Peak Oil paranoia on path to presidency

Last week, the Financial Mail led with a lengthy cover story on the oil price and its implications for the South African economy. It contains some very enlightening facts, such as a chart which shows that for every ten units of fuel South Africa uses for a unit of production, the United Stats uses only nine, and both China and the world average operate more efficiently, at eight units. Ours is a much more energy-intensive economy than even the United States. (So why exactly there’s a windmill on the graphic is beyond me.)

Source: The Economist, republished in Financial Mail, 6 June 2008Our consumption of oil since 1980 is up by 60%, compared to 20% in the US, and minus 20% in many European countries. In an energy intensive economy that actually grows (unlike, say, Europe), this is to be expected, and in itself is a positive sign. But the article is right to point out that both of these facts put us at a comparative disadvantage when global oil prices rise.

What the article neglects, however, it to consider consumption as a function of price, which in South Africa is controlled by the state. Our fuel, like our electricity, has been kept cheap compared to competing economies, which means that we can — or could, until recently — afford to favour energy over other resources such as time, labour, or high-technology, to drive production. (Much of this is because our fuel tax is comparatively low. Still 27% too high, of course, as pointed out in a previous post, but much less than in many other economies.)

What is disappointing is that instead of a focus on how businesses can reduce fuel as a component in production, or a discussion of price, price controls and how they might affect both suppliers and consumers, the article spends much of its time talking up the alarmist scenarios of the Association for the Study of Peak Oil and Gas, known as ASPO. Price deregulation is relegated to a short sidebar by a different writer, which predictably notes that lifting price controls in a steeply rising market is likely to be a political non-starter.

ASPO is an outfit born out of “Peak Oil” alarmism, a group of assorted environmentalists, socialists, economic illiterates and special-interest lobbyists, who have been whingeing for decades about a looming peak in oil production. I’m pleased to see at least one oil company CEO, Tony Hayward of BP, has taken on ASPO president Kjell Aleklett, in a wager reminiscent of the famous bet between Paul Ehrlich and Julian Simon, on a similar subject: the scarcity of natural resources. Simon won that bet handily, and I’d urge Hayward to take Aleklett’s complaint about the low prize pot (or rather, barrel) at face value. Double up. Go all in. Maybe set something up so others can buy shares in the bet too.

Fair enough, the ASPO alarmists, headed in South Africa by one Simon Ratcliffe, have been asked to inform the Thabo Mbeki presidency’s scenario planning exercise about their whacky, apocalyptic prophesies, so perhaps their arguments deserve to be better known, lest they become deluded government policy. But one would expect a finance publication to be a little more critical in its assessment of ASPO’s claims.

The Peak Oil paranoiacs say that much of what they predicted appears to be coming to pass. Well, that’s not quite true. They predicted that we’d run out of oil and have a crisis. Or more accurately, that we’d reach a production peak and then have a crisis. Price never really featured in Peak Oil alarmism until the oil price began its most recent run-up, when it became a convenient “told you so” data point.

The obvious response to their argument has always been: it doesn’t really matter if we’re running out of underground oil, if it becomes more costly to exploit, or if Americans are too stupid to use their own underground oil resources.

The donkey nods at sunsetIf scarcity does not increase, the case is trivial. There’s no problem. If it does increase, however, prices will simply rise. If prices rise, consumers will be forced to become more efficient, and more uneconomical resources such as tar sands and alternative forms of energy will become more profitable. Canada’s vast shale oil deposits, previously hard or impossible to mine, are being exploited at full steam (if you’ll excuse the pun). Even at the current meagre recovery rate of about 10%, they are second only to Saudi Arabia in their bounty. If the extraction technology improves, they could double proven global oil reserves. Their exploitation became economical only recently, so this kind of expensive production wasn’t even considered by the Peak Oil doomsayers at the time. Their simplistic argument, if I recall correctly, went something along the lines of “if it takes more than the equivalent of a barrel of oil to extract a barrel, it cannot be economically extracted”. Better technology, higher prices, economies of scale, or other forms of energy, never entered the static, linear systems in their muddled little heads. But then, perhaps that’s because they won’t profit from finding and producing energy. I sure hope they’ve sold their shares in the stupid companies that are flocking to Canada for a piece of the action.

So, the price mechanism works its magic once again, and the “crisis” is a non-event. Scarcity is the very reason the price mechanism exists; without scarcity, it couldn’t exist. Price has always managed to distribute scarce resources to where they are most productive. It has always motivated people to find alternatives, or find better, more efficient ways of doing things.

