Malthus and Mein Kampf come to Cork
For those who like their environmental gloom'n'doom spread with a thick dollop of Utopian totalitarianism and garnished with a slice of Galtonian pseudo-science, the Association for the Study of Peak Oil & Gas holds its sixth annual conference in Ireland this coming week.
Present will be the usual motley of silk-suited Carbohypocrites - each avidly promoting their tax-eating, alternative-energy start-ups - a gang of anti-capitalist activists, a squawk of sensescent members of the political elite, and a whole Bronze Age roundhouse of associated Gaia worshippers.
A flavour of what will be on offer can be had from this excerpt from one Nate Hagens of the Vermont-based Gund Institute of Ecological Economics (sic):-
The economic system that has ruled the planet while populations have grown will have to choose different ends on a full planet, which implies different means. Supply will gradually become inelastic in a world constrained by energy and power density, temporally and spatially diffuse alternative energy options, and increasing limitations to non-energy inputs such as soil, GHGs, land and particularly water. But perhaps more importantly, demand is inelastic too. We have evolved particular neural mechanisms through 250,000+ generations as hominids, and millions of generations as mammals that a)cause us to compete for resources, b)allow our systems to by hijacked by novelty and c) cause us to focus our attention on the present, rather than the future. The talk will discuss habituation, addiction, hedonic adaptation and other recent neuroscience research showing that homo economicus fails at its most basic assumption -- that man is rational. But where we cannot change the way we are wired, we can change what the metric is. Sociological research already shows that we are not happy with more pecuniary accumulation, but are happier with more social interactions, friends and community. Politics is genetic. Economics is cultural. We have to work on changing this cultural carrot, which will then dictate how best to use the remaining high quality fossil fuels.
Comments (674)
Well yeah, if by rational these wackos mean omniscient, because that's usually what they mean and how they understand the mainstream neo-classical model, man is not going to be rational.
Published: September 16, 2007 6:45 AM
"Politics is genetic. Economics is cultural."
Assertions. Gotta love them. If these knuckleheads knew what they were talking about, they'd realize that every genetic trait they referenced, as well as their talk of material prosperity, is dealt with by economics. If anything it is politics that is cultural, and not economics.
Published: September 16, 2007 7:46 AM
civil and intelligent comment?
Not too hard in this company.
Published: September 16, 2007 8:07 AM
Mr. Corrigan, once again, ably distills the goings-on with :"Present will be the usual motley of silk-suited Carbohypocrites - each avidly promoting their tax-eating, alternative-energy start-ups - a gang of anti-capitalist activists, a squawk of sensescent members of the poitical elite, and a whole Bronze Age roundhouse of associated Gaia worshippers."
The whole Klatch just reminds me of a line from the movie, Wall Street: "Buddy, Buddy, come on, You're not naive enough to believe we live in a Free Market are you?"
Published: September 16, 2007 8:38 AM
It's always amusing to find people - like Mr Corrigan - who believe that repeating their beliefs as loudly and aggressively as possible gives them a magical ability to overwhelm physical reality.
Throwing peanuts from the sidelines may be entertaining and enjoyable - even if the peanits are small and not particular well-aimed. But the facts are that the ice is melting, the weather is getting more extreme, people are dying and essential resources are running out.
Perhaps Mr Corrigan will understand one day that being abusive for the sake of it is no substitute for rational engagement with reality - a reality which is accepted by trained experts with rather better qualifications than he has, and whose job it is to understand and model what's happening.
No matter how much he rants about people he doesn't like, the world is round, and not flat and will continue to remain round, and not flat.
If Mr Corrigan disagrees, he might like to research the story of Lysenko in the Soviet Union - an excellent example of what happens when a culture chooses dogma over solid peer-reviewed evidence.
As for 'tax eaters' - with half a trillion wasted in Iraq, it's hardly the ecologists who are doing the most significant tax eating, now is it?
Published: September 16, 2007 9:13 AM
I live in Texas. Despite improvements in technology, Texas produced 44% the oil in 2005 that it did in 1985. That is Peak Oil.
http://tonto.eia.doe.gov/dnav/pet/hist/mcrfptx1m.htm
Peak oil is a date. It is geology, not economics, politics, or theory.
The UK, like the US, is now an oil importer and oil is still dirt cheap.
Published: September 16, 2007 9:54 AM
The Irresisitible Force of Economic Growth - which is mandated by the mathematics of compound interest on a deficit-based Money Supply - is now coming up against the Immovable Object of finite resources generally, and liquid fuels in particular.
The assumptions upon which you base your contemptuous (and contemptible) case, Mr Corrigan, bear no relationship to the reality that we lesser mortals daily experience.
Published: September 16, 2007 10:13 AM
As a speaker at the ASPO-USA conference in Houston (and Republican from age 19 till age 52 when GWB cured me), I was amused by the knee jerk and hysterical response.
Well known socialist T. Boone Pickens (who recently committed $6 billion to Texas wind projects, no need to hawk projects with a ten or eleven figure checkbook) is also speaking, as well as oil investment banker Matthew Simmons (he supplies the jet that M. Romney is campaigning in).
Another speaker is Jeffrey Brown (who I collaborate with), who is now completing a new 1,000 barrel/day field in Texas. His mantra is "Economize, Localize, Produce" as a personal strategy for a post-Peak Oil world. I am sure that Ludwig Mises would violently oppose such personal lifestyle choices !
Jeffrey will be speaking on his Export Land Model, observing that oil exporters will usually satisfy domestic demand first and export what is left over. This makes Oil Exports a more importnt metric than Oil Production.
My first and most important recommendation is to level the playing field between trucks (who use socialized roads) and railroads on private ROW that chose to electrify.
The "Free Market" as it is today is leading to failure post-Peak Oil and the Peak Oil Movement is a hotbed of divergent ideas being actively debated. The debate is marked by civility, comity and intellectual rigor, lacking in the article posted here.
Check out
http://www.theoildrum.com
Best Hopes for More Light and Less Heat,
Alan Drake
Published: September 16, 2007 10:20 AM
The last sound on earth will be the squawk of an optimist. It is not merely peak oil, but the energy cost of obtaining it. Mideast oil still costs less than $1.00 a bbl to produce because it is abundant, shallow, and easily accessed with 1950's drilling technologies. The net energy yield (or energy profit) is about 60 to 1- burn a bbl and get 60 back. For US oil production, the net energy yield is close to zero or negative. We can only drill for oil here because it is subsidized by cheaper foreign oil. The American oil industry is parasitic on the economy.
Published: September 16, 2007 10:56 AM
Dear Sean,
What in particular is it about the word 'finite' that have difficulty with?
All finite resources rise, peak and decline in production. You may not have noticed that the UK North Sea oil output peaked in 1999 and despite oil having RISEN in price from $10 to beyond £70 in the interim, has declined to the point where the UK is now a net oil importer. So it goes also in many other countries. Ditto also eventually for the whole planet, and there's nothing Austrian or any other sort of economics can do about it. Physics always trumps economics.
Published: September 16, 2007 11:11 AM
Wow, it appears that many of the new commenters (Did someone link this to some leftist website?) seem to be incapable of comprehending what Corrigan actually wrote. Nothing he wrote denies the possibility that oil production has or is about to peak.
What Corrigan is attacking, aggressively so I will admit, is the idea that there is no solution other than putting the state in control of economics. This was the central idea of the gentleman Corrigan quoted. Here are the relevant sentences from that talk:
Now, tell me, what do you (skeptic, Richard Leon, Chris Cook, and Alan Drake) think he means. My interpretation is that since we are clearly irrational beings, we need someone like Mr. Hagens to tell us what we really want, and someone like Mr. Hagens to tell us what to do.
Also, in addition, we again see the absolutely ridiculous argument that since we are running out of oil, it is best that we stop using it. In either scenario, we stop using oil, so what is the point, exactly?
Published: September 16, 2007 11:40 AM
Mr. Corrigan...this is simple logistics. If you have X amount of a finite resource and you try to add additional consumption on top of that, someone is going to come up short. If the availability of the finite resource remains constant or itself starts to come up short, no amount of philisophical or strategical wrangling is going to bridge the gap.
It's why Patton didn't get across the Rhine in the late summer and early fall of '44. The finite resource faced increased demand from another quarter and he literally ran out of gas, despite his best attempts to beg, borrow and actually steal it.
One can explotate this to a more modern time as the cold reality of demand vs. resource availability makes itself felt.
Logistics doesn't care that oil may reach a price that makes it "economically feasable" to go to the moon in an attempt to find more. If it ain't there, it ain't there...and increasingly the quantities required to run the modern dreadnought simply aren't there...no matter how many holes they punch in the ground.
As it stands, they're not finding the kinds of quantities required to replace what's being burned up. And they're spending billions trying...
At the same time, the "free market" is cutting the existing supply with raw alcohol (like a cheap whiskey) just to keep the tanks full. They're trying to scrape the bottom of old wells like a used bong, hoping the gobs of hardened goo will be enough to keep getting high with. The same free market is sinking millions into trying to figure out how to burn rancid fruit and chicken grease in your tank.
If oil was flowing like the fountain of milk and honey that it used to be, why is the market throwing this kind of money at "alternatives"??
How can you call yourself a free market advocate if you refuse to watch the real indications the market is throwing to you...?
If I'm spending billions trying to figure out how to fly an airliner on chicken ass, there's probably an underlying economic reason for that...
Mean, mean logistics...it simply doesn't care about your markets, your lifestyle, your civilization. It merely asks, "Where's the stuff." Increasingly that question is becoming troublesome to answer.
