The Giant Gas-Gouging Gaffe
On Wednesday the House passed a bill that would make price gouging by oil and gas companies a federal crime. The legislation called for jail time and fines of up to $150 million a day for charging "unconscionably excessive prices" and taking "unfair advantage" of consumers. This proposed legislation is horrendous and would do nothing to help the American motorist. The most obvious difficulty is the arbitrariness of the "crime." FULL ARTICLE
Comments (27)
The last time I waited in line at a gas station because of a shortage caused by the government's criminal price-fixing, I was 4 years old.
It was awful. I don't know how many of you remember 1973, but there was nothing to do as you sat in a hot car waiting for your turn in line.
Plus, all we had in the car was AM radio, since the Federal government had, through its indefensible regulatory scheme, stifled technological advancement in the RF spectrum.
This time around, if the House bill becomes law, we will all have the chance to repeat these little family get-togethers, sitting in our cars as we wait for our ration of fuel.
At least we have iPods and cell phones to help pass the time.
Published: May 25, 2007 10:44 AM
George Will (yes, I know, but sometimes even he is correct) wrote a column recently pointing out that the government rakes in about 18 cents per gallon of gas, while the oil companies earn about 13 cents. The state taxes are even higher; California's (third highest in the country) are around 40 cents. So we should demand that the government stop gouging us!
When people complain about record oil company profits, it is also worth emphasizing that a capital intensive industry is like a big flywheel or a giant oceanliner -- there is so much momentum that it's hard to change speed or direction quickly. (I know Mises disliked analogies with physics, but this one seems harmless.) So there will be times when demand far outstrips supply (causing high prices), but also other times when the reverse is true. In the long run, oil companies make the normal rate of profit.
Very good article, Professor Murphy.
Published: May 25, 2007 10:54 AM
The only organization that I have ever felt gouged by was the government. Is it possible for me to apply this new law against governments? If so, I might find some merit in it.
Published: May 25, 2007 12:33 PM
Your article is dead on regarding the philisophical emptiness of the so-called price-gouging laws. However you left out one very important, and ultimately the most important, factor contributing to the "high" prices today, and that is the simple fact that, after 100 years of exponentially increasing rates of extraction, the remaining oil in the ground is increasingly difficult to find, and what we do find is increasingly difficult to extract. We have probably already passed the peak extraction rate for light sweet crude, and will pass the peak extraction rate of lesser-grade oil types in the next couple of years. With non-increasing extraction rates and no real alternative nearly as useful as oil yet discovered, it's unsurprising to me that the price has been rising. Thank you for your great article!
Published: May 25, 2007 2:45 PM
Ludwig: "With non-increasing extraction rates and no real alternative nearly as useful as oil yet discovered, it's unsurprising to me that the price has been rising."
What you write is correct, but if you adjust for inflation, prices aren't that high. They're comparable to the early 1980's. The biggest contributor to high oil/gas prices has been the Fed.
Published: May 25, 2007 3:41 PM
You write:
"The only thing I've "assumed" to reach this conclusion is that people buy more gasoline at lower prices. If you grant me that, then you have to admit that government efforts to reduce prices below their market levels will cause shortages, and that means (as in the 1970s when the great Republican Nixon imposed price controls) long lines at the pump and arbitrary rationing schemes."
This is true-- UNLESS prices are being artificially inflated by price-fixing-- which is not completely impossible under such a Reconstruction-created oligopoly as the oil industry. Supply-and-demand only works in a competitive market, however when competitors are limited (as in the gasoline industry) then there's also sufficient conflict-of-interest toward price-fixing, to warrant reasonable vigilance against it. It's an economic fact that monopoly DOUBLES the price of a necessary commodity over a competitive market-- despite a constant level supply and demand-- and this is definitely an profit-incentive to fix prices.
Vigilance against such does NOT equate to price-caps, and it's fallacious to insinuate such-- as well as to automatically rule-out price-fixing or other illicit gouging-measures. Both practices are equally unacceptable in a free market.
Published: May 26, 2007 11:08 AM
"Both practices are equally unacceptable in a free market."
Oh come on...
http://www.mises.org/story/1800
Published: May 26, 2007 12:08 PM
I wonder...
