons don’t have a clear-eyed view of how the costs add up, and the nuance is lost in many of the comments. Even with your stipulation, we have the considerable challenge of trying to sell a policy which would cost a considerable amount today – bad enough in normal times when the President doesn’t get accused of “picking favorites” when he favors segments of the market, and more government leadership has been taken off the table not only here but elsewhere around the parts of the world seemingly best situated to deal with it.

I am not sure what the answer is but it surely involves recasting the challenge not just as the moral challenge of our time (as some put it) but as a growth industry. Unfortunately businesses related to oil and industry can simply point to price as the only significant element, keeping up the charade that the pump price captures all the costs that we care about (even though this is obviously false).

33

Matt 01.02.14 at 11:31 pm

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.

34

Plume 01.02.14 at 11:45 pm

In reality we’re living in a state of extreme delusion. First, that we can continue pumping pollution into the ground, air and sea at current or even reduced rates. The earth simply can’t handle it much longer. Rather, its ability to sustain life will go full tilt.

Already, the World Wildlife Fund estimates that by 2030, we will need two entire earths to support existing demand for resources. The same report says that if the world lived like average Americans, we’d need four entire earths.

America leads the world in the production of pollution and waste. It is up to us to do whatever we can to massively reduce that. It’s not just Climate Change. It’s all the effects of pollution on species life, eco-systems, etc. etc.

Second: Capitalism itself demands ever increasing amounts of consumption, which produces ever increasing amounts of pollution and waste. It it simply not sustainable, and if we think we can stick with it, we’re crazy and just fooling ourselves. Its core aim is incompatible with the survival of the planet — at least insofar as it can sustain present life forms. Everything it seeks to do runs directly into conflict with a healthy planet.

And, yes, for sure. The planet will still be around. We can’t “kill it” per se. But we can kill off its lifeforms, including ourselves.

Technology isn’t sufficient to fix this, though we do need to find as many new green technologies as possible to replace fossil based, etc. But the facts tell us we are going to have to go beyond mere green tech and roll back (and radically downsize) our life-print — not just carbon. And we should do this now, voluntarily, before the Earth makes us do it.

Some day, people will realize that ecosocialists and others in the Green Left aren’t “fringe” and had it right all along. Some day, if we survive, people will look back and wonder what took us so long to wake up, fight against capitalist, conservative, reactionary idiocy, plus center-left caution and accommodation. If we survive.

35

floopmeister 01.03.14 at 12:08 am

‘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.

36

floopmeister 01.03.14 at 12:10 am

Whoops typo: should have said “it’s the driver of complexity in complex systems” (Prigogine wasn’t talking about social or technological applications – but they follow from his work).

37

john c. halasz 01.03.14 at 12:20 am

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

Gott im Himmel!

38

Bruce Wilder 01.03.14 at 12:51 am

Matt @ 33: Is this really true?

I wasn’t really thinking that thugs in government make resource extraction more efficient — that seems like an obdurate reading to me. I was thinking more along the lines of the widely discussed, “resource curse”, corrupting politics and institutions of government.

39

Chris Warren 01.03.14 at 1:04 am

floopmeister

‘Exponential Economist Meets Finite Physicist

It may be simpler than you think:

Finite physicist “1 + 1 = 2″

Exponential economist “1 + 1 = 3″

40

floopmeister 01.03.14 at 1:12 am

Exponential economist “1 + 1 = 3″

LOL!

Is that what Einstein was on about when he described compound interest as the most powerful force in the universe?

41

Matt 01.03.14 at 1:16 am

‘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.

42

Matt 01.03.14 at 1:22 am

I wasn’t really thinking that thugs in government make resource extraction more efficient — that seems like an obdurate reading to me. I was thinking more along the lines of the widely discussed, “resource curse”, corrupting politics and institutions of government.

Yes, I know the “resource curse” idea, but again it seems a theory that gallops ahead of the evidence. These don’t look like lists of countries ordered by decreasing thuggishness of government:

https://en.wikipedia.org/wiki/List_of_countries_by_proven_oil_reserves
https://en.wikipedia.org/wiki/List_of_countries_by_oil_production

43

Ronan(rf) 01.03.14 at 1:37 am

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)

44

MPAVictoria 01.03.14 at 1:38 am

“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.”

Here, here! I love cars and I still support much higher fuel taxes. They will encourage people to drive less and to purchase smaller more fuel efficient vehicles. This means there will be less traffic on the road getting in my way.
/Plus some positive environmental effects as well which are also nice.

45

john c. halasz 01.03.14 at 1:44 am

“(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

Bruce Wilder 01.03.14 at 2:01 am

What was the name of the Saudi who expressed the wish that they’d discovered water?

47

john c. halasz 01.03.14 at 2:03 am

@46:

“Redacted”.

48

floopmeister 01.03.14 at 2:16 am

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).

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.

49

floopmeister 01.03.14 at 2:19 am

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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50

Ronan(rf) 01.03.14 at 2:20 am

@44

Afaik Saudi Arabia hasn’t had a foreign policy comparable to that of Iraq or Libya – the Saudi’s are a status quo power who will use proxies regionally and force domestically (and as they’ve shown in neighbouring Gulf states) but haven’t instigated wars at the same level as the revolutionary states.

51

Ronan(rf) 01.03.14 at 2:27 am

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

52

Chaz 01.03.14 at 2:40 am

From what I can tell the Saudi government is hopelessly disorganized. They are basically a feudal state. They have no codified laws in most areas; judges make ad hoc extrapolations from the original text of the Koran. All of their revenue is from oil. All of their manufactured goods are imported, almost all domestic labor is done by noncitizens. Their military is equipped and trained entirely by the West. It has no combat experience. I don’t know for sure, but I very strongly suspect that their military is totally disorganized and incompetent. They spend tons of money on it but it has no real capability. If they ever tried to use it against, say, Iran, they’d be more embarrassed than Egypt in 1967. In reality they rely on the US for military protection, and before the US it was Britain.