Published: September 16, 2007 11:58 AM
It's amazing how much effort the posters in this thread have gone to in constructing strawmen to knock down -- paragraph upon paragraph making an argument that no one could possibly disagree with: that the oil supply is finite.
Published: September 16, 2007 1:20 PM
Are far as I can tell Sean Corrigan's 'article' just appears to be an immature stream of abuse for no particular reason. There is certainly nothing intelligent or civil about it. Get help Sean.
Published: September 16, 2007 2:53 PM
"But the f-a-c-t-s are that the ice is melting, the weather is getting more extreme, people are dying and essential resources are running out"
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Really? A-r-c-t-i-c ice may be undergoing one of its cyclical, multi-decadal retreats, but Antarctic ice is thickening and spreading (and is of much greater magnitude and hence more important).
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"Weather is getting more extreme"? No, uncritical reportage of violent weather is now a 24/7 infotainment item to distract us from the state of Paris Hilton's liver. Yes, unsubstantiated solipsism and propagandist scare-mongering about its effects may have become more extreme, but 'weather' itself? I think not.
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"People are dying"? Yes, they always have and always will (it's called 'mortality'), but - even assuming warming is not just an hysterical/political artefact or a natural fluctuation which will reverse over the next 30 years or so as it usually has in the past - more people tend to live better lives in warmer climes than in cooler ones.
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"Essential resources are running out"? Which resources exactly and which services that such physical resources currently supply?
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This may possibly be true of easily accessible oil (though even that is as much a man-made curse of bad politics and ill-defined property rights as any physical necessity), but e-n-e-r-g-y sources, in general? NO! Coal is abundant, as is nuclear (short-term supply humps notwithstanding) and we still barely exploit a fraction of a percent of the solar energy incident upon the earth because it has not yet paid us to do so.
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Besides, even if such an imminent depletion of the resources important to our present way of doing things were beyond question, the exact point is that their increased scarcity would naturally be signalled by higher prices on the unhampered market and these would (a) progressively rule out the least economically important uses and (b) offer very sizeable, free market incentives for entrepreneurs to make money in the service of their fellow men by finding ways to ameliorate such shortages. There is nothing in all this to argue for any of the evils of autarky, mercantilism, or the imposition of centralized controls on individuals.
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To blindly repeat the Al Gore/Sierra Club/WWF nonsense about us human cancer cells using up the bounty of three planets as if it were beyond contention is a statement of misplaced faith and an open invitation to collectivist control, not one of either scientific truth or economic logic - exactly the point my original post was making!
Published: September 16, 2007 3:00 PM
"For those who like their environmental gloom'n'doom"
Scientific truth about geology and resources is not doom and gloom. It is just stating the facts.
"spread with a thick dollop of Utopian totalitarianism and garnished with a slice of Galtonian pseudo-science"
You are generalizing. Not everybody is like that :)
Why don't you attend to find out? You could learn a few things about the real physical world of resources, rather than just mere ideas.
"the Association for the Study of Peak Oil & Gas holds its sixth annual conference in Ireland this coming week."
So you don't like ASPO? That's it?
Where is your _scientific proof_ that shows they are wrong?
"Present will be the usual motley of silk-suited Carbohypocrites - each avidly promoting their tax-eating, alternative-energy start-ups"
Ad hominem. Show a person doing this in the line up.
"a gang of anti-capitalist activists, a squawk of sensescent members of the poitical elite, and a whole Bronze Age roundhouse of associated Gaia worshippers."
Anti-capitalist? You clearly haven't even read the conference schedule and contents.
"Vermont-based Gund Institute of Ecological Economics (sic):-"
Do you have _any idea_ what ecological economics is?
Do you understand philosophy of science?
Do you understand the scientific method?
Please post more of your enlightening thoughts, when you do.
Published: September 16, 2007 3:15 PM
This is encouraging. I think the sudden spike in desperate posts here might be an indication that "ecological economists" (as if there is such a thing) are becoming uncomfortable wrestling with their denial in the face of reason.
Published: September 16, 2007 3:47 PM
Yeah, Mr. Corrigan, it's like, duh, if there's a jar full of M&M's and you're eating them, eventually they're gonna be gone. Finite resources and all. Then you're screwed. What does your precious economics have to say about THAT?
Some of you better wise up or you're in for a rude awakening when society returns to a glorious, er...I mean, primitive, poverty stricken hell.
Published: September 16, 2007 4:30 PM
Firstly, Antti Kaipainen: Standard scientific method does not apply to economics--an economy of around 6 billion different people engaged in various and sundry activities to support themselves, their families, pets, causes, etc is too complex a system to completely isolate variables in an experiment. Popper's work only applies to the [i/]natural[i] sciences, not the social ones.
Secondly: What reason, Vanmind? All these comments seem to be poorly written polemics hurled around.
I'm willing to bet that environmentalists form a large enough portion of the US economy that if they stopped demanding the government to enact ever more incomprehensible and contradictory regulations and instead started a company to manufacture environmentally friendly technology (like low-emission cars, alternative energy) we would not have to worry about anything.
So find some venture capitalists!
Published: September 16, 2007 4:33 PM
Peak oil relies on the inability to more and different sources of fossil fuels, the anthropogenic story of global warming is getting more skepticism than ever (get this: humanity's total contribution to carbon dioxide in the atmosphere is like the linoleum on the first floor of the empire state building), and all of this eco-malthusianism misunderstands the power of freely trading people to preserve and extend their resources. If Nate Hagens gets his way, we'll be stuck on the same fossil fuel formula that his lack of imagination cannot see beyond.
Published: September 16, 2007 4:42 PM
Oil production is to a very large part politically controlled. Arabic kings and US wars are not market forces.
Politicians have incentive to cause short term overproduction of oil in order to stimulate consumption during their period in power. If the oil wells of the world were for sale, their owners would not extract the oil at todays low prices. They would wait until proces rose. With market forces, oil prices would rise gradually during a long time, stimulating one substitute after the other to kick in.
Peak oil is a problem caused by politics. Market economy is the solution!
Published: September 16, 2007 5:41 PM
Following the same logic, horse manure production as decreased sharply in the last century, therefore there is going to be some serious horse shortage a few years from now...
Published: September 16, 2007 6:14 PM
Wow, what is with the influx of stupid commentary? "Physics trumps economics" What?
RWW: "It's amazing how much effort the posters in this thread have gone to in constructing strawmen to knock down -- paragraph upon paragraph making an argument that no one could possibly disagree with: that the oil supply is finite."
I know! It's ridiculous.
Published: September 16, 2007 6:38 PM
Clashes of Fundamentalisms are always funny, shame its the real world that sickens as we bicker. I predict Mises fans will declare ideological victory when their local gas station starts auctioning fuel in 10gal cans, shortly before they scream for government mandated prices.
Published: September 16, 2007 7:35 PM
"Clashes of Fundamentalisms are always funny, shame its the real world that sickens as we bicker. I predict Mises fans will declare ideological victory when their local gas station starts auctioning fuel in 10gal cans, shortly before they scream for government mandated prices."
Why would we do that?
Published: September 16, 2007 7:42 PM
Would one of the "peak oil" guys posting here please inform us of exactly how much oil the planet has. To know that we're close to running out of oil, you would have to know exactly how much we have. So please tell us. Then we can use the current rate of depletion and learn the exact year we will run out.
Published: September 16, 2007 9:00 PM
To know that we're close to running out of oil, you would have to know exactly how much we have. So please tell us. Then we can use the current rate of depletion and learn the exact year we will run out
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That is not how oil extraction works. A number of oil fields will still be producing significant quantities of oil a century from now.
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I would wager that South Ghawar alone will produce more than 100,000 barrels/day. Canadian tar sands (if natural gas is still available) and Orinoco asphalt will likely be over 1 million b/day each in 2107 (less certain about Orinoco).
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As the saying goes "It is not the size of the keg, it is the size of the tap."
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Production rates are bound by a large number of factors, many of them reservoir specific. And a general truism is that the faster the rate of extraction, the lower the overall oil recovery % will be.
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Also, the supply of oil from a geologically depleted province has very little price elasticity of supply. Example, Texas 1972 (their Peak year).
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http://www.dallasnews.com/sharedcontent/dws/dn/opinion/points/stories/DN-brown_11edi.ART0.State.Edition1.900c598.html
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The East Texas oil field still produces 1 million b/day. Unfortunately, it is 99% water. The oil produced today from East Texas could not have been produced twenty years ago by any known economic exploitation strategy.
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North Ghawar, the "good end " of the largest oil field and the largest producing province in the world, appears about to water out in 1 to 5 years time at full production rates.
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Cantarell, the source of 60% of Mexican exports in 2004 and, until recently, the second largest producing oil field in the world is another example. First produced in the late 1970s, it peaked with conventional production at 2.2 million b/day and then sharply declined to just over 1 million b/day. Massive nitrogen injection boosted output back to 2.1 million b/day and now it is in very steep decline (scenarios leaked from Pemex have a range of 14% to 40%/year, the President of Mexico acknowledges "double digit" declines).
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Peak Oil does NOT mean that we "run out of oil". It means that the rate of production declines and economic incentives have little impact on production rates (see Texas, see Cantarell today).
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Major new oil production has long lead times (about a decade typically) and depletion within that time frame will very likely exceed known new production for a significant net decrease in oil production and an even greater reduction in available oil exports.
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Peak Oil is about rates of production declining.
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Best Hopes,
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Alan Drake
Published: September 16, 2007 11:01 PM
What a parade of economic ignoramuses...