But that’s not what the ASPO people say. They posit two “scenarios”. The first is “business as usual”, in which all of us are complete idiots and sit around ignoring scarcity and rising prices until we starve or kill each other (or both). As if we aren’t smart enough to economise or seek alternatives. Every day, you can hear people talking of ways to save fuel, including fairly extreme measures like moving closer to work, or working from home. Why would fuel be something unique? Why would consumers be insensitive to price rises until there is “a big oil shock”?

Shocks are only likely to occur in regulated markets, where producers and consumers are not able to adjust to surpluses or shortages, because of artificial restrictions, prices, taxes or other market distortions imposed by the state. Last year, the oil price took a breather, to the consternation of market watchers, who found it hard to comprehend a market so badly distorted by regulation, subsidies and outright extortion by governments.

The other ASPO scenario is wholesale restructuring of the economy, central-planning style. A vast web of quotas, rations, subsidies and taxes should be created, all with draconian legislative force. Combined with “a huge investment” in energy austerity and alternative energy sources, this, ASPO says, will solve all our problems and make us live happily ever after. Why it considers expensive fuel a “crisis”, but shrugs off a “huge investment” as just some bitter medicine we’ll have to swallow, is never quite explained. And what happens if our “huge investment” turns out to be misdirected, is never considered. No, the socialist panacea prescribed by Dr ASPO will cure all our ills. After all, the government knows what is best, and can make our commercial choices for us, since we’re too stupid to look after ourselves.

Let’s assume the underlying assertion that supplies are on an irreversible, long-term, downward trend are true. They may well be (beyond the trivial fact that no resource is infinite), though that is far from the only reason prices are rising, and anyone who makes firm predictions on when critical depletion would make oil unviable as a source of energy is either brave or stupid or both. But that oil will one day be too expensive to profitably extract is not an unreasonable expectation. That this will inevitably be followed by “societal and economic disintegration”, however, as Ratcliffe once told MiningMX.com, does not follow.

Source: The Oil Drum (www.theoildrum.com)The fact that ASPO’s preachers make only two prophesies is very revealing. Both are extreme. One is designed to put the fear of god into policy makers and the voting public, so they’ll buy the other as their only salvation. ASPO looks suspiciously like a lobby for all those companies that today can’t make an honest buck selling alternative energy solutions or more economical equipment. I hope the government treats them with as much skepticism as it would treat the oil industry: as just another pressure group, lobbying for preferential treatment for their vested interests.

If the presidency accepts ASPO’s doomsday scenarios as likely, and formulates policy accordingly, I sure hope you’re in on Tony Hayward’s bet. Spare cash will come in handy in a socialist utopia.

The fairest and surest way to resolve this “crisis” is simply to set the market free. Deregulate prices, even if they rise as a result, and even if they put inefficient companies out of business. People will make a plan. They always have. The world didn’t end when the horse became obsolete, or electricity replaced gas. It became better, healthier, more productive. Let alternative solutions to high-priced fuel fight it out on a level playing field, where nobody is forced to use anyone’s solution, no solution is unfairly advantaged or held back by subsidies or taxes, and no nanny-state restrictions are in play. May the best solution win.

  • http://ivo.co.za/ Ivo Vegter

    Says a man with a single-issue sales website, designed to help YOU!

    Perhaps I’m just tired of trying to have an intelligent discussion with someone whose rhetorical techniques are limited to insulting my intelligence, bragging about his own, misrepresenting what I wrote, or even directing condescending and argumentative points at me that I’ve already made myself. My modest facility with logic and reason seems wasted on your convoluted harangues.

    Sorry, but you have to earn the right to be this offensive and arrogant.

  • http://www.sailready.com Rod Campbell-Ross

    Good idea. You are clearly a single issue nutter, impervious to knowledge and learning, even the bleeding obvious.

  • http://ivo.co.za/ Ivo Vegter

    And on that presumptious, pedantic, pretentious, pointless and patronising note, I think I’ll withdraw from this conversation. I have work to do, and you have a calamitous die-off to prepare for.

  • http://www.sailready.com Rod Campbell-Ross

    However taxes are raised will have economic impacts.

    It is not that I do not “want” the Kuznets curve – I understand it very well. The point really is that developed countries have exported their polluting industries to the third world.

    I am not sure where you are coming from rubbishing a sustainability sciences degree. Ecology, economics, climate sciences etc all seem solidly worthwhile disciplines. I did it not not advance my career (I am an accountant), but to better understand the human impact on the world. I now, for instance understand why changes in the Southern Annular Mode are highly correlated with increasing levels of atmospheric CO2. Do you?