So they don’t run around on military adventures because they’d lose, and they’d piss of their patrons. Also they don’t have much to gain. But they do try to throw their weight around with their money, especially recently. They are lavishly funding a fundamentalist Muslim rebel group in Syria with the goal of defeating both the Free Syrian Army and Assad and taking over the country. They also dominate the neighboring Gulf monarchies, which have most of the same organizational failings of SA and look to SA for some of the services SA receives from the USA. Saudi Arabia sent soldiers to kill protesters in Bahrain, for example.

53

Plume 01.03.14 at 2:42 am

@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.

54

john c. halasz 01.03.14 at 2:42 am

@50-51:

“Revolutionary” or “status quo”, you might as well admit that the Saudi Bourbons are a fairly malignant reactionary “power”, who have been promulgating their state religion, Wahabism, (which isn’t the same quite as “Salafism”, and is far from “normative” Sunni Islam), for generations now, to globally deleterious effect. Which might just be something that IR specialists are trained to ignore.

55

P O'Neill 01.03.14 at 2:46 am

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

56

Ronan(rf) 01.03.14 at 2:48 am

Well I’m not a specialist in anything – here just a layman with a passing interest so have been trained to ignore nought !
Look, I’m not holding any water for the Saudi regime – which I think is an abomination and one of the major obstacles to reform regionally. I look forward to the destruction of the House of Saud etc etc
I’m just saying this is a relatively interesting argument about why certain regimes were more likely to be violent than others.

57

Rev Du Rite 01.03.14 at 3:00 am

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.

58

MPAVictoria 01.03.14 at 3:16 am

“I can’t think of a single war in the last 200 years, with the exception of WWII, that was defensible.”

Korea? Maybe Kosvo and the first Gulf War?
/emphasis on the maybe.

59

Matt 01.03.14 at 3:21 am

@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.

60

floopmeister 01.03.14 at 3:21 am

“I can’t think of a single war in the last 200 years, with the exception of WWII, that was defensible.”

The War On Christmas?

61

floopmeister 01.03.14 at 3:36 am

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.

62

Plume 01.03.14 at 4:14 am

MPAV,

Our involvement in Korea resulted in 2-4 million civilians deaths. In Vietnam, it was roughly 3 million. America, through technological “innovation,” radically increased civilian death tolls when it went to war. It worked to also increase “kill rates” as it went along, trying to make our soldiers more “productive” like our factories.

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. American military leaders didn’t like that, so they worked hard to increase those numbers. By the time we hit Vietnam, the “efficiency” of our soldiers was world-class.

Dave Grossman wrote an important book on the subject:

http://www.barnesandnoble.com/w/on-killing-dave-grossman/1101952207?ean=9780316040938

But, back to Korea. It was a civil war, and none of our business. It was made far worse by our intrusion, with those civilian casualties reaching millions, instead of a fraction as much if we had stayed home. By turning “communism” into the catch-all excuse for endless war to expand capitalism, we managed to turn a battle into nearly another world war. And again in Vietnam.

We had a chance to prevent the First Gulf War from ever happening. Hussein was our ally at the time and he would have listened to our “No.” He thought we said, “Go ahead, attack Kuwait, we couldn’t care less” . . . . and he did. Then we bombed his country into the stone age and placed sanctions on his nation that killed children by the tens of thousands, but not Hussein.

The second go round was also obviously unnecessary and completely unconscionable. We even had a deal on the table to get Hussein out of the country, but Bush refused to take it. No bloodshed, Hussein kicked out, but Bush and the powers that be wouldn’t do it. They had to attack.

Oil. Profits. Capitalism. They’re always going to come first before the lives and quality of life for the vast majority of the world.

63

Lee A. Arnold 01.03.14 at 4:38 am

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.

64

hix 01.03.14 at 4:49 am

At current high levels, costs of transtion to oil use, say in line with local production should be rather cheap. Im sorry, i just fail to see a decrease in lifing standard by driving an Auris instead of a SUV. Or if we are strictly speaking of oil subsitutes, an SUV fueled by CNG.

65

Ed Herdman 01.03.14 at 5:17 am

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.

66

Lee A. Arnold 01.03.14 at 7:18 am

What is the “usefully accurate and precise model of technological improvements”? What are the “definite limits on progress”? We need actual formulations of our predicament.

67

Peter T 01.03.14 at 8:03 am

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.

68

Charles Peterson 01.03.14 at 8:04 am

Regardless of all the great comments 1-22 above, I think few here would dispute that the idea that US policy in the middle east is wrong, and that’s because it’s not rationally useful for our individual or larger interests (as the post claims), as it may be for only a slice of elites and their top managers who have rigged the game for themselves. So it seems to me all the comments above already assume what Quiggin says at some level is true. I’d add we ought to scrap the whole oil protection racket and put it all toward our 100% effort at efficiency and renewable energy, the quicker the transition the better the future will be. That path is all benefit to society, the higher initial costs mean higher employment and wages, and the only losers are rentiers and thugs, but that would require a global revolution or something, as we live in global thugocracy run mainly by the grand thugs of the USA, and oil is just another of their dangerous and addictive substances.

69

Bruce Wilder 01.03.14 at 10:26 am

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.

70

Chris Warren 01.03.14 at 10:41 am

Charles Peterson

Could you be a bit more specific.

John Quiggin is a mainstream economist NOT trained in political economy, hence his erroneous statements representing oil as a commodity like any other. Economically this may be true, but socially, morally, politically, this is false.

The level at which your quip applies viz: “Quiggin says at some level is true”; is not relevant to world affairs and the interests of humanity. Humanity needs different and better truths.

It appears to me that Quiggin is a relatively a rightwing economist, compared to the more radical positions being promoted by, for example, John Langmore. Quiggin is forced into this predicament by his level of understanding – in other words, its breadth, not the level of his understanding within his narrow “economic” compass. His narrowness produced his statement.

This is not unique to Quiggin. It is common to all ‘economic’ commentators who chime in with supposed economic analysis of social justice and industrial development, usually derived from Keynesian rootstock.

It is all rather interesting. Is Langmore the only centre-left economist calling for spreading a Tobin tax? See;

http://archive.is/Eyijy

It is capitalist ‘economics’ that is the problem, Quiggin is just an example.

71

Pete 01.03.14 at 11:57 am

Calling John Quiggin a rightwing economist is ridiculous.