Clue: if some resource gets depleted prices go up. When prices go up, the use of alternative resources becomes economically feasible.
And we do have a huge source of energy (er, negative entropy - the energy is conserved) right up there in the sky.
Trying to rush switching over from a finite resource to a not-yet feasible alternative is just as stupid as calling to conserve rocks - because they are also finite on this planet and humanity is sure to run out of them at some point in the future.
Published: September 16, 2007 11:51 PM
Galton was not a pseudo-scientist. He invented fingerprinting, the weather map, the silent dog whistle the correlation coefficient and the concept of "regression to the mean". He was a genuine scientist whose work we still benefit from.
Published: September 17, 2007 12:07 AM
All I know is that if we have a problem, ONLY THE STATE CAN FIX IT.
But then again, because politics is genetic, I was born a communist.
Seriously, one would laugh if it all wasnt so sad.
Published: September 17, 2007 12:46 AM
What a parade of economic ignoramuses...
Clue: if some resource gets depleted prices go up. When prices go up, the use of alternative resources becomes economically feasible
Let me introduce you to the non-Austrian concepts of EROEI, energy return on energy invested and the
Law of Receding Horizons".
What is the energy gain for the energy invested into extracting the energy (energy economics rather than dollar economics) ? Society gets to operate off the profit, not the gross energy produced.
And the related Law of Receding Horizons notes that the more expensive (in $) conventional energy gets, the more expensive alternatives become (because the direct and indirect cost of energy to produce the alternative increase). Thus, when prices go up, the use of alternative resources does NOTbecome economically feasible !
Ethanol derived from corn has an EROEI of 1.3, Tar Sands about 4, Today's US Oil about 10 and steadily declining, Past Oil 100. Oil shale perhaps 3. Nuclear reactors are a matter of some dispute, but 40 is close, and wind turbines about 40 as well.
UK coal production peaked in 1913 when 1/7th of the coal mined was used to mine coal. An EROEI of 7.
Speculation is that modern society and civilization cannot operate on EREOI of 4 or 5, and that major disruptions occur as EROEI declines. EROEI also predicts that oil shale and corn based ethanol will never be economic unless one form of energy is significantly cheaper (say natural gas) than another (say gasoline). And in an energy constrained world, different sources of energy will tend towards equilibrium.
There is a definite observed (if poorly measured) trend towards lower EROEI over time.
There is a good argument, IMO, to use resources in today's higher EROEI world (lower than last year) to create long lived infrastructure that will save or produce energy in tomorrow's world. Thus Germany will derive future benefits from not issuing building permits unless new homes have R-49 wall insulation, etc.
I personally think that an Austrian school, leave it to (inefficient) markets approach will result in GDP at a small % of today's GDP and major social and economic disruptions. The reasons for market inefficiency are a matter of debate within the Peak Oil community but it is generally conceded that the markets are inefficient.
My annual stock market returns of 20% to 30% (compounded) for the last 5 years are partial evidence of market inefficiency.
Best Hopes,
Alan
Published: September 17, 2007 5:13 AM
EROIE is one of those seemingly self-evident statements which nonetheless obscures its irrelevance to matters of economics.
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For example, if I decide I like the taste of hand-massaged Japanese beef beyond all other foods, it matters not a whit that the calorific content of what I ingest is a small fraction of that which went into its production. Indeed, it was entirely my choice not to graze the lawn outside my house instead, a choice made because of the greater satisfaction I expected to derive from the finished product and as long as I can afford it, bully for me!
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Now, given that some estimates have it that the incident radiation flux from the sun equals, in a matter of a few short weeks, the current (definitionally incomplete) estimate of known mineral energy resources we are some way from approaching any absolute frontier of physical availability and hence we can be just as physically inefficient as it pays us to be in making such conversions.
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Where we are, of course, is that it is currently many times more convenient - and hence it entails much lower costs - to use those minerals now, while they are still cheap and readily available. To rig the market and/or to infringe personal choice in the name of some new 'Manhattan' project in favour of installing vast acres of materially wasteful, unsightly and risibly inefficient windmills, or by dictating that consumers take long-term capital spending decisions (through, e.g., 'higher' building standards) they would not otherwise countenance is to assume that bureaucrats, politicians, and tax-eaters in general are intrinsically more able to make wiser, more far-sighted decisions about our individual welfare than we can ourselves - the verdict of history is not exactly favourable to such a view point.
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Moreover, as even many Germans in the 1930s realized, insisting on unnecessarily inferior 'ersatz' production methods imposed genuine welfare costs on society little justified by their putative long-term benefits (hence my reference to Mein Kampf which was not, therefore, an easy sign of a losing argument - as some energy catastrophist blogger snidely remarked elsewhere - but the drawing of a genuine parallel with much of what lies at the core of today's Green politics, 'low food miles', energy 'independence', et al)
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As with all such state-led picking of 'winners', 'national champions' or 'technologies of tomorrow', the door is not only opened up to much covert banditry at the expense of the tax payer, the consumer, and the honest entrepreneur (which just about covers all of us not earning a crust from Leviathan), but the opportunity costs of all these broken windows are always left unnoticed.
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Why dictate that individuals surrender their welfare in order to lock into inferior technology today, instead of allowing each of them to make what they feel is the best possible use of what is available now (as guided best, of course, by free market price signals and as supplied most effectively by the entrepreneurial decision making to which these give rise)? That way, the surplus available for investment in new solutions will also be maximised and the detrimental effects of any physical constraint (should these ever, in fact, arise) will be greatly reduced.
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To employ a little Crusoe economics, it makes no sense to give up eating the shrinking harvest of berries on the nearby bush because the realisation suddenly dawns that they will one day run out and instead to start scrabbling around inefficiently trying to dig up hard-to-find wild roots from far up the hillside, on the basis that this is ultimately more ‘sustainable’. Far better to meet one’s daily nutritional needs in the shortest order by eating the berries while they last and by then using the time saved and the ability to work left over by collecting seeds and preparing the soil for one’s own vegetable garden and fruit orchard (i.e. by maximising short term returns and investing the savings in the capital with which one expects to ensure and hopefully to increase future income)
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And yes, when we try to tap some novel source of energy, the associated inputs may also go up in both intensity and price. Funnily enough, the first is usually a concomitant of a deepening capital structure, while the second applies to all economic goods which are, sui generis, 'scarce'. Having one's cake and eating it only plays a role in political, not economic, theory which is why savings are crucial to advance: that requisite pool of savings is not likely to be deepened by the forced impoverishment which the Gaians would call down upon us all.
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Such problems of allocation and choice would, of course, be solved in the least time and at the lowest cost by the action of the unhampered market. The fact that they are not, should not lead us to the market cannot work – or that it is ‘inefficient’ (your stocks went up largely due to that other non-market evil of inflation, by the way) - rather that it is not being allowed to do so.
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That is a failure which we can attribute to the same, sorry litany of political interventionism and intolerant Utopianism which so pervades the thinking of Peak Oilers, AGW zealots, and that global Platonic elite which insists all we little people give up our cheap flights, compost our own manure, and restrict the numbers of our offspring, so they can continue to enjoy their luxurious and ill-deserved lifestyles unimpeded on a world reduced to a planetary theme park for their exclusive pleasure.
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Accordingly, the attempt - often explicity endorsed by such organisations as ASPO - to solve a problem of market interruption and the violation of property rights through a programme which is composed of further such outrages seems a little - shall we say, perverse?
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PS Did UK coal output begin to fall because a certain EROIE threshold was crossed or because the use of oil became much more efficient (or because the British state – in the form of Churchill – favoured using that oil for the Royal Navy out of an exactly analogous false Malthusianism) even as labour costs were being artificially boosted by rising trade unionism and capital was being destroyed on a vast scale by war and inflation? Ironically, there are currently moves afoot to reopen some of those fine Welsh coal seams – assuming, of course that the Ultraviridians don’t prevent it because of their irrational and unscientific fear of CO2 at the same time that they bleat that we are facing an incipient energy crisis.
Published: September 17, 2007 7:17 AM
Alan: "Peak Oil is about rates of production declining."
What determines the rates of production? Investment and technology. Are you telling me that no one will invest in new production in the future and that no technological improvements will ever occur again?
Current high prices are a result of the lack of investment in the oil industry during the '90's, which was caused by low prices. High prices spur investment in new drilling and technology, which increases production. For example, new laser drill bits will increase the productivity of drilling dramatically because drillers won't have to pull miles of pipe out of the hole to replace mechanical drill bits.
Published: September 17, 2007 8:03 AM
"by maximising short term returns and investing the savings in the capital with which one expects to ensure and hopefully to increase future income)"
Have you any evidence, Mr. Corrigan, to suggest that this is what the industry is actually doing, or any explanation for why they appear rather to be doing precisely the opposite?
Far from investing the savings, the supermajors are returning it to the shareholders for lack of anywhere suitable to invest. They are merging and downsizing their workforces because they can't keep them gainfuly employed. They are shutting down their R&D facilities. They are failing to invest in new refining capacity, even though demand growth projections indicate that new capacity will be necessary within the investment cycle.
Why, if your theory is correct, are major oil company CEOs coming forward to confirm the reality of a peak in conventional oil supply in the near future? Why is the industry giving every signal consistent with being in long term liquidation? If industry is the agent of the change you believe them capable of, how long do you suppose it can continue to function with compounded annual reserve replacement factors now of below 60%?
Published: September 17, 2007 8:47 AM
Sorry, but I suggest you check your facts and pay less attention to the doomsters.