    I do not expect you to understand the carbon cycle in great detail, but your explanation that it is “a natural constituent of the atmosphere” is absurdly simplistic for discussion at this level. Even so, with only media based knowledge I would expect you to understand that CO2 does have particular spectral radiation properties. After all this has been known for over 100 years. This US DOE website http://www.eia.doe.gov/cneaf/alternate/page/environment/appd_d.html contains some information about how CO2 (and other greenhouse gases) operate.

    Two of the most important components of our environment, the oceans and air cannot be subject to property rights. They are by definition and law “The Commons”; and are treated as such. By definition then the market cannot protect them. This should be obvious. The notion that they are too big to affect is no longer true.

    Sustainability bubble? What on earth do you mean? Science is based on data, trends and observation. It is extremely conservative. Current trends in so many different areas are gravely worrying. Open your eyes, smell the coffee, wakker skrik, or whatever the current euphamism is SA dictates.

    Maybe humans aren’t smarter than yeast.

  • http://ivo.co.za/ Ivo Vegter

    I do not believe in using tax as a policy instrument, but to limit its use to the collection of revenue to fund technical public goods, which begins with the basic functions of a government — common defence, enforcing property rights, and so on, and ends not far beyond that. That’s why I want to see any tax designed so that it influences consumer behaviour as little as possible.

    On fuel taxes, I’ll tentatively accept one that is designed to fund anti-pollution measures, since they largely fit the definition of a technical public good, and it seems only fair to charge those people who cause the need for the provision of the technical public good in the first place.

    If that is somehow favouritist, you’ll have to explain how a CO2 tax, which not only taxes a natural byproduct of the very act of living, but is designed to favour less efficient forms of energy at the expense of (currently) more efficient forms, for the very dubious end of limiting CO2 emissions, is somehow more justifiable.

    I can see, however, why you, having just heavily invested in a degree in sustainability, have an interest in declaring all sorts of things unsustainable, whether the price signal — i.e. the aggregate view of producers and consumers — agrees with you or not. Would be a bit of a bummer for you if your degree turns out to be useless, and your earning potential turns out to be half of what it would be if we really did face this crisis or that related to sustainability.

    I can also see why you don’t want the Kuznets curve quoted at you. (For those who don’t know it, in the environmental context it says in essence that the more prosperous societies get, the more they care, and are prepared to do something, about things like environmental quality and pollution.) For some reason, this curve does not appear to behave for CO2 the way it does for pollutants. This makes it a serious problem for those who advocate CO2 taxes, or other absurd ways to limit CO2 emissions. Perhaps that is because people are smart enough to realise that a natural constituent of the atmosphere, the stuff plants live on, the stuff they exhale with every breath, isn’t very likely a pollutant that needs urgent and expensive abatement.

    As for the free market, yes, it did indeed get us to where we are today. In the last century alone, it has increased our average incomes by a factor of between two and six, depending on how free our markets have been. It has doubled or tripled our life expectancy. It has reduced our mortality rate due to infectious diseases by a factor of ten. It has increased the yield per hectare of grain two and a half times. The calorie intake per capita in the developing world has increased by some 50% just in the last 50 years. All this and more can be attributed to free markets. More to the point, all this has been fuelled largely by fossil energy. Now you propose to limit the freedom of markets and restrict the use of fossil fuels well beyond what the price mechanism says about their cost and scarcity, because you have some theory about future risk, which you want to avoid?

    So we’re dealing with speculative claims about the future. You clearly do not think producers and consumers can, or should be free to, evaluate such risks in the aggregate for themselves. You believe they need Masters in Sustainability Sciences — like you — to rule by coercion on their behalf. That being so, have you considered the grave risks posed by forcible intervention in our economy, compared to the risks you say are inherent in a free-market, energy-driven society? And are those risks low enough for people to sacrifice at least some of their future prosperity growth — not to mention their economic liberty — to Masters like you? If so, why is it that people refuse to do this voluntarily, but need to be coerced into conformance by government force?

    If I were you, I’d demand a refund on that degree, and trade it in on something useful. The “global” “warming” “crisis” isn’t going to last long enough for you to maintain your coercive claim on people’s taxes. You’ll have to whip up new artificial crises of sustainability when this bubble pops, because without prophesies of “calamity” and “collapse” (your words, not mine), you and the thousands of scientists like you are going to be earning a lot less than the brochure said.

    Lucky the media thrives on sensationalism and alarmism too. At least you have them on your side.

  • http://www.sailready.com Rod

    I also agree with low flat taxes. But I have studied climate science and it is a risk management problem. I have also studied energy and understand the thermodynamic challenge.