Higher prices benefit oil companies. Green regulations result in higher prices...
Shouldn't I conclude that politicians and the greens are working for the oil companies ?
Published: May 26, 2007 2:13 PM
As the article rightly points out, for all their absurdity at least a price control is clear.
Sell for over a certain price and you have broken the statute, sell for less than this price and you have not. So if supply and demand mean that the market price is over the government set price one simply does not sell (let the government provide the good or service by one of its magic spells).
But with the vague language of this Bill ANY price may (or may not) be "criminal".
One can only conclude that the House of Representatives is controlled by lunatics.
Published: May 26, 2007 2:36 PM
"Oh come on...
http://www.mises.org/story/1800 "
That article doesn't defend or deny deliberate price-fixing-- rather the opposite:
"Monopoly prices are consequential only because they are the outcome of a conduct of business defying the supremacy of the consumers and substituting the private interests of the monopolist for those of the public. They are the only instance in the operation of a market economy in which the distinction between production for profit and production for use could to some extent be made… The characteristic feature of monopoly prices is the monopolist's defiance of the wishes of the consumers."
It's all well and good to say that this wouldn't happen in a lassez-faire world, but that's hardly been the case for the gasoline-industry.
Published: May 26, 2007 4:42 PM
Brian,
"
It's all well and good to say that this wouldn't happen in a lassez-faire world, but that's hardly been the case for the gasoline-industry."
If by that you mean the oil industry has never functioned in a free market, and it is thusly considerable less competitive, I agree.
However, that does not mean that anti-trust laws, price control laws, or price gouging laws are justified. All they serve to do is further cartelize an already cartelized industry, infringe upon consumer sovereignty and property rights.
The only justifiable solution is to eliminate all privileges that the oil industry currently has and allow the free market to function. (This includes, of course, eliminating all taxes on gasoline.)
Regards,
Dave
Published: May 26, 2007 4:55 PM
There was a (dugg down) comment on digg, that started something to the effect of "you libertarians don't know what you're talking about..."; that, in the interest of being contrary and vigilant against monothought, I expand and bring to you in a more palatable and economically relevant form:
Suppose there is no gas shortage at all (even an excess, where there is enough gas for everyone's uses and more), but instead there's a sudden huge temporary local surge in the _inelasticity_ of the price of gas (and no ability for new sellers/suppliers to enter this market fast enough to be relevant)... like a pending natural disaster (where say people would then be willing to pay over $10/L). The individual gas station operator then sees an opportunity to 'price gouge' since the customers will now pay $10/L (even $50/L in some cases), he could sell his gas for say $9/L, there would be no incentive for the gas sellers to under cut each other since everyone's entire supply will clear regardless (they could even take it a step further and attempt to sell at the price that would produce maximum revenue not caring whether their entire supply cleared or not). If there was enough gas for everybody to get out of town (that wanted) at any price at or above the usual price... in other words the total demand was for almost exactly enough for everybody to leave, and the total supply (for the relevant next few days) was nearly exactly that (plus some extra)... then forcing the gas stations to charge the usual price would _not_ create a shortage, and charging an 'excessive' amount wouldn't bring in more suppliers since it was a temporary price and no additional supply was actually needed (or possible) during that short period.
What you have is a 'bargaining situation'... where the people trying to leave are at an extreme disadvantage (the gas station operator might find that he could even charge $50/L and even though many would be stranded he would still make a greater profit than at $10/L due to extreme inelasticity). The only way a shortage could result at the enforced cheaper price, would be (if it were possible) for a particularly shrewed speculator to buy up the entire (accessible) supply of gas at the usual price, and then sell it on the black market at an excessive rate (since he too would run afoul of the authorities).
There isn't really an economic argument against this (the vagueness of the law being a legal issue)... other than perhaps the _potential_ for price gouging could perhaps increase the _reliability_ of supply (which isn't a half bad argument) and perhaps the high cost of gas inelasticity serving to reduce that inelasticity... but I'm not sure you really have any argument against the statists here other than property and freedom (both of which are axiomatic... and they clearly don't believe in).
Published: May 26, 2007 7:46 PM
I think a lot of people are missing the elephant in the room.