=================================================In truth, industry investment IS rising even if - yes - money is being returned to shareholders at the same time (check out quarterly reports to that end). If there were no investment and no expansion, how would we explain the strong performance of oil service stocks, rising rig counts and rig rates, rising engineer salaries, etc etc?
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Granted, costs have risen so sharply that the effectiveness of much of this has been less than spectacular, but R&D and E&P budgets have risen substantially in recent years.
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Refinery capacity is also on the up - so much so that there are fears in some quarters that we may soon face a glut. Most of this investment, yes, is taking outside the US (perhaps that's why you seem to have missed it) as crude producers wish to 'add value' by adding to their downstream facilities and as those countries not hog-tied by Western enviroluddites are seeking a piece of the pie.
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Yes, CEO's at the IOCs are facing problems replacing reserves, but that's because they have been frozen out of c.90% of known deposits and are having to be content with earning money from expertise and processing/distribution, not ownership. Extrapolating from this political truth to assume that nothing is being added to national oil company reserves is highly questionable at best.
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Nonetheless, it is hardly supportable to say that the oil majors are "giving signals consistent with long term liquidation", whatever they might be. For example, XOM's stock is up 150% absolute and 70% relative in the past four years, in which time shareholders' equity has risen 40% and ROC has expanded from c.23% to 33% - some decline!
Published: September 17, 2007 9:44 AM
What determines the rates of production ?
The primary determinate is geology. A comparision between the northern and southern halves of the world's largest reservoir, Ghawar can illustrate.
North Ghawar is medium quality oil with near ideal rock formation (high permeability). It has produced as much as 6 million b/day (from memory) in the past.
South Ghawar is thicker, lower quality oil in tighter rocks. It is doubtful if it will ever produce more than 1 million b/day, although it can be expected to produce this oil for a very long time.
The total volume of oil in the two halves is roughly comparable. The ultimate recovery % will be lower in the south.
The secondary determinant is the strategy of development. The major oil companies (before KSA bought them out) wanted to inject water throughout the field and the Kingdom vetoed this because it would increase production rates at the expense of a lower % of oil recovered. Instead, Aramco has water flooded the periphery of the oil/water boundary and gradually drained North Ghawar, maximizing the total oil recovered at a lower production rate (6 rather than, say, 10 million b/day max). An "efficient market" would have drained N. Ghawar before now and oil prices would be $150 rather than $80 today (my estimate on price elasticity of demand with Aramco production 1/3rd of today).
Are you telling me that no one will invest in new production in the future
As with Texas in 1973+, massive investments will be made in seeking oil, but relatively little will be found. Larger reservoirs are simply easier to find and are found first.
Texas saw +1000% prices, producing wells up +14% and production down -26% in a decade (1972 3.4 million b/day, 1982 2.5 million b/day, 2007 1.06 million b/day) $150/barrel will NOT bring forth significant new supplies from Texas, or any other mature oil producing province. And almost every significant oil producing province is mature.
Investment and price elasticity of supply of oil are largely irrelevant, except on the margins for a few %. Besides, investment on large scale oil projects takes about a decade from $ in to oil out. Higher investment will mean very little new oil on the market (see Texas after 1972 peak).
The last two super-giant oil fields discovered in the world were both in Kazakhstan, in 1988 & 2000. The 2000 discovery (1 million b/day) MIGHT see production in 2011. Outside this one corner of the former Soviet Union, no super-giant fields have been discovered in over 20 years. We get about 60% of oil production from super-giants.
and that no technological improvements will ever occur again ?
No significant new technology will see widespread implementation in the next ten years. Prior experience with other oil field innovations supports that view.
As for laser drill bits, even if they work (VERY unlikely) the energy requirements will be enormous to vaporise rock. Despite much lower EROEI, there is also the issue of getting energy to the drilling site.
Cheaper wells are NOT a solution if there are only small pockets of oil left. And well drilling technology has already improved with little effect other than opening up ultra deep drilling. And all world-wide ultra-deep drilling combined is unlikely to ever equal Ghawar alone.
Better seismic has increased the wildcat success rate (some oil found, even if not commercial) from 1 in 6 or 8 to 13 in 14. Limited room for additional improvement. And better seismic also increases the confidence that not only are no super-giants left, but also no giants and few medium size fields. Just lots of small fields that were overlooked before. Jeffrey Brown (author of the linked editorial) is now completing a 1,000 barrel/day field in Texas that will add significantly to his wealth but not to Texas production.
Best Hopes,
Alan
Published: September 17, 2007 9:58 AM
Alan Drake,
You keep missing the point. However, I will credit you with finally owning up to the statist intentions of a lot of peak-oil alarmists, thus proving Corrigan's actual point.
As for EROEI, I doubt there is a single Austrian economist that is unaware of its significance to energy production. However, it is pretty irrelevant to the economic solution to the problems caused by the depletion of finite stores of fossil fuels. As oil and gas are depleted, the prices will rise, and at some point alternatives such as nuclear, wind, solar, or something else still unforeseen will become economically viable as a source of marketable energy. It does not matter that these alternatives, today, have lower EROEIs than the energy sources they are replacing, it only matters that they exist. Price signals will determine which are developed, used, and in what proportions, and the market price signals will do this in the most efficient way possible because it includes all the necessary information for making the requisite decisions. For example, you mentioned a level of insulation as a state mandate that would be more efficient than what the free market would decide. However, you completely overlook today's costs of the mandate, and how those extra costs in the present subtract from future value. In other words, you neglect to include them in your cost/benefit calculation- the same mistake all statists make. The free-market price system does not overlook these costs- they are already included by the fact that some participants already purchase such insulation. If those present purchasers are correct in their cost/benefit analysis, then increasing numbers of market participants will freely purchase such insulation in the future. If those present purchasers are incorrect in their cost/benefit analysis, their actions will not be adopted by increasing numbers of free-market participants.
The same logic applies to your claimed success at stock trading. If, in fact, you are truly ahead of the market curve (you have correctly anticipated a future price signal), others will notice and adopt your strategies, and your return on your strategy will decline. To stay ahead, you will have to find another successful strategy. The fact that you were successful the last five years does not even partially prove that markets are less efficient than you as a whole, just that you were more efficient at a particular point in time. In time, you may prove that you are better able to predict future price signals than the market over the course of your life, but that still does not support the case for using state coercion to force everyone to adopt your decisions today since we would need to be omnicient to know that you were correct. And if you were wrong, then the harm to the whole would be magnified, and since state decisions often don't get overturned by market realities, it may be an everlasting harm.
Published: September 17, 2007 9:59 AM
Oh, well, I see I should have read the thread just a little longer before replying. Corrigan had already written my reply.
Published: September 17, 2007 10:05 AM
Rich,
Even if I grant to you all that you assert, the obvious reply is, "So what?"
How do you know that returning increasing income to the shareholders is not the best path available to oil companies? If you think what they are doing is wrong-headed, then you and others like Alan Drake can take advantage of this by putting your own capital at risk.
Or are you more like Alan, wanting to coerce others to put their capital at risk based on your opinions of what is best?
Published: September 17, 2007 10:19 AM
You cling to the fallacy of an efficient market with respect to oil/energy, which is demonstrably false.
First, to use the Crusoe analogy, the optimum choice is to consume a fraction of the diet from the easy to get berries & nuts (perhaps drying some) and get part of the diet from harder to get sources. So that 1) the effort required to keep from starving never exceeds the calories available and 2) when sick or some other shock (broken leg) occurs, the easy to get resource is available to prevent starvation and not entirely depleted. I think Aesop had something to say about grasshoppers and ants in that regard.
Second, rational trust fund recipients generally prefer level payouts (with perhaps higher levels during child raising years and old age) because of the marginal utility of money. Money to provide basic needs has significantly higher value/utility than money for simple luxuries, which has higher utility than money for conspicuous consumption.
However, Net Present Value calculations would call for all the trust money NOW !
I truly expect to see the US GDP shrink by half or more, with associated social distress and economic dislocation, as available oil shrinks significantly and no “good” substitute appears. One can argue that maximizing GDP today at the cost of minimizing it tomorrow gives one maximum NPV (it may well do so), I would argue that most Americans would prefer a more stable economic environment.
Third, those statist, uber-liberal Swiss voted in 1998 to spend 31 billion CHf over twenty years to improve their already excellent rail system. There were several goals, but the primary one was to shift freight off heavy trucks and onto their hydroelectric railroads. Adjust for currency and population and this is comparable to the USA voting $1 trillion for a similar purpose. Many 1998 voters would get little or no benefit for this investment (dying beforehand) but, IMO, a hallmark of a successful society is making prudent, long term investments even if the NPV is low.
Fourth, the free market solution for developing North Ghawar, proposed by the IOCs, would have maximized production in the 1960s to 1980s at 10 million b/day and resulted (one estimate) in 20% less oil in toto being produced and essentially no oil today in today’s high price environment. The Kingdom chose a slower rate (max 6 million b/day and more oil in toto). In retrospective, the NPV chosen by the Kingdom is higher than that of the IOCs, and the social benefit is dramatically higher.
Fifth, the UK and Norway developed North Sea reserves side by side. UK was strictly market forces & develop AFAP by the IOCs (and spend the royalty money as fast as possible). The Kingdom of Norway withheld several smaller, then marginal reservoirs, for development later and enforced some production limitations to maximize total production. UK Peaked in a period of low oil prices and it now a net oil importer. The Norwegian production peaked later and they got much higher NPV for each barrel of oil originally in place (I daresay 50+% better). And Norway is saving & investing their oil royalties.