72

soru 01.03.14 at 12:08 pm

Personally, I find the beliefs:

1. ‘killing people and taking their stuff is necessary for US prosperity’

2. ‘killing people and taking their stuff is inherent in capitalism, or perhaps civilisation in general’

pretty much functionally equivalant, no matter their distance in theory. It seems like it would be pretty hard to find an example of a plausible situation in which belief #2 would cause someone to take an action different from that of a holder of belief #1.

The thng more likely to change behavior is not some heroic moral abstention from the action that necessity dictates, but the simple idea that necessity is not actually what you were told it was.

73

Chris Warren 01.03.14 at 12:51 pm

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.

74

mattski 01.03.14 at 1:47 pm

@ 73

If you don’t want to be interpreted as saying that Quiggin is a relatively rightwing economist then don’t say that Quiggin is a relatively rightwing economist.

And what exactly is the usefulness of such a construction anyway?

75

Lee A. Arnold 01.03.14 at 3:20 pm

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

76

Plume 01.03.14 at 8:03 pm

Bruce Wilder,

Grossman’s book put the estimate at 15-20% of soldiers in WWI actually shooting to kill other human beings.

That means “most” did not. Obviously.

His studies, and the studies of many others, show the absolute reluctance of soldiers to actually kill other human beings, and the likelihood that they would shoot and miss on purpose.

Until they were thoroughly “reeducated” to get over that unconscious or conscious taboo. The US led the way in that indoctrination, though it was, of course, far from being alone.

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John Quiggin 01.03.14 at 9:11 pm

” Is Langmore the only centre-left economist calling for spreading a Tobin tax? “

Umm, would that be the John Langmore with whom I wrote “Work for All’, and with whom I have regularly collaborated on calls for a Tobin tax. Or did you not even bother with Google before writing this?

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John Quiggin 01.03.14 at 9:28 pm

““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””

As regards the replacement of oil in most uses, it’s already happened. Between 1970 and 2000, oil virtually disappeared in uses like electricity generation and space heating in which it was previously dominant.

You’re conflating “oil” with “fossil fuels” here, I think. Even so, the costs of replacing fossil fuels are of the order of 5 per cent of national income and the changes will be things like reconfiguring the electricity grid and the associated pricing system – a big deal but not what is brought to mind by “huge social and cultural changes”

Obviously, a continuation of the current trend to less driving is part of the story. Again, that’s a big deal, but I suspect that if someone were asked to list the top 5 cultural and social changes of the last decade it would not make the list.

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Chris Warren 01.03.14 at 9:54 pm

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.

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Plume 01.03.14 at 10:02 pm

I’ve read his excellent Zombie Economics, and many of his posts here. I’d place Mr. Quiggin a bit to the left of American liberals, basically in the social democratic camp. Tony Judt fit there as well. Though he had more “radical” beginning.

There is a lot of real estate to the left of Mr. Quiggin. But I’d guess he’s solidly center left.

Of course, American liberals are to the right of their peers in Europe and Asia, generally speaking. Some might even say that American liberals are like “conservatives” overseas. And that American liberals seem to have shifted to the right over the last three decades.

That said, Mr. Quiggin would comfortably fit in with New Deal American liberals, I’m guessing. And they, basically, in their time (30s, 40s, 50s, early 60s), were moderates between far left and right.

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Chris Warren 01.03.14 at 10:23 pm

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.

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Chris Warren 01.03.14 at 11:03 pm

Plume

That is about right.

“Centre-left” is associated with welfare-state capitalism, and various fiscal and monetary schemes to counter the boom-bust cycle.

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Plume 01.03.14 at 11:41 pm

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.

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Ed Herdman 01.04.14 at 12:05 am

#66: Technological models change depending on what kind of technology you are talking about – hence my emphasis on rethinking the problem and looking for solutions that aren’t techno-messianic. I get what you’re saying about there being some degree of unpredictability, but this is easily overstated. In the realm of computing, for example, gains in raw processing power (that is economical to produce) don’t stray far away from the formula of doubling every 11 months, so we have decades of experience in just that area that belies any claim that it’s not usefully predictable.

So far nobody has been able to come up with a way to get negentropy or FTL signalling – despite many years of concerted effort. That very clearly represents a hard limit on growth (you can put it in terms of efficiency if you like). You can pin your hopes on this being defeated, but that would be naive in the extreme, IMO.

My main point vis-a-vis your comments is that however much you think the other side is exaggerated, it’s too easy to try to say “technology can do everything” and exaggerate the other side as well.

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Chris Warren 01.04.14 at 12:56 am

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.

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mattski 01.04.14 at 1:11 am

@ 79

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

I see. That about covers it doesn’t it? So your previous characterization was quite illuminating. (I asked you of what but you let that one slide by.)

I was also impressed with the way you handled Quiggin and the Tobin Tax. (OK, kidding.)

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Carlos Ave 01.04.14 at 1:16 am

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.

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Ronan(rf) 01.04.14 at 1:37 am

“So, wtf? Serious question.”

Well US companies made money from the war, and even now in the Iraqi oil industry as contractors afaik. (Building/maintaining the capacity to extract oil etc)
I guess if you wanted to build an oil based explanation you could offer basic incompetence, that US elites expected a future Iraqi regime to be more compliant .. Or argue that since the global oil system is now so integrated (I assume) it was about opening Iraqi oil fields to investment, so by who doesn’t matter .. Or that US interests changed when domestic energy resources were found (though I dont know if the time scale matches)
Oil doesnt look (to me) like an overly convincing explanation, id still take the neo-cons at their word as the main reason, but who knows ..

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Ronan(rf) 01.04.14 at 1:56 am

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

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

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Lee A. Arnold 01.04.14 at 2:01 am

Ed Herdman #84: “however much you think the other side is exaggerated”

I don’t disagree with the reality, only the expression of it. My main point is that it doesn’t work psychologically for everybody. Yet we have to get everybody on board. You are putting statistical results in opposition to other statistical results, with an additional claim that you yourself know what is going on. That is no way to win an argument, certainly not a political one. ALL sides of this argument are wrong, for purposes of doing what needs to be done.