    You on the other hand appear to choose to ignore the facts behind these issues. Note I do NOT advocate a “fuel tax”. I said “energy tax” though that needs refinement. What I actually support is a tax on CO2, a metric that can be easily calculated for any particular grade of coal, oil or nat gas.

    Why should a tax be designed to restrict fuel use as little as possible? I thought favouritism was anaethma to you.

    It is clear that you and I will never agree on the issue that fundamentally divides us. That is sustainability. I recently achieved a Masters degree in Sustainability Sciences (I am also a CA (SA)). As such I have recently studied these issues from economic, social and scientific perspectives and I have every reason to be concerned. Pollution, which you mention, is a very significant problem that we have not touched on. It is not clear to me at all that the free market will resolve the most pressing issues facing us. Indeed the free market largely got us here. And do not quote me Kuznets curve. It is largely irrelevant.

  • http://ivo.co.za/ Ivo Vegter

    You too are reading more in what I said than I actually wrote. I oppose all taxes, or rather, favour a low, flat tax. Perhaps with a Friedmanesque negative element for low income bands to make it politically palatable to those who think (however wrongly) that a flat tax is regressive and unfair.

    Whether such a tax is levied on income or on some or other consumable is a different argument. It should, indeed, be simpler, less costly and more efficient to collect than our current income tax is. Why it should be levied on fuel beats me. Energy might indeed be a fairly representative commodity on which to levy tax, assuming you don’t levy it at a flat rate on income. However, if you think so, I can’t see why a general consumption tax, which doesn’t distort the market’s choices between energy use and alternative resources (like technology or labour), wouldn’t achieve the same objective. And a fuel tax is not an energy tax. A fuel tax is something else entirely (speaking of favouritism…).

    Now given that I can’t accept most of the reasons you have given for wanting to restrict energy use — that human production needs to be reined in lest we end up with “inevitable die-back”, for example, or that “climate change” and “peak oil” are critical problems which require interventionist management imposed by government force — I can’t accept your argument in favour of levying fuel taxes.

    The only fuel tax that seems to me even worth discussing (though way off topic here) is one designed to restrict fuel use as little as possible, while funding pollution abatement (not to be confused with stopping global warming) as a technical public good.

    It’s ironic, incidentally, that now fuel prices actually are high — which is what anti-energy leftists for decades have advocated we need to achieve through “sin taxes” on fuel — they’re whining and moaning and even proposing fuel rebates. Debating taxes with such whimsical, inconsistent fools seems a fruitless exercise.

  • http://www.sailready.com Rod

    Fair enough Ivo – you are against petrol taxes. You no doubt have your own reasons. I would suggest that such favouritism is irrational.

    Thinking of Maslo’s heirarchy of needs it seems perverse that tax should be imposed on income. It is complex, difficult to define and needs an army of people to police. Hayek himself proposed that taxes should be imposed on shelter (land). Humans also need energy (especially food) and clothing.

    It would seem to me that provided the quantum of tax overall is not increased that taxing energy instead of income would be very simple, efficient and broad based – the classic 3 requirements of a “good” tax.

    In the current environment where climate change and peak oil represent significant risk management issues, taxing energy ,instead of income would in addition to being a better tax from a technical perspective also provide powerful impetus for conservation and alternatives.

  • http://ivo.co.za/ Ivo Vegter

    What is unclear about our petrol tax being “27% too high”? Where did I propose raising fuel taxes? It would help if you actually read what I wrote before argumentatively restating it.

    But to be clear: I agree, tax on petrol is one of the most insiduous impositions on a country’s productivity a government can make. I oppose all fuel taxes. Clear enough?

    I think I was quite explicit about his in the piece above, and in more detail over here.

    As for growth, I have long argued that we should never have been satisfied with 4% or whatever. We needed (and could have had) 10%, while the global economy was strong, if it weren’t for absurd taxes, subsidies, tariffs, government handouts, onerous licencing conditions and fees, anti-competitive state-owned enterprises and bureaucratic red tape. Six percent? A free market can and should do much, much better than that, and a country with serious unemployment and poverty must do much, much better than that. Sadly, we missed a golden economic era in which to achieve that, so it’ll be that much harder in future to make up for our historic losses.

  • Nasdaq7

    In other words comparing countries whose economies are dominated by service industries, such as the US, Ireland with SA is a waste of time and energy.

    The developing world hasn’t developed the intellectual capital to produce high technology products such as computer chips, to earn a living. They are still driving raw materials around with trucks for the industrial world.