Sixth, adding high levels of insulation in new construction is about 1/10th to 3% of the price of retrofitting it later. Insulation reduces energy consumption passively, and the market does not price all of the externalities of energy into the marginal price paid by the user. The Iraq War comes to mind. In Germany, it is political fear of excessive energy dependence upon Russia as well concerns over Global Warming. Although the building owner benefits from improved insulation, the benefits may not be a positive NPV (that will depend upon future energy prices & interest rates). However, it could be considered a tax on the builder for 1) benefits to future generations 2) a national defense tax and 3) environmental benefits.
Best Hopes and Likely My Last Post,
Alan
Published: September 17, 2007 11:37 AM
Yes, Cro-Magnon man truly was a wealthy SOB without a care in the world, what with those plentiful resources and all that wonderful unused oil. Oh, but today we're hounded by that terrible beast of the modern age - scarcity. What can save us from scarcity? What science can possibly inform us of how we can continue live without ration cards when it is ever more apparent that roasted chickens do not fly into our mouths and the seas aren't filled with lemonade? A curse on the person that paved the road to our impoverishment by using the first drop of petro.
Published: September 17, 2007 11:41 AM
Alan,
You cling to the fallacy that you can always make better predictions of future value than the market as a whole. This is the thing that is blinding you. We don't know that the Swiss have made the correct investment at the correct time- you again completely discount what is not, and now won't be seen. The same thing applies to Norway and Great Britain- we still don't know who made the better decision in the long run, or even now, because you once again only focus on one side of the investment equation.
We have gone 41 comments deep, and I have to acknowledge that the most correct and succinct comment was the very first one by Mathieu Bedard.
Published: September 17, 2007 11:53 AM
Alan: "Outside this one corner of the former Soviet Union, no super-giant fields have been discovered in over 20 years. We get about 60% of oil production from super-giants."
So you're saying that we will discover no new significant oil fields in the future at all; we have discovered all of the oil that the planet has? And you're saying that no new technology is on the horizon that will reduce costs of searching and drilling for oil? I assume, then, that you would be purchasing future contracts in oil in the hope of making a killing?
Published: September 17, 2007 12:22 PM
So you're saying that we will discover no new significant oil fields in the future at all
Zero, one or two supergiant fields left to be discovered. Low probability of three. From memory, a 5% chance that ANWR is a supergiant (better than 50% of being a giant oil field). The Arctic is expected to trend gas more than oil and likely contains several supergiant gas fields with some associated oil, but the ratio may surprise. The South China Sea (if territorial claims can be settled) is the best single chance left on this planet. Yellow Sea probably has at least one giant, but no supergiant, oil field. Likewise offshore Africa, Brazil and GoM.
With modern seismic techniques it is almost impossible to hide a supergiant oil field.
we have discovered all of the oil that the planet has?
Some giant and medium size oil fields left here and there (China found one recently in the Yellow Sea that was giant at first estimate, revised down later) and LOTS of small puddles.
Global production at 1,000 barrels/second (about 600 barrel/sec from supergiants) takes a LOT of big reservoirs and giants cannot replace depleting supergiants.
And you're saying that no new technology is on the horizon that will reduce costs of searching and drilling for oil ?
Yes. Never say "never", but not on the horizon.
I assume, then, that you would be purchasing future contracts in oil in the hope of making a killing ?
I have invested in oil & gas companies with good reserves and no refineries & pipelines, as well as railroads over two years before Warren Buffett did. Small shorts on airlines, mortgage companies and casual dining/fast food. Safety portion in hydroelectric producers and foreign denominated bonds.
Could not resist,
Alan
Published: September 17, 2007 1:58 PM
Alan Drake: 'Another speaker is Jeffrey Brown (who I collaborate with), who is now completing a new 1,000 barrel/day field in Texas. His mantra is "Economize, Localize, Produce" as a personal strategy for a post-Peak Oil world. I am sure that Ludwig Mises would violently oppose such personal lifestyle choices !'
You must be joking.
"I personally think that an Austrian school, leave it to (inefficient) markets approach will result in GDP at a small % of today's GDP and major social and economic disruptions."
The Austrian School is actually opposed to inefficient markets, that is to say opposed to the claim of "market economy" by what is actually an interventionist economy. You are correct, Alan, that what you perceive as the market (but what is actually coercive intervention) is inefficient. P.S. GDP=LOL
"You cling to the fallacy of an efficient market with respect to oil/energy, which is demonstrably false.
First, to use the Crusoe analogy, the optimum choice is to..."
Wrong wrong wrong. There is no objective optimum choice, Alan. Value is subjective. Perhaps I would rather live like a king today and die tomorrow. You would probably say that such a choice would be error, but you would be wrong again.
"Many 1998 voters would get little or no benefit for this investment (dying beforehand) but, IMO, a hallmark of a successful society is making prudent, long term investments even if the NPV is low."
Stealing from the elderly, Alan? Shame on you. Where's your mother?
Published: September 17, 2007 2:46 PM
I think Alan is going to make a lot of money, despite the fact that he has the whole story wrong. Uncle Sam and the FED will make sure that his investment's rise.
"The stone age did not end because we ran out of stones, neither will the oil age..."
Published: September 17, 2007 3:04 PM
Richard makes a comment early on I would like to address.
"If Mr Corrigan disagrees, he might like to research the story of Lysenko in the Soviet Union - an excellent example of what happens when a culture chooses dogma over solid peer-reviewed evidence."
He uses this precisely backwards. It is an excellent example of what "peer review" actually delivers...vetting via groupthink instead of empirical testing, the actual gold standard of scientific method. Peers afraid to come to any conclusion other than that held by the party all agreed Lysenko's take on reality was correct, and since they had a consensus...concluded they were correct.
This didn't make a round earth flat, however...and in the real world, millions starved to death while Lysenko tried to teach wheat to grow where it would not, according to proper marxist theory instead of the bourgeous genetics of the capitalists.
HCGW is the province of dogma when it is claimed to be a 'truth', and doubly so when 'consensus' is invoked as proof or evidence in itself. The history of science is absolutely littered with shattered consensus views, and this one is being used to back a program extending the power of govt over billions of people's live, resources, lives and actions....all based on a theory for which no control case empirical testing is even possible.
When anyone tells you the earth is 0.8C warmer (or whatever) than it 'should be' absent man, ask them to provide the location for the empirical measurement of the baseline unforced temperature. The fact of the matter is it has been at least a century since any empirical baseline measurement could have been taken if their theories are correct, and the farther on in time we go, the more divergent any current claim is from being empirically tested.
Secondly, even if the theory had the possibility of empirical testability, it carries no social imperative or moral basis. Science merely tells us what is and in some cases what will be.
It cannot tell us what is good or desirable. These are all value judgements. This subject has been hijacked from science and straight into politics for those who wish to use it as a lever. This is proven by the fact that shortly after you are told this idea is 'fact' or has 'consensus'...you will be told this means increased collectivism is what must be done, as if science tells us this. It tells us no such thing.
Published: September 17, 2007 10:57 PM
In reading alan's comments I am continually struck by his continual use of value judgements, resting on his values, to define what is 'rational'. Now, I can agree that given a particular personal choice some decisions may be 'rational' when analyzed using a particular logical chain, but the problem is that Alan seems impervious to the idea that other people have goals and values he may neither comprehend or even know of. When claiming it's 'rational' to invest in any one way, he's ignoring that he must first know the goals of the people he's judging, and why they value these goals, and the tradeoffs they have decided to make.
In this light we can see the comments on the ordering of markets, resource utilization, and personal choices are all colored by assertions based on people he doesn't know making decisions based on values he cannot know.
He is inadvertantly demonstrating why markets are superior the mandates he suggests...the market's divergence from his choices show that it's participants are making choices they value for reasons he doesn't and can't know. Precisely why markets respect rights, when properly formulated and defended.
Published: September 17, 2007 11:05 PM
Alan - in case if you did not know, free market is weakly Pareto-optimal at any given moment of time if the utility functions are defined as, ahem, personal utility functions of all participants. And because it is also an evolutionary optimization machine (owing to the fact that people tend to imitate success) it also always converges on strong Pareto-optimality, given steady environment.
The proof of weak optimality is trivial, and basically follows from the definition of personal utility function.
It follows that any regulaton (which either enforces non-efficient transactions or prohibits efficient transactions) cannot make market "more efficient". It is impossible, period.
Where your EROEI argument is wrong is that it assumes that energy matters. In fact, it does not (you should have noticed the remark about negative entropy). The Earth suface receives and dissipates roughly the same amounts of energy (or it'd be heating or cooling). I find it amusing that quite a lot of people pontificating about "energy policy" do not bother to think about ramifications of the energy/mass conservation law which they sure must've have heard about in the middle school.
What matters is the efficiency of conversion of high-energy photons coming from a little spot in the sky into low-energy photons going to all different dark places in the sky, as defined by the increase in the entropy of these photons.
The fossil fuel usage is a very inefficient mechanism of conversion of solar photons. It is several orders of magnitude worse than simple things like Stirling engines - and is economical only because it is, essentially, a form of spending the bound negentropy which accumulated over millions of years through the hugely wasteful solar->plankton biomass->geo-liqueification process (if we discount the abiogenic theory of oil formation).
Now, listen carefully, the efficiency has both fundamental (efficiency of Carnot cycle) and technological limits. We are so far from hitting the fundamental limits, that it is not going to be a problem until we run out of raw materials in the Solar system. The technological limits are, essentially, is what we didn't figure out how to do - yet. And if there's a sure way to kill innovation, it is to start regulating it.
Which is what all your proposals are about. Stretching life on borrowed time instead of doing business using the inherited capital. How very smart.