Look at each side: Climate realists wrong-foot themselves by relying upon statistical results to predict disaster, because that discussion becomes open-ended. Climate denialists are wrong to take advantage of climatology’s reliance on statistics, to argue (in opposition) that we need firmer data before proceeding with mitigation, because their argument leaves out the possibility of unpredictable tipping-points and complex cascades of catastrophes. Technology optimists are wrong to argue that we will solve our problems. Technology pessimists are wrong to argue that we cannot solve our problems. Economics pessimists are wrong to argue that climate mitigation must require economic damage.

I think the better approach is to say that we don’t need statistics: the climate system will go into wild gyrations, because that is what complex systems do, when forced. Just stuff yourself with candy and see what happens. Forget the statistics. Because we are not going to be able to predict it exactly. But it is going to be bad.

And on the other side, we need not fear whether the economy can withstand the effects of CO2 mitigation, or withstand the effects ofrewducing fossil-fuel use. That is because the economy is composed of creative actors, and therefore, the economy is far more human-friendly than the climate is.

The number of possible Earth-climate-states which are also human-civ-friendly, may be few.

If everything is uncertain, and if the denialists are so adept at exploiting uncertainty, then fight fire with fire. We know that complex systems go haywire when forced: nothing uncertain about it, except the exact timetable. And we know that individuals are creative — indeed conservatives as well as liberals insist upon it — and that makes the human economy strong and resilient, despite inner constraints.

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Ed Herdman 01.04.14 at 6:41 am

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.

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Plume 01.04.14 at 7:10 am

The key to Climate Change policy is its Pascal’s Wager aspect.

As in, if we listen to the consensus that tells us it’s a catastrophe in the making, go full out to stop polluting, reduce our waste, our carbon footprint, etc. etc. . . . and it turns out to have been all wrong as prophecy . . . where are we? We have a MUCH healthier planet, with thriving species life, we live longer, healthier lives, we have far more planet diversity, cleaner, safer water, skies, land, etc. etc.

The downside is a far greater “home” for everyone.

However, if we do nothing, ignore the Climate Consensus, bow to corporate interests fighting to keep their cash cows, low taxes and deregulation, and to right-wing maniacs who believe their god would never let it happen . . . . and the catastrophe becomes reality?

Do nothing, risk the end of human life and many other life forms. Do enough to stave it off, and even if it turns out to be one of those “whoops, my bad!” . . . . the worst you get is a more beautiful, verdant, safer, healthier planet.

Actually, it’s not really even a Pascal’s Wager. It’s a slam dunk decision.

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Ed Herdman 01.04.14 at 7:15 am

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.

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Collin Street 01.04.14 at 10:17 am

“Rich bastards making decisions about climate policy” is a pretty classic moral-hazard situation, no?

Fixing moral hazard’s pretty straightforward. All we have to do is make sure that the people making the decisions share the bad outcomes if the decisions go badly, and make sure they know this, so that when they do make the decisions they’re thinking from the perspective of someone subject to possible bad outcomes.

So… who’s going to bell the cat?

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Bruce Wilder 01.04.14 at 7:49 pm

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.

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Bruce Wilder 01.04.14 at 8:48 pm

Collin Street: “Rich bastards making decisions about climate policy”

Earnest lucubration over the problems of climate change, peak oil and ecological collapse is subject to the “niceness” constraint that I referenced in an earlier comment. We’d like political solidarity to motivate a socialist solution, fair to all: we’re all in lifeboat earth together, and we must cooperate in bailing and paddling. Unfortunately, the folks in charge are in charge, because they know the value of throwing some of us overboard. And, who can say for sure that they’re wrong?

Our macroeconomic problems — and the austerity prescribed from above — are already throwing a few percent overboard. The rich are unimaginably rich today because they are disinvesting, and as the capital stock shrinks (and as the natural resource stocks shrink, as well), they will throw more and more people overboard, out of a job, out of the 1st world economy. The upheavals in the middle east are, arguably, about great masses of people shoved to the edge of starvation and hopelessness, within sight of a highly visible one world culture of extravagant, televised abundance.

While we earnestly imagine a transformation of civilization to adapt to the limits to growth, a rapacious elite, under the guidance of the likes of Larry Summers or Richard Cheney will shape a very different future. They will adapt to climate change, peak oil and the rest. It just won’t be pretty.

Among people actively thinking about these problems threatening civilization, and not just titillating themselves with concepts for Hollywood disaster epics, a popular deus-ex-machina is technological progress so stupefyingly extravagant that it relieves us from having to make any of those “tough choices” — we don’t have to worry, say, about the temptations of “cheap” oil or coal, because solar’s costs will be, magically, cheaper still, totally dominating the fossil fuels.

I’m not one, who credits the Tyler Cowen thesis of slowing rates of technological innovation; I think the rate of scientific and technological advance continues to accelerate, as it has, broadly, over the whole of the last 10,000 years. I just think that rapid, broadening advance is as likely to sink lifeboat earth as it is, to patch the leaks. With the population we have, and the level of resource utilization in production, the time horizon on recognizing and coping with the problems our technology creates has shortened beneath the reaction time of the political process. As a pilot about to crash might realize too late, we are in danger of getting “behind the plane”, and in the coming panic — and there will be panic at some point in the next 15 years or so — it is quite possible that critical responses will just tend to drive faster toward the cliff — not over it so much as into it.

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Plume 01.04.14 at 9:11 pm

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.

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Bruce Wilder 01.04.14 at 10:16 pm

Graeber’s essay is stimulating, despite the moronic approach to technological change, which is its rhetorical hook. Seeing, “where are the Klaatu-style killer robots shooting death rays from their eyes?”, posed as a rhetorical question is amusing, though.

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roy belmont 01.04.14 at 10:47 pm

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.

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Plume 01.04.14 at 10:48 pm

Aside from neoliberalism more generally, I think the single biggest obstacle in the way of technological change is the bizarre belief, held primarily by conservatives, that government can not create jobs, innovate, etc. To refine that belief still further. Conservatives seem to believe that money spent by government disappears, and that money spent by private sector enterprise, in the sainted “free market,” not only creates everything that is good and holy in this world, it magically doubles, triples, quadruples (and more), and is both in the consumer’s pocket and the business owner’s at the same time.

As in, when they talk about government spending, they see money leaving their pockets and disappearing forever, without result. But when they talk about Adam Smith’s udopia, they imply that business money doesn’t come from some place else, it was always already in the hands of business from the getgo.