The simple fact is that most coutries (including the US, Russia, Iran, Iraq, Venezuela and many others) are well beyound their production peaks and extract less oil every year than the year before. So far, some countries (Saudi-Arabia, UAE, Kazahstan, Nigeria, Angola and a few more) have been able to make it up by increasing their extraction, but as more and more countries have to witness less and less oil coming out of their fields (for example Mexico and UK have recently reached their production peak in oil and gas respectively), it is getting harder every year to raise production for those left with untapped reserves.
It is true that "refineries can't keep up". And if you read "Twilight in the desert" from Mathew Simmons (who is no environmentalist but a oil-banker), you know why:
We only have a few years left with rising oil extraction. After that, we will have each year less oil available than the year before.
Nobody will invest in surplus refinery-capacity which will only be needed for 3 or 4 years.
That just doesn't make any sense, you don't reach break-even within 3-4 years with a new refinery and soon all the existing refineries will be easily able to handle the decreasing oil supply.
The facts speak of themselves:
1) Oil companies report record earnings, yet they reduce their spendings on finding new oil fields (even with much higher oil prices, almost no new economically viable oil fields are found.)
2) Gas prices are on record levels, but no new refineries are built.
I've been told numerous times that higher prices will cause more investments into finding new oil fields. That just is not happening because no matter how high the price is, if you need 2 barrels of oil (or energy) to find, drill and extract another barrel of oil, then it is not economically viable, period. Oil companies reduce their investments because they have already found all the bigger oil fields outside Africa and Antarctica and because new refineries just are not needed.
Of course we will not "run out of oil" for many decades, but the age of CHEAP oil clearly is over.
Published: May 29, 2007 2:57 AM
The refinery problem isn't directly related to the supply of oil, but is more a problem of regulatory interference, both in the quality and complexity of gasoline that government is demanding, and thus on the difficulties of refining to meet government demands (unrelated to public demands), and also the environmental concerns and NIMBY attitudes towards refineries and the refinery process.
Also, further research into discovering and extracting petroleum doesn't necessarily require a greater expenditure of oil itself--like most productive increases, it could be an efficiency increase (doing the same thing as before but doing it better), or it could be a revolutionary increase (discovering an entirely new way to do something).
Furthermore, higher oil prices will spur more research not just into oil, but also into alternative energy resources. Before the 19th century, petroleum was a worthless, undesirable material that nobody wanted. Who knows when a similar discovery will occur that provides mankind with another cheap energy source?
In the meantime, higher oil and gasoline prices are the only truly effective means of encouraging the rest of us to conserve fuel and adapt our lifestyles to the reality of economic scarcity, and if we really have "many decades" of oil left, then there's no reason this transition has to be unnecessarily painful or difficult. People, especially environmentalists, shouldn't be upset with high gas prices, but thrilled to be getting the economic information that the days of cheap oil are over (assuming that it's REALLY economic information minimally distorted by political intervention).
Published: May 29, 2007 3:29 AM
Right now most of America wants to stick it to the Oil companies. We've seen far too many convenient hikes and slumps in the price of gasoline to believe that it is purely due to supply and demand any more.
Critical natural resources have been exploited by monopolies and cartels throughout history. First it was wood, then it was coal, now it is oil.
Before peak oil was even an issue, the Saudis and OPEC were clearly able to manipulate the price of oil. I don't believe that has changed.
Our government taxes gas far less than most other countries and it looks like the money goes straight to the interstate highway system if it benefits the public at all. Other countries have vibrant public transit and especially electric trolley and train systems, but we in America seem to think that petroleum derivatives are the only worthwhile fuel for anything of consequence.
Of course, we used to have many vibrant public transit systems, which of course suffered their fair share of local corruption and neglect, which only made the job of GM and National City Lines that much easier.
This legislation is probably more about stirring up a national dialogue in the hopes that something concrete will result. Big Oil is very good at manipulating the price of oil as much as they can without actually being caught, but hopefully we will begin to reconsider all the government subsidies and leniency in royalty payments they get.
The real problem is that cheap credit from the Fed and cheap gas from Big Oil are the Bread of our empire. As long as both are plentiful around election time, people are much less likely to demand change.