(BTW, I've got better ROI just by living in my house in Silicon Valley... which proves - what? Exactly, nothing.)
Published: September 17, 2007 11:35 PM
I'll agree that this article was obviously politically slanted, and probably has no place on an economics blog. Whether or not peak oil or global warming exist has absolutely nothing to do with economics of any sort, and no economist could claim that we are running out of oil too quickly because we have a free market in it (and we don't, not even close).
In any case, I'd like to point out a gross error in the quoted text. Social interactions, which make people happy, are not "politics". Politics is a means of controlling the power of the state. Since the state is a near-monopoly on the use of legitimate force over a given territory (Weber, 1919), politics is the means to acquire legitimized force. That is very, very different from social interactions, and I believe it is dangerous to associate politics with voluntary society.
Published: September 18, 2007 1:04 AM
The "economists" who frequent this site seem very unwilling to stand back and look at the big picture of how the global economy works.
Ever since the start of the industrial revolution the world has extracted and consumed more coal, oil and gas each year. It is easy to make a case that "economics" is really no more than the study of how this vast store of free energy is distributed to a grateful populace. When we talk about the "work" that we do in our offices and factories we are really talking about our small part in distributing and consuming this store.
Clearly, at some point in time, this situation will end. Coal, oil and gas are finite and in time we will find ourselves progressively consuming less each year. Even the most devout believer in markets might stop and wonder whether our fragile global economic system can deal with this. It is a profound leap of faith, for example, to assume that renewables can act as substitute (for all uses of fossil fuels, not just energy).
World population has grown ten-fold since the start of the ind. rev. The resources might be going away but this massive population won't (at least, not voluntarily). Again, this should be real food for thought.
Published: September 18, 2007 5:18 AM
"World population has grown ten-fold since the start of the ind. rev. The resources might be going away but this massive population won't (at least, not voluntarily). Again, this should be real food for thought."
The reference to Malthus in the title responds to this.
Published: September 18, 2007 5:56 AM
Yes, but any clarity of thought in the article and comments is subsumed by a torrent of labels such as "Carbohypocrites" and "knuckleheads".
I don't really buy in to Campbell (of ASPO) style "peak oil is the end of economics", because while coal and unconventional oil are around there will be many ways to make liquid fuels.
But at some point (this century?) the world is going to have to face up to year-on-year declines in ALL fossil fuels, coupled with growing environmental problems and a population of maybe 10 billion. Its going to be interesting, to say the least.
Hopes that Adam Smith will come to the rescue seem far fetched. He didn't even see the 2007 credit crunch coming.
Published: September 18, 2007 6:54 AM
Yancey Ward: Even if I grant to you all that you assert, the obvious reply is, "So what?"
"So What?" is a great question to ask. Even if I grant you that the market is capable - given sufficient time - of restoring the prospect of an uninterrupted, monotonically increasing energy supply - so what?
The challenge facing the crew of Apollo 13 was not to restore the air supply - it was to restore the air supply before the interruption of the air supply prevented them from restoring the air supply.
The challenge facing the market is not to restore the energy supply - it is to restore the energy supply before the interruption of the energy supply prevents the market from restoring the energy supply.
Failure to secure energy supplies in time, and failure to secure energy supplies at all, are indistinguishable. So the question economists must address is whether markets can secure energy supplies in time. The indicators are not reassuring.
According to a report commissioned and endorsed by the U.S. Government[1], the consequence of even a short term interruption of the global oil supply will be catastrophic failure of, amongst other things, the market. According to the CEO of Statoil[2], interruptions to the conventional oil supply will start in about 4 years. According to the President of Exxon[3], to prvent this a volume equivalent to 80% of today's production will have to be mobilised in the next 8 years just to maintain supply.
Irrespective of debatable remaining resource volumes, there is no technology or market scenario of which we can conceive today that is capable of mobilising production of that magnitude in a 4-8 year time scale. In the event that one fails to emerge in the next 4-8 years, the market itself will become at best significantly impaired, further reducing its capability to deliver one.
Technology or scenarios of which we can not conceive are indistinguishable from magic. So economic theory, as it applies to the real challenge that faces us, is indistinguishable from magic.
That is not a secure platform from which to launch so complacent an argument as "So what?".
[1] Robert Hirsch, Peaking of world oil production: Impacts, mitigation & risk, 2005
[2] Helge Lund, Chief Executive Statoil, DNtv, Jul 30, 2007
[3] Jon Thompson, President ExxonMobil oil company, The Lamp(1) 2003
Published: September 18, 2007 7:11 AM
"I'll agree that this article was obviously politically slanted, and probably has no place on an economics blog. Whether or not peak oil or global warming exist has absolutely nothing to do with economics of any sort, and no economist could claim that we are running out of oil too quickly because we have a free market in it (and we don't, not even close)."
The blog is not just an economics blog - it addresses political theory as well.
A weird assumption I see here is that we already have free markets in energy; we don't! Saying the market has failed/succeeded is pointless unless economists can demonstrate if it has or hasn't, and if so, why it has (thus study the effect of institutions on the market.)
Published: September 18, 2007 7:31 AM
>
Markets are relatively free. Not perfect, but not bad. Bush's objective in attacking Iraq was seen by many as an attempt to drag Iraq's oil on to the global market - because Saddam was not taking any notice of market demand. The objective may well be attained in due course when things settle down. In the meantime the world's 3rd largest stash of oil is somfortably stashed away underground waiting to be pumped.
To me all of this is missing the point. The world has never experienced an ongoing year-on-year never-ending decline in fossil fuels which is inevitable at some point in the not too distant future. Economic theory assumes that the market will always find substitutes, so what happens if there are none for substances which are simultaneously (a) our primary energy sources and (b) feedstock for almost everything else we make, most notably food?
Published: September 18, 2007 8:24 AM
Holy crap I just went down to the local store and they're all out of whale oil and they said they're won't be anymore coming in. Said it's much to expensive and scarce to meet our current energy needs with. How in the heck am I gonna light me house???. Oh wait, nevermind....Yawn, wake me up when something important happens.
Published: September 18, 2007 11:34 AM
Rich,
It is not a complacent attitude on my part. I know government cannot save us from the the depletion of fossil fuels- it can only prevent us from using the remaining fuels in the most efficient way. If free-acting people can't solve the problems, then they can't be solved.
Published: September 18, 2007 4:02 PM
"Even the most devout believer in markets might stop and wonder whether our fragile global economic system can deal with this. "
Why? We do not believe markets are 'fragile'...to the degree that they are free with respect to the excercise of the participants negative rights.
The more regulated they are in ways that are not consistent with negative rights, the more fragile they become. After all, each regulation is at best crafted with a set of initial conditions and some goal and seeks to impose some external set of value judgements and strictures on what is 'best' for the market.
At the same time necessarily violating the negative rights of the participants in order to gain the necessary control over said market and it's operation. this is not only a prescription for failing to allow each participant to regulate their own interactions to their own liking for their own reasons, it is also is a prescription for top down, 'one best way' solutions. State imposed stasis serving a limited number of outcomes as forseen, and most often not, by a limited number of planners and *their* values judgements.
A market regulated to defend negative rights is quite the opposite of fragile...it is responsive, fast, incredibly fine grained for each of innumerable choices and values, and adaptable to every single person's control over their chocies.
A true free market isn't fragile because unlike a statist one, it is *alive* and infinitely adaptive with the power of untold numbers of people all cooperating openly for their own reasons. It has so many people operating in parallel, essentially everyone, that no group of planners or professors can ever hope to outdo the innovation of everyone doing their own thing for their own reasons.
When I see the power of markets called fragile I have to smile because markets are the ultimate in economic adaptability...when they are not chained in stasis by regulation. Look at the complaints pouring forth continually from leftist corners around the world that markets create 'too much' variety, have 'too many' niches that are 'wasteful', and create 'too much' wealth, while decrying the fact that govt's are offtimes powerless to keep up with regulation because of market innovation.
"Fragile" markets indeed. To keep them from being fragile, stop chaining them to the floor.
Published: September 18, 2007 5:17 PM
mtngoat - The problem with the "free markets will solve anything" concept is at the macro level. Global resources are finite and suffer from the "tragedy of the commons" - in simple terms over-exploitation. The reason is that the marginal utility to the individual of (for example) emitting CO2 into the atmosphere or burning that irreplaceable barrel of oil will always vastly exceed the cost to that same individual of this single action.
Economics conveniently "externalises" such costs. Pumping waste CO2 into the atmosphere or depleting global fish stocks does not appear in the micro-economic equation, despite the massive costs we might be incurring at a macro level.
Free market economics would be the perfect model if the world was infinite. As we don't seem about to colonise the univerese any time soon we need mechanisms to build these externalities into our day to day micro-economic decisions. That means (sadly) more regulation. To really get on top of climate change it may mean world government AND heavy handed regulation, however much you and I might dislike the idea.
On the other hand I really don't see this happening. It is much more likely that we will consume all available resources, wreck the climate and enter the usual "die-off" phase reserved for species that get out of hand. One great example from nature is the fate of the deer introduced to St Matthew's Island, where over 6000 deer was reduced to about 40 in a single season when their food supply ran out.
http://dieoff.com/page80.htm
Published: September 18, 2007 5:43 PM
Easter Island is an example of a civilisation collapsing when one critical resource becomes unavailable. Historians debate the details (did the humans cut down all the trees, or was it the rats that lived off their waste?), but the net result was a population crash around 1770 and a collapse into chaos and canabilism.
http://www.smithsonianmag.com/issues/2007/april/easter.php
http://dieoff.org/page145.htm
My fear is that our complex, tightly interconected and interdependant world has become, in effect, an island. We all float or sink as one. Our civilisation risks collapse like Easter Island when critical resources dry up. Such a collapse would be on a massive and unprecedented scale.