In reality, there is no difference (essentially) between tax dollars leaving your pocket to go to DC, and consumer dollars leaving your pocket to lodge in a CEO’s fat wallet — aside from what you get in return. In both cases, it’s “other people’s money” and it can’t reside in two places at the same time. In both cases, we exchange money for goods and services. In the case of public expenditure, obviously the money doesn’t disappear. It works its way through our one and only economy in the same way as consumer dollars and/or we get roads, bridges, libraries, museums, schools, etc etc. It, in fact, becomes consumer dollars via many sources. Not to mention government lending money, guaranteeing loans for business, doing R and D, directly hiring businesses, buying their products, etc. etc.

This foolishness, this truly asinine belief, prevents us from utilizing the public sector to its fullest. The public sector, in fact, can do everything a private business can do, and for much, much less — at a far lower cost for consumers, too. It doesn’t have to pay exorbitant salaries to execs or make profits. It doesn’t need to pay out shareholder dividends, hire marketing agencies, tax attorneys, ad agencies, etc. etc. It has what it needs in house already, and the ratio of top to bottom salary is roughly 5-1, as opposed to 500 to 1.

The conservative battle cry is Get government off the backs of business, and it will roar!! It reality, we need to get business off the back of the public sector. If it were truly free to do what is best for people, if it were truly structured and operated democratically, it could create more jobs than we knew what to do with, put the economy on turbocharge, and create products and services that actually benefited humankind and the earth, for once. If the public sector were not in the thrall of corporate interests and the 0.01%, we’d have the potential for Atlantis on this side of the Atlantic.

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Andrew F. 01.05.14 at 12:18 am

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

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Rev Du Rite 01.05.14 at 3:07 am

Thanks, Andrew, for some numbers.

In the most recent issue of SciAm (the print copy of which I’m reading on a layover), Smil collects interesting data on the historical timetables for primary energy supply substitution.

Share of global primary energy supply sixty years after each of the following sources emerged from infancy (~5% of global energy supply):

1. Coal — 5% in 1840; 50% in 1900
2. Oil — 5% in 1915; 40% in 1975
3. NG — 5% in 1930; 25% in 1990

Modern renewables (biofuels, wind, solar), according to Smil, account for 3.4% of global primary energy supply as of 2012.

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Matt 01.05.14 at 3:21 am

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.

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Plume 01.05.14 at 6:03 am

Matt,

You’re missing the point. It’s not about “limits.” Because he gives us examples of things that eventually did happen, they just took a coupla decades longer than some of us thought they would. That means that these things were always possible, and eventually they were going to happen. A scientific limit means they can’t happen, ever.

It’s the speed of innovation, not scientific limitations per se.

And, yes, it IS about capitalism, obviously. Because R and D investment is going to go into things with likely payoffs. As in, the possibility of profits. Capitalism follows us everywhere, our universities are more and more run like corporations (and beholden to them), and innovations are mostly limited to things that will make a few folks very rich. If that’s not the case, if it shows no sigh of profitability, it’s put on the back burner or shut down completely. Whereas if the “public good” were the goal and criteria, we’d have solved a host of maladies by now, many times over, including cancer.

For instance, is it in Big Pharma’s best interest to completely cure diseases, say, with gene therapy? No. Which is why corporate America has fought so hard against stem cell research — using yahoos on the right as their shock troops. If we could fully develop things like stem cells, we could do away with the need to take medicine on a daily basis, and basically drive most of Big Pharma out of business. They’re not going to let that happen.

Green cars, agro, energy, cleanup. We could have done all of that decades ago. But in each industry, the powers that be have billions invested and they’re not going to let their products and services become obsolete.

This isn’t rocket science, ironically. The pace of real innovation has been stifled by the profit motive for generations. There is only one existing counterweight to that currently, government. And governments around the world are mostly bought and paid for by corporate interests. They’re only going to help insofar as it makes money for their corporate masters.

Aside from Graeber, a really good book on the subject is Common as Air, by Lewis Hyde. It doesn’t focus on the rate of innovation. Its main subject matter is the destruction of the commons and the lost of our intellectual heritage. But it gives plenty of heft to the above arguments, indirectly and directly.

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Matt 01.05.14 at 8:00 am

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.

106

Mario 01.05.14 at 10:22 am

Andrew F. writes,

Percentage of transportation powered by petroleum: 93%
[...]
Transportation accounted for 28% of America’s 95 quadrillion Btu consumption in 2012.

Right. And replacing it is not really an option, as the scale of the modern transportation infrastructure is so fantastically staggering. Scaling it down significantly will lead to mayor disruptions of our current way of living. Oil is a fundamental factor in how our world works, and this is why Quiggin is wrong (there is a lot more that is wrong with his article, btw, but I guess you people are his colleagues and thus don’t call him out on that).

107

John Quiggin 01.05.14 at 11:05 am

“And replacing it is not really an option, as the scale of the modern transportation infrastructure is so fantastically staggering”

Umm, you do know that cars can run on LNG, biofuels, liquefied coal, electricity etc. and that the car fleet turns over every decade, right? The only infrastructure that needs replacement/modification is the refuelling system. That’s significant, but not huge.

And, even without replacing gasoline, Obama’s fuel efficiency mandates and current driving trends will cut petroleum use in transport by half over the next 15-20 years.

Mario’s comments are the silliest and most arrogant version of claims that come up every time I make these points, and have been made repeatedly upthread. So, just to remind everyone

(a) The article is about oil, not fossil fuels in general
(b) Like nearly every other commodity, oil has properties that make it convenient, but not essential in particular uses
(c) These aren’t just hypothetical claims. Oil use per person in the US peaked around 40 years ago and is falling fast

108

Peter T 01.05.14 at 12:10 pm

I think JQ is being a tad optimistic here. When oil prices hiked, the low-hanging fruit (power generation, home heating) predictably fell fairly fast. Then it gets more difficult. Around half of the oil used in transportation is used by commercial vehicles or aircraft, and another chunk in shipping. Electric aircraft and semi-trailers may be a while coming. Biofuels get us back to the trade-offs between using land for food, textiles, energy and environment that so constrained our ancestors. Substituting coal worsens climate change. As JQ notes, there’s still room for considerable improvement in passenger vehicles. Investment in public transport would really help, but that would be felt by many as a decline in quality of life.