Published: May 29, 2007 3:38 AM
Much of the article is correct about how market forces cause the fluctuation in the price of gasoline.
However, the conclusions are all wrong. Easing restrictions on new refineries and oil drilling ignores the problems of using oil - environmental impacts (smog, oil spills, global warming, etc). Moreover, there is always the long-term issue of running out of oil. It is a decent amount of time into the future, but it will happen. Threatening to nuke Iran does inflate the price of oil (and thus gasoline), but as long as the US allows itself to be dependent on foreign oil, there will be enormous pressure for those foreign countries to have conflicts with the US that cause supply risks to increase the price of oil. The solution is to become independent of foreign oil, not to put a band-aid on the trouble spot of the week.
And the bigger solution to the bigger problem is to develop a clean, renewable, domestic energy source to replace oil.
Published: May 29, 2007 6:32 PM
Michael claims: "The refinery problem isn't directly related to the supply of oil"
The supply of oil is not only "directly related" to the refinery problem, it's the fundamental driver for the building of new refineries. Or to put it in another way, supply of oil is the basic and most important "market force" which drives the refinery-industry.
Basically it all comes down to this: If there is both enough supply of oil and demand for gasoline, refineries will be profitable. I don't think anybody will dispute that there is plenty of demand for gasoline, but what about supply? Is there enough supply of oil to power the refineries for long enough to get back the investment?
It is the big oil companies who are unwilling to build refineries or finance big searches for oil. And all this is happening while the price is high and likely to rise further.
"Also, further research into discovering and extracting petroleum doesn't necessarily require a greater expenditure of oil itself--like most productive increases, it could be an efficiency increase (doing the same thing as before but doing it better), or it could be a revolutionary increase (discovering an entirely new way to do something)."
First, the experts (which are the oil companies, not economists) disagree, they obviously don't think that building refineries is profitable. Second, oil is mostly used as energy and if you need more energy to pump it, it does not make sense to pump it, period. And pumps are pretty old, mature technology without any big room for improvement. Pumps are already very close to the theoretical optimum (the bounds of the laws of nature) and further improvements will not make up the difference.
"Furthermore, higher oil prices will spur more research not just into oil, but also into alternative energy resources. Before the 19th century, petroleum was a worthless, undesirable material that nobody wanted. Who knows when a similar discovery will occur that provides mankind with another cheap energy source?"
First, you should check your facts before claiming petroleum was "worthless": http://en.wikipedia.org/wiki/Image:Oil_Prices_1861_2006.jpg
Second, what does "a similar discovery [..] that provides mankind with another cheap energy source" have to do with refineries? Nothing, it's just wishful thinking.
Third, petroleum as an energy source was well-known even in antiquy (it was used for lamps at that time). So it was not the petroleum which was discovered, it was an efficient way to use it as fuel. (Basically the internal combustion engine) I don't see anything even close as comfortable, easily available, easily storable and easily usable as oil. Also, it would be a pretty far-fetched coincidence that some mysterious easy energy-source will be discovered just right when we need it.
"In the meantime, higher oil and gasoline prices are the only truly effective means of encouraging the rest of us to conserve fuel and adapt our lifestyles to the reality of economic scarcity, and if we really have "many decades" of oil left, then there's no reason this transition has to be unnecessarily painful or difficult."
We will have "many decades of oil" left, but for the forseeable future we will have less oil per person every year (globally, that happened already in many countries), which will mean lower living standards each year, a recession that will last several generations.
Of course a smart policy could soften the blow somewhat, but I personally get the impression that the politicians in charge just hope for the best and want to serve their term and then retire.
If you are interested, read http://s3.amazonaws.com/priceofoil/LeggettIndep012006.pdf
to see how the experts are warning politicians who are only ignoring the situation. (And who can blame them, any serious policy would mean an immediate stop to all immigration, a sudden cut of all social spending and a decline in living standards for all. - Which would mean that any such policy would not outlast the next elections)
Basically, I don't believe much in the state (and I think most on this blog agree with me on that) and it's basically everybody for himself.
If you believe the state will come up with some great new policy or scientists with some new miraculous invention that will save you, good luck.