Published: September 18, 2007 6:05 PM
Robert T,
You have it precisely backwards--a system of property rights and free exchange is the only tenable system for a finite world. Government regulations cannot solve the problem of the commons: governments ARE commons. Hence asking them to make sure that the long term costs of micro level decisions are minimised is absurd: the Kyoto protocol, for instance, if implemented in full would only put off the anticipated effects of global warming by four years.
The fallacy in your argument is assuming that private actors are necessarily short-sighted. But there are many private institutions with long-term interests. Most important among these is insurance companies, which have already altered their policies to take the anticipated effects of global warming into account. If enough areas of the earth are liberalized, insurance companies and other long-term institutions would doubtlessly penalize bad micro level practices with increased costs.
Furthermore, as the price of fossil fuels go up, which they surely will as reserves are depleted, the incentive for new technologies to fill the void will further increase. Solar technology is moving forward in leaps and bounds; nuclear power already generates a quarter of the US's powewr with only 100 plants; and let's not forget the prospect of fusion power, along with other improved means of accessing renewable sources of energy.
Also:
1) Your example of depleted fish stocks is a perfect example of the need for property rights in natural resources. The seas are currently a commons: in order to be managed properly, fishing rights need to go to homesteaders. For an excellent example of why, you should go to
www.freedomain.blogspot.com
and look up "cod" and "Newfoundland". There you will find the story of how the Canadian government, through its environmental controls, managed to destroy the cod stocks off of the coast of Newfoundland.
Another example is private vs. government owned forests. The former are thriving throughout the world; the latter, such as in the Amazon, are being depleted at a massive rate.
2) Your deer example isn't relevant to discussions of humans. Deer don't exercise property rights or engage in exchange. Moreover they cannot understand complicated things like scarce resources or a die-off.
Humans are far more elastic than the small fossil-fuel box you put them into would suggest.
Published: September 18, 2007 7:13 PM
Robert T,
I find the Easter Island analogy to be a poor one. For one, we don't know whether they exercised property rights in wood. Given their mystical culture and their use of wood in building their monuments, they probably didn't. Second, Easter Island is extremely small and cut off from trade. History has shown that societies in which markets and trade were relatively free have been able to trade their way out of ecological shocks and have taken much better care of their environments and natural resources. It's true that a great deal of the world does not have free markets, but there is quite enough freedom left in the world to produce tremendous technological innovations, particularly in solar power.
And to reiterate, your proposed solution to the problem of the Macro commons is inadequate, because governments themselves are commons.
Published: September 18, 2007 7:21 PM
Yancy Ward: If free-acting people can't solve the problems, then they can't be solved
My argument is that the problem of maintaining an uninterrupted, monotonically increasing energy supply (a precondition of capitalism) is insoluble. It is not necessary for me to contend with you over which agency finds it the most insoluble!
Published: September 18, 2007 11:22 PM
Ouch! Maybe Yancey Ward has hit a nail on the head. If there's an obvious replacement to oil just around the corner then someone would have discovered it. So far there doesn't seem to be any serious replacements for oil (maybe uranium?). Some places may be good for solar panels or wind mills but most aren't. But it has been pointed out that in 200 years we'll have definitively run of oil one way or another. So it is interesting if some new technology can't come online in the not-too-distant future, then perhaps it's time we all started reading books on what people in the Middle Ages did to put food on the table.
Published: September 19, 2007 12:48 AM
Ahhh - Easter island! I wondered when we would use Jared Diamond's historically unreliable and logically unsupportable Just-So story to back up both our pessimism and our statism!==================================================
Firstly, even under his dubious telling wasn't this a problem of a society in thrall to its leaders and visionaries, not one where individual choice was freely exercised? Score one for us!==================================================
Secondly, the 'footprint' of us humans is much smaller in relation to our environment and our combined, 6 1/2 billion-strong brain power and untapped entrepreneurialism is much greater than those of the tribesman marooned on their little pelagic rock. A caculation of the kind done by Lomborg, for example, shows that a Manhattan density city of c.600kms a side (say the size of New Zealand) could comfortably house ALL of humanity and another land area packed with even today's inefficent solar cells could provide all its power needs. That leaves an AWFUL lot of planet earth untouched and economically unexploited. ==================================================
As others have pointed out, all we get from you Saint-Simonians are blunt assertions in place of facts or reasoning. MUST we have 'monotonically increasing' energy supplies to enjoy capitalism? And, as a follow up, have we actually not - ahem! - achieved whatever has been necessary so far; arguing that perhaps we poor, stupid humans might just triumph again if all you defeatists don't deliver us to Moloch first. WILL the population inevitably expand to the the point of catastrophe (in many advanced societies, a major statist concern is rather that child-bearing has been voluntary limited to such an extent that Leviathan will soon not be able to man its armies or harvest enough tax fully to enjoy its rule)? ==================================================
Finally(!), if you really do wish to persuade us that only YOU sages know how we should govern our lives, trusting to your demonstrable lack of economic nous and your necessarily incomplete understanding of the scope of scientific possibility, you might start by showing us how you WON'T simply usher in another economic, ecological, and (often) energetic nonsense like the government-mandated, corruptly vote-grubbing lunacy that is biofuel!
Published: September 19, 2007 12:52 AM
Robert, the problem I have with your approach is basing the analysis on a 'finite' world. Yes, it is finite..but people are not. People change what they desire and why all the time. We are not static nor are our wants. This line of thinking relies on the concept of absolute limits to resource usage I simply do not agree with. Substitution of many resources has occurred countless times as as we gain technological prowess, this only increases. I have severe doubts about applying malthusian methodology to a system whose actors can change their usage of any given resource at will given sufficient price incentive, in whatever form that price takes. We're not deer or rabbits who eat all the grass and then cannot change when it's all gone, or do not note that the price of grass increases as shortages do.
Secondly, I'd like to put forth the idea that you are applying the tragedy of the commons in what I will claim is a missapplication..yes it occurs precisely *because* there is no clear ownership....but... Making this situation more widespread by declaring everything a commons is precisely the wrong action.
Making discrete ownership more widespread places the loss in usability and increased risk squarely on the owner. The methodology we see pushed forth is to increase 'public' ownership, which in effect means nobody owns it, because no one has specific rights they soley own or can transfer, thus there is no specific personal risk. We see this on a large scale where fishing is 'owned' by multiple nations instead of one...and they all attempt to get what they can while they can. We see it on a smaller scale where one nation owns a fishing ground, where smaller entities still attempt it. There is no benefit to not taking all you can when the risk is not solely borne by a discrete player who will then suffer the losses of doing so.
One problem I have with these ideas is they all wind up backing calls for top down planning, which inherently places people in power to impose their own value decisions on others via law. Now, in cases defending negative rights I'd make the case this is consistent and warranted when such decisions involve violations of same. But in all other cases it reduces those on the receiving end to supplicants under threat by those above, and as such elementally disrespects their minds and choices, as well as engendering the creation of a true upper class, one which can command actions and back them with the sole sanction of threats.
In any event, thanks for the detailed response.
Published: September 19, 2007 12:53 AM
Rich comments: "My argument is that the problem of maintaining an uninterrupted, monotonically increasing energy supply (a precondition of capitalism) is insoluble."
I appreciate the argument, but I cannot for the life of me find that precondition in any capitalist material put forth by actual capitalists, including myself and all my reading. Capitalism says nothing at all about ever increasing energy use or even commerce. Others critique capitalism on this basis, but when the basis is not a precondition held by actual adherents, I cannot see it's validity.
It may be that these are current features of capitalism with respect to the choices made by the individuals in a market, but these choices will necessarily change should conditions regarding this change..and no capitalists I am aware of would find anything wrong with this, if it occurred in concert with observation of negative rights.
Capitalism is simply a system based on respect of negative rights and individuals self ownership. It makes no presumptions concerning perpetual growth, in fact proper theory accounts for this every time the individuals in a market deal with shortage via means of price. We do not claim this is unjust, because shortage is by it's nature the root problem driving all economics.
To sum up, I submit that the claim that capitalism 'requires' or is 'based' on monotonic increases in trade or energy, is not actually based on a solid understanding of capitalist principles as espoused by those who hold them. We are ready and willing to deal with changes and influences and shortages and surpluses in all conditions, so long as individuals rights to value these tradeoffs is preserved, we have no problem with these changes.
Published: September 19, 2007 1:05 AM
"The latest edition of the Top 10 "World's Worst Polluted Places" was released this past week. And unsurprisingly all ten are in regions of the world where property rights are either non-existent or not respected."..."Arguably, if the land had been owned by private companies capable of suing for restitution or damages, the dumping/toxifying would probably never have occurred in the first place."
From:
http://blog.mises.org/archives/007153.asp
by Tim Swanson 16 Sept 007
while Robert T goes with: "To really get on top of climate change it may mean world government AND heavy handed regulation, however much you and I might dislike the idea."
(?)
Published: September 19, 2007 3:12 AM
The heavy hand of the state needed to 'get on top of 'climate change? But, of course - WHY ELSE DO YOU THINK ALL THE GOVERNING ELITE ARE SO KEEN TO PEDDLE THIS MYTH?!?
Published: September 19, 2007 5:41 AM
I am not a raving leftie, so my views stem from what I consider to be a logical analysis of the global economy as a system.