  • Nasdaq7

    NO MAN! The petrol tax is too high! You don’t even understand economics. You want the petrol price as low as possible, to encourage the economy to grow. The NATURAL PROGRESSION of economies towards the service industry can only occur in what type of environment? One whose economy has show 6% + annual growth per year. Now how are you going to get the economy to grow by 6% with a very high oil price. You are putting the cart in front of the horse. The natural progression should take place at TECHNOLOGICAL LEVEL – SUCH AS RENEWABLES, NUCLEAR and not at price level. Study free market capitalism economics before making uninformed and stupid suggestions such as raising petrol taxes.

  • http://hardrain.iblog.co.za Hard Rain

    The mythical scientific “consensus” regarding AGW and the IPCC’s position is slowly dissolving: http://wattsupwiththat.wordpress.com/2008/07/17/aps-edito-reverses-position-on-global-warming-cites-considerable-presence-of-skeptics/

    Also, NOAA using junk data and junk information about climate to hype warming: http://wattsupwiththat.wordpress.com/2008/07/16/latest-noaa-press-release-in-total-disagreement-with-nasa-satellite/

  • http://hardrain.iblog.co.za Hard Rain

    And this thread has become so convoluted with comments it’s taking forever for me to load to the last one.

    I think a new AGW post is in order, Ivo. Respect the cries of the proletariat masses or suffer our red-taping bureaucratic wrath!

  • http://hardrain.iblog.co.za Hard Rain
  • http://ivo.co.za/ Ivo Vegter

    Great piece, thanks HR. Far from being spin, it is consistent with what I’ve discovered, both in terms of science and politics, since I began doing serious reading on environmental issues in general and climate change in particular.

  • http://hardrain.iblog.co.za Hard Rain

    Some interesting spin on carbon dioxide as a “pollutant” versus a real pollutant, such as sulfur dioxide: http://wattsupwiththat.wordpress.com/2008/07/04/alleviate-world-hunger-produce-more-clean-carbon-dioxide/

  • http://ivo.co.za/ Ivo Vegter

    @ Rod: If you believe in the market, why do you advocate tax on carbon emissions? That distorts the market. The mistake is evident in the term “using the market”. You can’t “use” a market without limiting freedom and distorting prices.

    I happen to believe reducing pollution is worth doing for its own sake. Minimising our negative impact on the environment is simple good sense. But that does not extend to CO2, to which I think humans contribute relatively little, and which is not a pollutant in any case. And that certainly doesn’t mean that the decision of how much pollution is acceptable should be in the hands of bureaucrats or special-interest lobbies.

    As for energy return on energy invested, everything you need to know about that is contained in the price signal. If it takes 200 BTU of cheap on-site energy to produce 100 BTU of transportable energy that can be sold for three times the price, it makes sense, no matter that the energy efficiency is only 50%.

    @ Keith Bryer: You’re quite right. I love that Tesla, because it shows what a private investor can do when he sets his mind to it. I happen to disagree with Elon Musk’s view of the environment, but if he can give me that kind of performance in an electric car, why would I care? Sign me up.

    You’re also right about the conservatism of the intellectual left. They cling to the self-contradictory precautionary principle, and call themselves progressive. They advocate extensive bureaucratic constraints on how people live their lives, and call themselves liberal. They’re neither. They’re fundamentally conservative and illiberal.

    Important point, thanks.

  • Keith Bryer

    I think this anecdote proves your point perfectly Ivor: When British scientists gathered in London in 1911 to ponder the future, they confidently predicted that by 1940, London would be knee deep in horseshit. Everyone nodded in agreement of course since only the very rich the had motor cars.

    Today, the Tesla electric car can out perform a Ferarri, has a range of some 200 miles for each charge, and plugs into a domestic power point. It costs US$90 000. In forty years’ time, I would bet on electric cars like this or better being affordable by almost everyone.

    The bureacratic feudalism that seems to be the aim of western intellectuals these days strikes me as evidence of their profound conservatism rather than the cutting-edge radicalism they fondly believe they represent.

  • http://hardrain.iblog.co.za Hard Rain

    “Because CO2 is changing our climate it makes sense to reduce CO2 emissions”

    And this where it all goes pear-shaped…

  • http://www.sailready.com Rod

    Mmmm……..

    Not sure I ever claimed to understand the climate, though I have made some effort in understanding more about than Joe 6pack. I certainly never claimed ti try and control it. Because CO2 is changing our climate it makes sense to reduce CO2 emissions (using the market of course – though I actually favour carbon taxes to replace labour/income taxes).