The bottom line is that, whatever we shift to, it will be a shift downwards in terms of energy returned on energy invested. All previous major shifts have increased EROEI.

109

John Quiggin 01.05.14 at 12:20 pm

@Peter T: This is all fair enough, but it just reinforces my central point. Just as with every other commodity, oil is useful. It’s the most convenient option in lots of cases. So, of course, doing without it or making do with a lot less will be inconvenient.

But all of that is a long way from either
“Oil is rightly a/the central concern of US foreign policy”
or
“Oil is critical to modern civilisation”

110

Plucky Underdog 01.05.14 at 3:27 pm

Apropos de energy, interesting visualisation here of (one scenario for) UK energy sources & applications in 2050: http://bost.ocks.org/mike/sankey/

111

Mario 01.05.14 at 9:22 pm

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.

112

Plume 01.05.14 at 9:30 pm

@Mario,

The same was said about the technological challenges of deploying every single type of energy and transport now in use. No exceptions. The naysayers said it couldn’t be done, and that “you just don’t understand science yadda yadda yadda.”

We weren’t supposed to be able to put all of these cars on the road and feed them gas. No way we could ramp up production, create the infrastructure, or supply the fuel. It was impossible. We weren’t supposed to be able to put airplanes in the skies and feed them fuel, etc. The logistics were all wrong, impossible, couldn’t be done.

Logically, there is nothing to prevent us from switching to all Green, all renewable, sustainable energy, transport, agro, grid, etc. etc. Nothing. The only thing standing in our way is corporate dominance of governments and the capitalist system itself.

113

Chris Warren 01.05.14 at 9:45 pm

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.

114

Chris Warren 01.05.14 at 9:58 pm

I share a similar outlook as Plume.

However, while capitalism is the underlying problem (properly understood), socialist economies, also driven by growth, can lead to the same problems.

The difference is that, under capitalism, exponential growth is necessary, under socialism it is not.

Oil underpins modern exponential growth and determines who has the greatest competitive advantage with an opportunist, self-serving, privatised, capitalist mode of production. The fact that this leads to catastrophe for future generations is of no interest to capitalist bean counters.

115

Plume 01.05.14 at 10:00 pm

@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.

116

Plume 01.05.14 at 10:02 pm

@Chris Warren 114,

Agreed. I probably jumped too quickly on your previous comment.

117

Matt 01.06.14 at 1:14 am

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.

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Plume 01.06.14 at 1:22 am

Matt,

Rooftops and car tops.

Think about all of those cars sitting out in the sun for 8-10 hours while their owners are at work.

It should be possible to create tech that generates enough fuel from that time to power us home — and then some.

The waste we create with disposable goods and by not using renewable, clean power sources like the sun . . . .

Criminal.

119

Matt 01.06.14 at 1:44 am

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.

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Collin Street 01.06.14 at 1:51 am

Think about all of those cars sitting out in the sun for 8-10 hours while their owners are at work.

They ain’t gonna be sitting in the sun: surface carparks are bad urban planning. Under-the-building carparking adds virtually nothing to the cost of a building and hugely reduces land footprint. [if nothing else you can cover the roof with PV and sell the electricity to the people parked there: this offers substantial advantages [weight, flexibility, capacity] over each car being self-reliant…]

[if personal cars still exist as a mass transport medium: self-drive cars will almost certainly be largely pooled, with one of the big drivers [heh] being the cost reduction through sharing what is after all a pretty expensive piece of equipment to buy and run. Also, tendencies are strongly towards increased density both of housing and employment, where public transport will offer greater comparative advantages. If you want to see the future, go to Osaka.]

121

Peter T 01.06.14 at 2:39 am

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.

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Mario 01.06.14 at 9:48 am

Peter T. is right on. And Quiggin is being silly when writing that a reduction in oil consumption will be “inconvenient”.

As to the rooftop arithmetic: good luck making that work. In the US that would only be feasible after substantial changes in the political and social system. It would be interesting to watch that playing out.

The “it has been said before that it couldn’t be done, but look what happend” – this is survivalist bias. I mean – where are the flying cars? Where the fleets of cargo blimps? Why aren’t there big networks of maglev trains? Or tailless cargo/passenger airplanes, as they can be 30% more efficient? Please don’t waste everyones time going off topic. The point is that technological barriers exist, and can’t be brought down just by throwing money and scientists at them.

In the last decades, we have built a civilization around a cheap, easy to obtain and transport, easy to use high density energy source. It will become scarce soon.

123

Mario 01.06.14 at 9:49 am

Errata:

it shoud read

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

124

Collin Street 01.06.14 at 10:22 am

Why aren’t there big networks of maglev trains?

This one I do know. See, one of the key limits of passenger transport is the fact that you’re shifting “people”, and “people” can only stand so much acceleration and jerk before they’re liable to damage in transport [Verne1865].

And, see, there’s these things called “roller coasters”. Which are designed to exceed comfortable accellerations and jerks, and do so with steel-wheel-on-steel-rail technology.

[it's a little bit more complex: physical maximum top speed also matters, in theory, but any economically-justifiable alignment will be limited by the human acceleration tolerances before it reaches the top speed the rail/wheel/overhead structure can support. Only in uneconomically straight alignments with uneconomically great station-to-station distances [JRTokai2027, in process] does maglev offer an advantage. It’s a pretty niche product]

125

Collin Street 01.06.14 at 10:27 am

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.

126

John Quiggin 01.06.14 at 11:25 am

@Peter T: ” moving away from oil, coal, unsustainable agriculture, over-fishing, commercialisation of the environment” is a big deal

We seem to be agreeing furiously, given that the OP says “oil is no more special or critical than coal, gas or metals—let alone food.”

We face some big challenges across the board in achieving sustainability while raising the living standards of the poor. I’ve written about agriculture in particular here
http://crookedtimber.org/2011/02/12/can-we-feed-the-world-will-we/

But sloppy thinking about the role of particular elements in the problem, like oil, won’t help us solve these problems.

127

Chris Warren 01.06.14 at 7:54 pm

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.