The last few replies display a real lack of understanding of "the tragedy of the commons"
http://en.wikipedia.org/wiki/Tragedy_of_the_commons
The atmosphere has become a critical commons and there will never be any way to carve it up piece by piece into private ownership (see the section "Modern solutions" in the wiki article). Individuals and companies are duty bound by their drive to act in the own interests and treat the atmosphere as a global dustbin for any gaseous waste that they don't want over their land. Meanwhile global CO2 levels just keep rising faster every year:
http://www.esrl.noaa.gov/gmd/ccgg/trends/
Someone commented that governments are commons. This is true. It stems from the fact that governments are elected by people and would get rapidly kicked out of office if they took the drastic CO2 reduction measures that science is telling us are needed.
Just because the solutions are difficult (e.g. Kyoto didn't work) does not mean that the problem does not exist, as some of you seem to imply.
As for solar energy. Great. But all the time it is even 1 cent more expensive than coal fired electricity your wonderful markets will not allow it to gain a foothold. But if we wait until every last lump of coal has been burned it will be way too late. Now do you see why some form of market intervention is needed to make fossil fuel more expensive and reflect its true (externalised) costs?
Published: September 19, 2007 6:21 AM
Another important point a intended to make:
Oil has become a "commons". Oil is fungible - i.e. is traded freely and globally. It flows to whoever is prepared to pay for it without hinderance at a price determined by the markets.
The only rider to this is that supply is somewhat controlled by governments (particulraly non-democratic ones) and by OPEC. But in really the market gets pretty much all the oil it demands. Bush needed democracy in Iraq not because he was trying to steal the oil, but simply because a democratic system cannot easily prevent oil from getting to market.
The issue is that the markets take only an instantaneous view. They do not recognise that oil is a critical, irreplaceable non-substitutable resource and when its gone its gone, along with our ability to grow food at anything like the rate we need to.
If global oil reserves were neatly packaged up in a huge barrel about 1 cubic mile in volume for all the world to see people might be alarmed that we are burning it up at the astonishing rate of a 1000 barrels a second.
Still. The markets know best.
Published: September 19, 2007 6:45 AM
mtngoat comments: Capitalism is simply a system based on respect of negative rights and individuals self ownership.
With respect, there are a number of flavors of capitalism, and there is no statement beginning with the words "Capitalism is simply..." that is true. At the core of most, however, is the concept of the extraction of value from surpluses and shortages, mediated by a market economy.
A more precise question therefore is whether surpluses can arise, shortages can be met, value can be extracted and the market economy can continue to function in the absence of a continuously expanding energy supply.
The first and most obvious answer is - who knows? You will concede, at the very least, the necessity of an energy supply to animate the manufacture and trade of goods and services that capitalism depends on, and the historical correlation between the strength of capitalism and the consumption of energy. You will also concede that capitalism has never been tested under the conditions of a continuously shrinking energy supply, and that markets get very stressed under conditions even of zero energy growth (witness the current U.S./European financial crisis).
The possibility that it does depend on it seems to be worth further consideration.
A less obvious answer is to consider that the surpluses, shortages and the manufacturing capacity to address shortages all presuppose an increasing energy supply, whether capitalists specifically acknowledge it or simply take it as axiomatic. Without an incremental unit of energy there can be no surplus, no demand that creates a shortage, no manufactured commodity to fulfill a shortage and there is no price at which a shortage can be fulfilled and therefore no market.
Capitalists and economists can talk all day about the wonderful things that happen when shortages and surpluses arising *within* the matter/energy system from energy imbalances created by an expanding energy supply are mediated by a market economy under the unique condition that each incremental unit of energy to do so is available. They have nothing to say - and can have nothing to say, for lack of any experience - about what happens when the matter/energy system itself suffers an energy shortage.
(None of this addresses quite how the notions of rights, private ownership, financial markets and all the other apparatus of capitalism function once the rule of law upon which they depend breaks down, but that would be a different point entirely.)
Published: September 19, 2007 9:55 AM
Rich,
That was a nice strawman if I have ever seen one.
Capitalism is not based on the idea of perpetual growth. Where did you ever get such a silly idea?
Perpetual growth need not be based on monotonically increasing energy consumption. If you believe this, then prove it. And, while you are at it, prove that energy production/consumption will not increase monotonically.
Don't you see it? This is the continual mistake that you and others are making- you claim foreknowledge of the future, while, at the same time, claiming to know a solution to the problems you foresee, and they are always solutions cannot be acted upon without resort to coercion.
And you have yet to even outline what the solution is other than to stop using the resource you claim is running out. An absurd solution.
In the example at hand, the issue is whether fossil fuels will run out, thus ending their contribution to the growth of energy consumption. Your contention, such that I can understand it, is that once this happens, we are in trouble- energy consumption will go down, and, along with it, prosperity. What, exactly, does state action do for this situation? What you seem to be proposing is that we "stretch" out the supply of fossil fuels, but what good does this do? The fossil fuels will still run out under either scenario, and their replacements will either be viable or not. You and I cannot know what will occur in either case, however, I am not the one with the hubris to claim to know the solution to the problem, a solution by which I violate the freedom of others to act.
Published: September 19, 2007 10:55 AM
A set of nice observations there Yancy. Since we are discussing ideas which essentially represent discussion of action at or beyond the supposed limits under discussion (oil in this case), this limit is not escapable.
That oil could run out does not actually tell us any particular way of managing it is necessary, because no matter who does it, the same limits apply (assuming these limits represent reality).
IF there is a replacement, and IF economic conditions make it viable, the massive parallel effort of billions of minds will find it. IF there is not, having govt plan the problem won't solve it either.
I also note that oil will not just suddenly run dry. It will be preceeded by continual price rises over a long period of time. During this period food production for example will adapt, and if this means more of our economic energy goes to paying for higher food costs because of massive increases in labor and reduced trade, and this is a free market result, then it is what it is, with no rights violated. There is no reason to expect that the nature of food production will remain static or that the proportion of our efforts or scope of our trade will remain static. Or that changes which gradually accrue and are accounted for and adapted to as they occur will not simply take place gradually instead of in some massive shock.
Published: September 19, 2007 1:03 PM
Yancey - how entertaining to be accused of floating strawmen, before being accused of making so many other claims that I had to check if there was another Rich in the thread!
I claim no foreknowledge of the future other than that suggested to me by such silly fellows as oil company Chief Executives and senior Whitehouse advisors. I have proposed no solutions (were you perhaps thinking of some other meaning of the word "insoluble"?). I have made no speculation about whether we should or shouldn't continue to use the resource, or whether the state should or shouldn't intervene. I've made no comment that I recognise as a proposal to stretch anything.
Proof that perpetual growth necessitates an increasing energy consumption is trivial. Call the size of the matter/energy system M. Call its energy consumption E. Then M/E is the amount of matter/energy system supported by a unit of energy. Monotonically decreasing energy consumption E tends (by definition) to zero energy consumption. For rates of change of M greater than the rate of change of E, M/E tends to infinity i.e. you would have one AAA battery powering the U.S. Congratulations Yancey, you just proposed a perpetual motion machine.
On the other hand, I don't need to prove that energy production/consumption will not increase monotonically. I only need to demonstrate the absurdity of the counter argument - that we can replace 80% of our current energy supply within 8 years, given that we have replaced not more than 20% of it in the last 10.
On your last point: The fossil fuels will still run out under either scenario, and their replacements will either be viable or not, we agree.
Published: September 19, 2007 1:55 PM
Rich,
Then explain to me the meaning of the following
as it applies to free market action vs coercive collective action? What I did not include in this quote is your assertion that the depletion of fossil fuels will impair the free market's introduction of replacements. If the free-market is not a "secure platform" for the future, and my inference, from the above, of your support for more state action are incorrect, then what, exactly were you proposing as the right path? I am honestly confused since I see only two paths, one of which I am convinced is unoptimal.
As for your "proof", perpetual growth need not mean growth without limits. Yes, one can always define a higher output that must be met with a greater energy input, but you have completely ignored increased efficiencies, and even worse, who says economic growth has to be matter based? I have no idea what future humans will consider value-added, nor do you. For all you and I know, they will be far wealthier and capable with fewer inputs of matter and energy.
Published: September 19, 2007 2:21 PM
Rich: "Capitalists and economists can talk all day about the wonderful things that happen when shortages and surpluses arising *within* the matter/energy system from energy imbalances created by an expanding energy supply are mediated by a market economy under the unique condition that each incremental unit of energy to do so is available."
If you’re like other socialists I know, you’re probably so giddy about the prospect of the collapse of capitalism that you’ve wet your pants a couple of times. Most socialists today follow the neo-Marxism of Emanuel Wallerstein and define capitalism as that sector of the economy comprised of big corporations. They divide the economy into the “market” sector made up of small, competitive businesses on the one hand, and large, multinational corps (MNC) on the other. The MNC’s are capitalist because they are so large, and therefore so powerful, that only government can control them, but for the most part they control governments through bribes and campaign contributions. In a sense, the MNC’s are governments unto themselves. MNC’s don’t compete, they collude and fix prices. They aren’t subject to the discipline of the market because they dictate to the market what will happen, what we will buy from them, when and for how much.
So many socialists have popped up on this subject because they think the key to destroying capitalism is to end the supply of cheap oil. They think that without oil, the MNC’s will fail and capitalism as they define it will end. Without subscribing to your definition of capitalism, I suggest you visit the web sites of a few MNC oil companies. They have invested in every alternative to oil that anyone has thought of. If oil died tomorrow, you would be purchasing whatev