    EROI makes perfect sense. Oil is mostly lifted using energy from oil (or gas) taken from the same field. However the quality of energy is important too. Humans ave very precise energy needs. A refinement of EROI is the relative financial cost of various energy source. For instance although a barrel of syncrude produced from Canadian tar sands contains 3/4 barrel of oil equivalent in energy from natural gas, the realtive price of the two energy sources makes it worthwhile. This could change of course. In fact natural gas is in decline in North America, so the tar sand producers are planning to buid nuclear power plants to generae the heat needed for production.

    Similarly US corn ethanol is on some calculations EROI negative, but because of the relative value of the energy inputs (and the government subsidies) corn ethanol has made economic sense for the producers, even if it makes little sense otherwise.

    Neverthless EROI, as refined above still makes sense. It is one tool in the toolkit needed to understand energy in the context of an economy.

  • http://ivo.co.za/ Ivo Vegter

    And if you claim to understand climate and its dynamics well enough to propose trying to change it, you’re right there on first base with him.

    But that’s beside the point. The point was whether government should forcibly restructure the entire economy because we’re running out of oil, not whether reducing our dependence on oil would have other benefits.

    It just occurred to me, by the way, that the popular thermodynamic argument for Peak Oil is nonsense. It says that it is uneconomic to extract a barrel of oil when the energy required to do so is more than the equivalent of a barrel of oil. If this were true, there would be no difference in terms of economic viability between extracting a $10 barrel and a $100 barrel.

    The truth is that it is uneconomic to extract a barrel of oil when it costs more than the price of a barrel of oil to do so. How much energy it uses is relevant only in terms of the cost of that energy. That’s why many extraction facilities rely on natural gas or other forms of energy that are cheaper than oil.

    So while its validity in terms of oil reserves and production isn’t even the point, one of the core arguments of Peak Oil populism appears to fundamentally misunderstand economics and price theory too. Fancy that.

  • http://www.sailready.com Rod

    Maybe global warming is geographic. Americans overwhelmingly deny it, some even think the world is cooling, as evidently does Hard Rain. Google “ENSO” Hard Rain and do some learning. While you are at it, learn aboout some of the other climate oscillations, how they interact and some details about recorded changes over the last 50 years. Also find out what is happening with ocean temperatures and coral.

    Also the behaviour of animals is an important indicator of global warming. If you do not understand that you not even at first base.

  • http://hardrain.iblog.co.za Hard Rain

    Oh, I don’t know, Ivo. Apparently the only way I can refute global warming is with zoology!

    So I guess we’re not going to offer an explanation for the steady decline in temperatures all the while the alarmism continues?

    http://wattsupwiththat.files.wordpress.com/2008/07/uah_june08_curvefits-520.png

    Forgive me for being a “denialist” but I’m certainly not denying what the data says.

    What a difference twenty years makes:

    http://wattsupwiththat.files.wordpress.com/2008/07/uah_june_082.png

    For some anecdotal evidence people here in the Mid West are wondering where summer went this year… I was in Chicago this time in 2006 and there is a massive difference in the climate and temperature between then and now. Something’s up- and it ain’t temperature (but maybe it’s CO2?)

  • http://ivo.co.za/ Ivo Vegter

    Ooh, ooh, he called you a denialist, Hard Rain! What are you going to do about it?

  • http://www.sailready.com Rod Campbell-Ross

    Hard Rain

    No doubt wattsupwiththat.com is the definitive truth in all respects. However I think I will stick to my knowledge of climate science and the hard data thanks very much.

    When you can tell me that animals are migrating toward the equator, that polar ice is consolidating, that glacier mass is increasing etc I will listen.

    Otherwise you are just another denialist.

  • http://hardrain.iblog.co.za Hard Rain

    Oh dear, we did all the “warming” go?

    http://wattsupwiththat.wordpress.com/2008/06/23/warming-on-11-year-hiatus-how-about-cooling/

    An 11 year hiatus of warming approaches the spectrum of “cooling”. Meanwhile, greenhouse gases go up up up all to no avail.

  • http://www.sailready.com Rod Campbell-Ross

    Hi Ivo

    Ja, it has been an interesting discussion. Thank you.

    I have just finished a Masters in Sustainability Sciences degree (I am also a CA), having gone back to ‘varsity at the tender age of 50.

    I studied energy (and other subjects, such as ecology & climate science) from many angles – economics, basic geology, political science aspects and international policy.