128

Plume 01.06.14 at 8:12 pm

Again, there is a direct conflict between capitalism and the health of the planet. Capitalism has a GOD imperative. Grow Or Die. It must maintain growth in consumption and production, which entails more and more waste and pollution, which kills species life, ecosystems, warms the planets, etc. etc.

It can not be sustained.

A lot of people dance around the issue, refusing to see our economic system for what it is. They jump through endless hoops and contort themselves into umpteen shapes and shades of pretzel logic. But in the end, it boils down this:

Our economic system is driving us into an eco-catastrophe. No way around it. No amount of technological innovation will offset that fundamental aspect.

That said, in a horrifically perverse way, one of the built-in effects of capitalism is currently its saving grace, as far as delaying total collapse of our planet:

It is an inequality machine the likes of which have never been seen before. That means the planet has a bit more time than it would if we had more egalitarian results via the same economic system. Again, via the same economic system, which we must end. As in, according to the World Wildlife Fund, if we all lived like average Americans, we would need four entire earths to support demand for resources. As is, we will need two entire earths by 2030.

Our rampant inequality is one of the most obscenely immoral and indefensible aspects of life on this planet in 2014. The richest 20% of the earth’s population account for 85% of consumption. America alone accounts for a third of all pollution and waste. But if we lift the rest of the world to our mode of living, the planet will die to us as a home.

The obvious answer is for us to scale waaaaay back, downsize, down-shift radically, and lift up the rest of the world, not to a life as American-style consumers, but as green citizens of the world. We must lead. We must dump our economic system or the rest of the world will just do what it can to be like us.

The planet is doomed if that happens.

129

Bruce Wilder 01.06.14 at 8:39 pm

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.

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Vatican Dick 01.06.14 at 8:45 pm

Planetary doom from the perspective of an e. coli bacterium looks a little different than from the human or even mammalian perspective.
“Scaling back” could easily be achieved by reducing the numbers of humans.
Reducing carbon footprint is easily achievable by reducing the size of the foot in question.
This has been tried before, apparently.

131

Bruce Wilder 01.06.14 at 9:35 pm

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.

132

Greg vP 01.06.14 at 10:15 pm

Larry Summers, in his recent Stan Fischer speech:-

There would be a set of economists who would sit around explaining that electricity was only 4% of the economy, and so if you lost 80% of electricity, you couldn’t possibly have lost more than 3% of the economy. Perhaps in Minnesota or Chicago there would be people writing such a paper, but most others would recognize this as a case where the evidence of the eyes trumped the logic of straightforward microeconomic theory.

JQ, paraphrased: “oil is only 4% of the economy, so it can’t possibly be very important.”

OK, enough trolling. The issues are: (1) the analytical framework, (2) rates of change, and (3) counterfactuals.

On (1): As JQ himself says, but not very clearly, oil is sold on a world market and OECD countries buy on a world market. So where the USA happens to buy its oil is irrelevant.

If the market is a world market, the unit of analysis is the world. Globally, about 45% of oil is used for transportation fuel, and another 20-ish percent is used for similar and related purposes (off-road machinery in agriculture, construction, mining, ‘defense’; bitumen for roads; lubricants; etc., etc.)

Supply and demand set the price; globally, supply means “oil exporters”. The key analytical figure is total exports, not total supply. Middle East countries contribute about a third of global crude oil exports, and the IEA expects the region’s share to rise over time. Following Summers: the sudden loss of 80% of global oil exports would undoubtedly be catastrophic. Would the loss of 30% also be catastrophic? Perhaps not quite. But it would probably hurt a lot. And the risk is growing, not shrinking.

On (2), the world economy has from 1980 to 2005 increased its oil efficiency at a rate of about 1.5% to 1.8% per year. The magic of higher prices may increase that to as much as 3% per year. But this sets an upper bound on GDP growth: 3% higher than oil supply growth–or shrinkage.

Currently, oil supply growth is coming from (i) refinery gain increases, (ii) natural gas plant liquid increases, and (iii) biofuels, in roughly equal amounts. Production of actual crude oil has been essentially flat since 2005, supported by the USA’s LTO (shale oil) boom. (Refinery gain arises from splitting carbon-rich molecules and decorating them with more hydrogen atoms. There’s an energy loss but a volume gain; the increase has arisen from the move to using heavy crude oils insterad of light. NGPLs move in lock-step with natural gas production. Biofuels have an absolute ceiling of about a third of current total oil production.)

So the Middle East will remain important as a key source of exported crude oil, while other countries remain unable or unwilling to take the steps necessary to increase supply.

On the demand side, US private vehicles can and will easily double their MPG over the next two decades — but that gain (optimistically 3% of total world consumption, after population growth and rebound effects) will be overwhelmed by growth in the vehicle fleet elsewhere, in places where vehicles are already quite efficient.

So the Middle East will remain important as a key source of exported oil.

The world cannot simply switch its transportation fleet to LNG, because existing and projected LNG supplies are already fully committed to electricity production, and LNG projects take a decade or more to complete. (Besides, NG is also a fossil fuel and subject to the same geological constraints as oil, and electricity production may always be a higher-value use of NG than private transport. If PV ever becomes dominant globally, it will have to be backed by CCGT generation.) The rate at which the world can electrify its transportation is also limited. So is the rate at which the built environment can be adapted to a different transportation mix.

So, for the next few decades at least, the Middle East will remain important as a key source of exported oil.

In the long run, all of those changes will take place, to some degree. But also, and to a greater degree, people will move around less. That’s how we’re coping now with high oil prices. It’s how we’ll continue to cope.

The key issue is rate of change. Will global oil supply decline slowly enough that we have the time we need to make the adjustments? Or will there be fights in the line for Middle Eastern oil exports?

Counterfactuals:-

If other countries adopted the USA’s legal framework for ownership of mineral rights, and impartially protected private property rights, we wouldn’t have a problem.

With US laws, the Russian Federation could increase oil production by 50% (exports by 70%). Venezuela could triple production and more than triple exports. Nigeria, Angola, Sudan, Libya and Algeria could all double exports. So could Kazakhstan. Indonesia, Malaysia, Argentina, and the UK could return to being oil exporters instead of importers. Brazil might even live up to its reputation as the Next Big Thing. Even China would suddenly find a lot more oil under its own land.