However, basically I'm an optimist and even though the coming decades will certainly bring a big loss of live and living standards it will end most forms of moral and intellectual decline so common these days and may lead to a new cultural rennaicance after the die-off.
Also (to get a little more on-topic) it may be the final nail in the coffin of socialism - because socialism promises unlimited and endless population and economic growth with unlimited ressources for everybody, which will become not only practicably, but also theoretically impossible.
Published: May 30, 2007 7:15 AM
Tulipsspeculator,
That is a fine hypothetical scenario you have created. And how, exactly, is anyone going to determine that your scenario ever applies? There are so many variables such as how much gasoline would actually be bought at the old price since you seem to be just assuming that there is, in fact, an adequate amount to fill everyone's demand regardless of price.
Even though price controls violate the axiom of respect for private property, I say that the government should simply confiscate such resources and dole them out when it deems it necessary. At least that way, people will know whom to blame for the mess.
Published: May 30, 2007 9:05 AM
Thanks for straightening me out on the uses of petroleum. The Wikipedia article on petroleum expands on what you said:
http://en.wikipedia.org/wiki/Petroleum#History
So it is more correct to say that it wasn't used as a fuel until the mid-19th century (1861 is in the 19th century, btw).
And while lots of people like to argue that oil was some kind of energy bonanza for humanity, the point is that the discovery of being able to use it as fuel wasn't any more automatic or inevitable than any other human discovery. I don't hold out for miracles, merely the optimistic view that human creativity and ingenuity, when left free to operate, will discover ways of dealing with this "crisis", involving both evolutionary tactics of improved efficiency with the occasional revolutionary discovery. Based on human history, this is not "wishful thinking", but simply betting on good odds.
Naturally, governments can muck things up if they decide they need to take action and do something about the "crisis", which is all the more reason for people to not panic, else many of them will demand that government do something.
As I said, I'm an optimist, too, so while we may get a serious "reality-check" in the energy department, I think we can cope to the point of not having to suffer a major decline in living standards.
Published: May 30, 2007 11:30 AM
Worldwide oil refining capacity has increased annually since about 1984. The increase has not kept pace with the increase in demand, but nonetheless, oil companies are investing and building new refineries. Just not in the US.
Published: May 30, 2007 12:06 PM
I don't hold out for miracles, merely the optimistic view that human creativity and ingenuity, when left free to operate, will discover ways of dealing with this "crisis", involving both evolutionary tactics of improved efficiency with the occasional revolutionary discovery. Based on human history, this is not "wishful thinking", but simply betting on good odds.
Based on human history, collapses of civizations happened all the time: The Indus-Valley civilization, mesopotamia, The Mayas, The Romans, very recently eastern-European Communism and many, many others scattered throughout history.
Based on human history, most "states" or political units don't stay stable forever.
The decline and eventual collapse of a civilization is often marked by a ever more greedy central state (highest taxes ever - check), decay of morals (check), partial breakdown of internal security ("gated communities" - check), loss of confidence in the men in power (lower and lower voter turnouts - check), overpopulation and overutilization of ressources (check). So except for overpopulation today's USA fullfills all markers for a civilization in decline and Western Europe fullfills all of them, including overpopulation.
The system has accumulated so many trends that just cannot be sustained (balooning public debt, exponential demand for ressources, destruction of groundwater and top-soil, large population growth in the unproductive welfare class) that it just cannot go on like this much longer even if there were unlimited oil.
Also, I'm not so naive to believe that politicians and charity organization will want to "save" people. Politicians use social security to buy votes and charitable organizations are just another business model. In times of crisis both government and private charity will decline or even disappear altogether. Basically nobody really cares wether you live or die, except your immediate family and friends. So there won't be any serious efforts by government or anybody else to avoid loss of life as soon as the crisis really hits. As soon as the government can no longer pay soldiers, policemen, judges and public employees, the state as we know it will just disappear. There won't be any teams of scientists working around the clock for the benefit of the community. Most smart people will have prepared and will survive, most dumb people will probably starve. (Of course population density, immunity to desease and just plain luck will also play a role)
That's actually a pretty common pattern throughout history. No state or civilization has been stable for longer than a few centuries so far.