    For what it worth Climate Change is a real problem. The Arctic is warming very rapidly and the Greenland ice sheet is a big worry. By itself it’s worth a 7m sea level rise. It could slide into the sea more less anytime, but the next 10 years will give a much better indication of what is happening there. Dig out your school maths. It is approx. 3m cubic km and the rate of melt accelerated from 100 cubic km in 2003 to 250 cubic km in 2005. If the ice sheet does start collapsing we may see governments closing down coal fired power stations world wide.

    When I say the economy is not resilient, it reflects a very broad range of input, not just economic. Of course there are many ways in which the economy is resilient. But it lacks resilience at key bottlenecks. Energy is obviously one. The capital markets are another. The electric grid (especially in the US) is another. Long and complex supply chains are another. There are no doubt others.

    We have witnesses catastrophic breakdown in society, even in places such as the US. Katrina was a case in point. There is only 3 days food in the supermarkets. Garages only have acouple of days supply in their tanks. Many factories are organised for Just in Time production. Any small hiccup can have major ramifications. Another example was the fuel truck strike in the UK in 2000. Supermarket shelves were empty, garages were empty, people were travelling around the country looking for food! I was there, I remember it well.

    If things do get tight, I think it depends on the society you are in. The UK (I imagine) could revert to a war time mentality of cooperation and seeing it through. South Africa……. Australia will be more like Britain, but we have some sectors of the community here who get violent.

  • http://ivo.co.za/ Ivo Vegter

    Indeed they are sensible. And the more expensive oil gets (or the worse the economy gets in general), the more sensible those choices become. I expect people will react accordingly, just like many began buying gas lights, gas heating, liquid-fuel stoves, and diesel generators, when electricity supply suddenly ceased to be reliable.

    You say the modern economy is not resilient, but I beg to differ. It has vastly more participants, at all prosperity scales, than any historic economy ever had. It has far more technology and education available to it, again right throughout the economy. It has developed much more complex and sophisticated futures and other financial instruments that help to evaluate, ameliorate and spread risk to where it can most efficiently be borne. These are just three reasons for optimism — three reasons why the economy has remained relatively healthy, despite high oil prices and other shocks that would have caused economies of the past to tank horribly.

    The reasons are largely related to lower regulation, less taxation, freer global trade, smarter (as distinct from “smart”) monetary policy, and less state control of important assets and key resources.

    This is exactly why advocating big government programmes to restructure the economy, as ASPO does, strikes me as such a dangerous idea.

    We may disagree on peak oil, or on the degree of panic that high oil prices should engender among ordinary consumers, but thanks for an interesting discussion nonetheless. Respect. :-)

  • http://www.sailready.com Rod

    Hi Ivo

    There is much we can agree on:

    1. Socialism in any form is no solution

    2. Peak Oil means a production peak – no more

    3. Oil will never run out. We will only stop using it when it tekes more energy to lift than it yields.

    4. There is no possibility of a rapid collapse in production, except possibly by an attack on Iran which could result in an instant 25% reduction in export capacity (approx 10mbpd).

    Beyond that net exports are a real problem. They have declined by 2.5m barrels per daya since 2005 (EIA 2008) and this fact alone probably underlies high oil prices. The “Export Land Model” (Google it) postulates a rapid decline in export capacity.

    My concerns are how this will play out in the capital markets. Our just in time – high efficiency economy has little resilience; and on top of that is immensely complex. It was these two issues – energy and complexity that brought down the Roman Empire (Homer-Dixon 2006).

    I have no idea how things will pan out. And I do not pretend to have any solutions. On an individual level I would advocate not being in debt, having some ground to grow food in, investing in some PV electrical capacity, buying local goods and produce, living near a train station and driving the smallest cheapest car practical. But these are probably just sensible life style choices anyway.

  • http://ivo.co.za/ Ivo Vegter

    The fact that you and I think differently — and Tony Hayward and Kjell Aleklett disagree — is exactly why markets should be free. Without free markets, how would we resolve our differences in terms of public policy? With free markets, it is simple: those who disagree risk their own time and money developing what they believe to be solutions that customers might buy. It is up to each investor to understand the market and then put their money where their mouth is. If they’re wrong, only those who invested in their scheme lose, while those who bought into their competitor’s solution, win. Either way, customers benefit from the competition.

    I grant that if we were suddenly to run out of oil, we’d have a fairly annoying little crisis on our hands. But we aren’t “running out” in any acute sense. So all that will happen is that prices rise, to modulate consumption and encourage better production, but even that will happen over a long, long time. (Much of the current price increase has little to do with critical reserve depletion.) Why is it called “peak oil”? Because it postulates only that: a peak in production. It doesn’t postulate that running out is imminent. Even if we concede — unreasonably — that oil exploitation is so easily modelled and has reached a peak, this portends no crisis, nor does it predict a situation in which ordinary market economics would fail. Even the more alarmist predictions predict that we have decades in which to adapt, and more reasonable predictions give us between half and two centuries (even given only current knowledge, technology and discoveries) to change our production and consumption patterns.