In this counterfactual world, the Middle East would definitely lose geopolitical significance. In our world, it is becoming more important.

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.

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Matt 01.06.14 at 10:48 pm

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.”

134

John Quiggin 01.07.14 at 1:06 am

“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.”

Amen to that!

135

John Quiggin 01.07.14 at 1:16 am

@Greg VP At the risk of being lumped in with Minnesota and Chicago, 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

(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
(2) We have backstop substitutes that cost no more than twice as much, and are more environmentally benign (direct use of LNG, electricity generated by gas or renewables). So replacing 4 per cent of GDP with backstops costing twice as much would imply a loss of 4 per cent.

Taking a combination of the two, eliminating 80 per cent of oil uses over a period long enough for the required adjustments to go smoothly would cost between 0 and 3.2 per cent of income.

Of course, if you wanted overnight elimination, that would be extremely costly. But that’s true of everything. As an example, there was a scare about rare earths a couple of years ago (coltan? paging Tim W). If the supply of these things were cut off overnight, modern civilisation would collapse or so the story went. But oil isn’t like that and neither, as it turned out, were rare earths.

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faustusnotes 01.07.14 at 3:38 am

The southern European nations have all the sun, and currently lots of debate about how to manage their huge youth unemployment problem. If the ECB printed some money, teh EU could fund a massive rooftop solar campaign that would sharply drive down world solar costs and help to wind back the EU’s contributions to warming. Of course, the idiots in the EU refuse to even consider such a move. This problem isn’t just driven by ignorance of environmental problems, or by capitalism’s internal logic. It is also driven by the economic naivete and pig-headedness of our leaders.

See e.g. Japan turning off its nuclear power program, as well.

137

Mario 01.07.14 at 2:10 pm

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!

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ajay 01.07.14 at 3:01 pm

“We have backstop substitutes that cost no more than twice as much, and are more environmentally benign (direct use of LNG, electricity generated by gas or renewables). So replacing 4 per cent of GDP with backstops costing twice as much would imply a loss of 4 per cent.”

AAUUGH.

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.

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Lee A. Arnold 01.07.14 at 3:45 pm

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.

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Lee A. Arnold 01.07.14 at 3:50 pm

I should have written, “the era of computer-assisted materials science is just beginning.” Because of course materials science has a long history, back into early chemistry. The point is, there are new discoveries being reported weekly, and there is no telling what may be found or developed. It is not predictable.

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John Quiggin 01.07.14 at 5:58 pm

@ajay “AAUUGH.”

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.

Again as I already pointed out, this replacement has already happened in the case of electricity generation, when oil was replaced by coal and LNG: this process was pretty much complete 15 years after the oil shock of 1973, although the use of oil had been expanding rapidly before that.

A more careful calculation might get you a number somewhat larger or smaller than 4 per cent. But it’s not going to be a lot different, and ALL CAPS handwaving about capital assets isn’t goign to change that

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john c. halasz 01.07.14 at 9:37 pm

NG is not an “environmentally benign” substitute. From an GHG perspective, it’s as bad as oil and coal.

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Ed Herdman 01.07.14 at 11:32 pm

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).

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John Quiggin 01.08.14 at 12:05 pm

@jch As I’ve pointed out many times already, the article is *specifically* about oil, not about the bigger challenge of making the economy sustainable. But it would be helpful if people learned to think clearly before making silly pronouncements about oil (shifting back and forth between claims based on intuitions about oil and about fossil fuels in general) as ajay, mario and many others have done in this thread

That said, I think the evidence on methane leakage suggests that, even taking this into account, NG is less damaging than oil or coal. But that’s a topic for another post.

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Chris Warren 01.08.14 at 7:55 pm

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.

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Chris Warren 01.08.14 at 8:27 pm

In Pakistan and India, a gallon of petrol already costs over 100% of a day’s wage. This equates to a month’s wage for a barrel (@ 31 gallons).

In the Philippines, petrol is over 50% of a day’s wage – so this equates to a half month wage for a barrel.

In Australia, a months basic wage is over $2,000 and a half month’s wage is over $1,000.

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Mario 01.08.14 at 10:24 pm

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.

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John Quiggin 01.09.14 at 6:25 am

@Mario I was going to leave you to it, but this is like shooting fish in a barrel. The “humungous” SPR is 700 million barrels, a value of around $70 billion at current prices. Assuming an interest rate of 5 per cent (way above what Uncle Sam is paying), that’s a carrying cost of $3.5 billion a year, pocket change compared to cost of the EU CAP, creator of the butter mountain, wine lake etc, which runs at about $90 billion a year, and is supposed to protect Europe against a disruption of food supplies. And as CAP suggests, stockpile policies have applied to all manner of minerals – nothing unique about SPR. Just give up.

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Peter T 01.09.14 at 7:45 am

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.

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Mario 01.09.14 at 9:25 am

The EU CAP is quite unique too, I agree, but it is only remotely related to an oil reserve of this size. In particular, its purpose is not to stabilize supply, but demand, like almost any other reserve in this class. Also, the SPR is really large, about ten times the CAP in net storage volume. And as far as I can tell, there is nothing comparable for coal, for example. I think this all qualifies the SPR as unique and humongous.

BTW, I am still interested in hearing why using the Katrina event as evidence for oil being “a commodity like any other” is not a clear cut case of a fallacy.

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ajay 01.09.14 at 11:05 am

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.

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Matt 01.09.14 at 11:58 pm

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.

Just another mineral commodity, maybe? You could compare with the tremendous capital cost, high environmental damage, and low average returns realized with mining projects for copper, iron, bauxite, gold, silver, and so on.

There can be years of planning and billions of dollars spent before the first kilogram is in hand from a new copper mine that could add maybe 1% to annual world supply — while increasing recycling rates could add 20% to world supply at lower energy and pollution costs per tonne. Recycling projects could also start producing much faster and with much smaller capital commitments. Similarly, between 1985 and 2010 US-headquartered oil companies spent hundreds of billions of dollars on new exploration and production while US passenger car fuel economy standards did not rise at all. “Billions for extraction, but not one cent for optimization” is the rallying cry, it seems.

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