Naturally, governments can muck things up if they decide they need to take action and do something about the "crisis", which is all the more reason for people to not panic, else many of them will demand that government do something.
I agree that the governments have caused many problems and their "cures" are more often than not counterproductive. However, even though I agree with most Austrian economics, I don't think that Austrian economics can solve all problems overnight. Even though the government has caused many problems doesn't mean removing the government will solve them. (Just look at Russia where things got a lot worse after communism.)
The governments are partially responsible for the imminent oil-crisis: OPEC-governments lied to us about their reserves, our governments lied to us about perpetual economic growth and unlimited immigration (without the immigration reform in 1965 the USA would still be able to meet domestic demand without oil imports).
That's all nice to know, but right now we are so deep in trouble that there just is no solution which won't involve massive amounts of pain and suffering.
Published: May 31, 2007 7:18 AM
Is that a Q.E.D. proof Roland that the best state of human living is the small village pocketed with mostly self-sufficient family farms and a few artisans here and there? Where people are free and create most of their own necessities and trade for a few extras as well as a few wants? Where people either barter with actual goods, favours and gold chips? The only reason society could have gotten so far as to be large and destructive is thanks to technology . . .
Published: May 31, 2007 7:27 PM
Roland, you are surely one of the most cynical optimists that I've encountered in a long time.
The trends you point out are indeed difficult to deny, but they surely don't tell the whole story. Just in my lifetime we've gone from 8-tracks to cd's and mp3 players, broadcast TV to cable, satellite, and dvd's, from minicomputers to powerful personal computers, from the AT&T monopoly to a broad cell phone market and even Voip.
This tells me that human creativity and ingenuity have not disappeared, but are quite willing to come to the fore where allowed or where necessary. And the application of this creativity has a benefit far beyond the immediate creators. No doubt, as the auto industry or the mess of HDTV has shown, governments stand ever ready to restrict our options and stifle said creativity, but their coercive actions always have unintended consequences, and politicians and bureaucrats themselves are often stymied and bewildered by new developments and advances, and thus are usually trying to play catch-up.
Things are far from perfect, but there is little reason to think that we are fast approaching a new dark ages, either. History may tend to repeat itself, but not in exactly the same way.
Published: June 1, 2007 1:19 AM
Roland, you are surely one of the most cynical optimists that I've encountered in a long time.
True, I'm kind of a cynic. Anyway I always try to see the positive aspects which exist in even the most horrific situation.
The trends you point out are indeed difficult to deny, but they surely don't tell the whole story. Just in my lifetime we've gone from 8-tracks to cd's and mp3 players, broadcast TV to cable, satellite, and dvd's, from minicomputers to powerful personal computers, from the AT&T monopoly to a broad cell phone market and even Voip.
I don't see how mp3-players and dvds will save us from starving or poverty. Heck, in most of the third world mobile phones and other technogadgets are pretty common already, but that doesn't really make them rich nor change the fundamental laws of nature.
In fact if you look at for example Brazil I think we have a pretty good picture of what the USA will look like in 50 years if trends continue: Small "gated communities" with rich people in a sea of crime and poverty. This was pretty far-fetched and alien 50 years ago, when the USA was still a coherent stable nation, but by now these characteristics are seen in many areas already and all trends point towards more 3rd-world immigration, more population-density, less personal freedom, more political corruption and more chaos in general.
If the USA were a coherent nation as it was 50 years ago, I agree that it could handle the Oil-crisis. But these times are long over, the USA is a collection of alienated groups (not just races and ethnicies hate each other, feminism was so successful that large groups of men and women see each other as competitors (who do and should compete for the same occupation) and not as partners) and each group constantly tries to gain at the cost of others. The elites of the USA (both parties) is possessed with "social justice", "equality", "diversity" and other nonsense. Heck, the slogan "diversity is strength" could be right out of a novel by George Orwell.
The only thing that keeps the USA together is huge imports from the middle east (oil) and East Asia (everything you quoted: mp3-players, personal computers, dvds, mobile phones, etc.)
Now add the joke of what passes for elections (even the UN agrees that such massive differences between exit-polls in over 10 states and official election-result is proof of vote fraud) and even more importantly the fact that neither the media nor anybody else seems to care. The USA is already in a state of decay and decline as it is and (now my cynically-optimistic side coming through again) I think a quick and dirty die-off because of Peak-Oil is preferable to decades or even centuries of progressive decline (which happened to both the Western and the Eastern Roman Empires).
This tells me that human creativity and ingenuity have not disappeared, but are quite willing to come to the fore where allowed or where necessary.
Of course it has not disappeared, but human creativity and ingenuity have to operate within the bounds of the laws of nature - also if you open your eyes and see how many intelligent people just don't have children while unemployed welfare-mothers breed like crazy it's clear that human creativity and ingenuity has declined in recent generations. For example read the "Bell Curve" of Charles Murray (it is said that Bill Clinton read that book and the welfare reform of 1996 was very much influenced by it), in it the authors calculate the decline of intelligence by comparing the fertility of high-IQ mothers to low-IQ mothers and also calculate the effects it will have on crime, illiteracy, income and many other things. All trends points toward a state of affairs similar to - as I said already - Brazil today.
In a way Peak-Oil may be desirable if only because it will put a quick end to the current insanity and allow a more sustainable form of organization to take it's place.
Things are far from perfect, but there is little reason to think that we are fast approaching a new dark ages, either.
What is a "dark age"? There is very much archeological evidence that leads to the conclusion that the Western Roman Empire has become so oppressive and corrupt that the collapse was terrible for many (mostly the parasitic classes be they welfare-receivers or politicians) but beneficial for others (mostly farmers).
Sure, the loss of oil and the loss of trade will lead to enormeous changes and terrible loss of production - but on the other hand the dissapearance of taxes and oppressive laws (affirmative action, etc.) will open up new opportunities for responsible and intelligent people. I have no doubt that new structures, new states will form in the Western world and probably around the rest of the world as well. Sure, intelligent and responsible people are fewer than a generation ago, but they are still numerous enough to band together and form smaller, but sutstainable communities.
Oil has allowed us to reach a level of decadence and insanity which would have broken down a long time ago without it. The collapse is already overdue and was just delayed by reckless and ever-increasing consumption of ressources.
@TLWP: Is that a Q.E.D. proof Roland that the best state of human living is the small village pocketed with mostly self-sufficient family farms and a few artisans here and there? Where people are free and create most of their own necessities and trade for a few extras as well as a few wants? Where people either barter with actual goods, favours and gold chips?
Well, I don't think I know what the "best" state of human living is. Also while we will lose the ability to pump ever-increasing amounts of fertilizer (made of oil and gas) for easy increases in agricultural yields, we will not lose our technology which means that we will still have tracktors and farming machinery which means that probably a large majority of people may have non-farming occupations.
Of course without synthetic fertilizers and a limited area of arable land, only a limited (and stable which means not constantly growing) population-density can be sustained.
In the long run this density might be a little higher than in 19th-century Europe for areas comparable in fertility.
I also don't think that self-sufficiency is needed or even desirable in general. However I would strongly advocate some kind of "fiscal autonomy" at all levels (that means for individuals, at the city-level, at the province-level, etc.) which forbids all kinds of "redistributionist" schemes. While I don't agree with all aspects of Austrian Economics (for example I do think that some kind of public authority is necessary to manage roads because private owners could blackmail users because everybody has to use some specific roads to reach his own home and there is no competition) I agree with almost everything that is about movable, tangible goods.
Anyway, I think it will be an era in which many groups (including Austrian economists) will have the chance to try out their theories in practice.
Published: June 1, 2007 8:15 AM
Why don't we boycott the two top gas stations in north America the billions they recorded for profit would soon be depleted (two weeks) would be devastating. That way no one has to stop driving. Bet prices would really drop
Published: June 1, 2007 8:01 PM
Their "record profits" would be depleted in a mere 2 weeks of boycotting? Perhaps their record profits aren't as great as some people are claiming...
Published: June 2, 2007 1:24 AM
Tariffs and subsidies prevent US citizens from accessing cheap efficient green energy. The current ethanol tariffs have falsely propped up the industrial corporate corn farms to the detriment of citizens and trade partners like Brazil. To learn more check out my blog spot: http://www.cwt.org/blog/
Published: June 19, 2007 10:10 AM