    That’s hardly something that demands urgent government programmes, especially on the part of a developing country like South Africa. And that’s my problem with Peak Oil. It uses simplistic rhetoric, contrasting two equally unlikely extremes — utter calamity versus business as usual — to demand massive planned action and drastic economic restructuring. Such alarmism, and such an excuse for government intervention in the economy, is something our already far too aneamic, statist economy can ill afford.

    And that is if the theory of peak oil is correct.

    If it is wrong, recommending such state intervention would amount to a criminal waste of resources that could have fed the hungry, clothed the poor, grown the economy, paid for the 2010 FIFA World Cup, given the people clean water, and/or saved them from dying of malaria or TB. I don’t think such a gamble is economically sound, nor morally justifiable. It isn’t a bet a government should place. Leave the betting to Tony Hayward and Kjell Aleklett.

  • http://www.sailready.com Rod Campbell-Ross

    Hi Ivo

    We are far apart in some respects; and quite closely aligned on others.

    I certainly do not believe governments can do any better than individuals. I do not want to rely on a super anything.

    Aside from Iraq & Iran where we differ quite sharply but we can leave off topic even if related. So we can boil down this issue to one single factor:

    Can, or will, replacements for oil and natural gas (depletion); and coal (climate change) be found in a meaningful timescale? You say they can/will be, I say they cannot.

    You say they can because you believe in human capacity to solve problems. I say it cannot, to any meaningful degree, because I understand the thermodynamic challenge.

    That is why I say your logic is faith based. I cannot refute it because it has no empirical basis. And to suggest that it will be so, because humans have always solved their problems, is to ignore history. Major human societies have collapsed before and ours is essentially no different.

    That does not mean that humanity will soon become extinct, however 99% of all species that have ever existed on earth have become extinct, so that will happen too some day. But not soon; and certainly not in the current context.

    That does not mean that there will not be a significant die back, that you and I may well be part of. The key is to first recognise the problem; and you clearly believe there is no problem. I believe you do not understand the thermodynamic challenge involved in maintaining our society. It really is no more complex than simple bookeeping. How much energy do we need? And where will it come from? The first question is easy. Any reasonable examination of the second quickly reveals a very serious gap opening up.

  • http://www.leonjacobs.com Leon Jacobs

    I think it is difficult for arguements either way on this topic not to be construed to be ‘religious’ – either way.

    Depletion of resources before we have viable alternatives will be calamitous, even apocalyptical for many.

    So if the spiritual way, simple in thought and action and consumption, sounds like it overlaps with good common sense in the view of scarcity, than even Dawkins could sound like a pious monk.

  • http://ivo.co.za/ Ivo Vegter

    PS. For someone who was letting me have the last word, you first quoted a remarkable number of people at me, and then wrote an impressive number of words. Not that I mind, you understand, just saying… ;-)

  • http://ivo.co.za/ Ivo Vegter

    Let’s take this point by point.

    If you’re talking about society understanding a problem and solving it, I assume you refer to government action, or some other form of collective determination and enforced action. That we should all “work together” and take whatever actions some authority, democratically elected or otherwise, to whom it is “clear what is happening”, deem necessary. That’s what I mean by depending on some superior agent. Your view appears to assume, and depend on, its existence. If that assumption is wrong, and you really do believe in individual freedom, my apologies. In that case, whether you expect calamity is your problem.

    Speaking of calamity, you variously described it as the collapse of civilisation, “serious disruption and possibly quite a significant contraction in population”, “die back”, and so on. I didn’t describe that as Armageddon. I described it as alarmism. If such phrases, involving lots of dead people, are not intended to be alarming, how would you raise alarm? Your reference to religion is neatly ironic, though. Your expectations of calamity (unless we atone for our sins and live a righteous life, in which case we may be saved) sound very religious to me.

    Next: $140 oil. If you haven’t heard anyone say it isn’t a problem, let me be the first. $140 oil is not a problem. There, I said it. In fact, it is the solution. When Peak Oil alarmists raised panic about “running out”, but couldn’t point to a high oil price, my answer was: if oil scarcity does indeed increase, prices will rise, reducing demand, making more expensive sources viable, and prompting more investment into alternatives. Now that prices are rising, why would I suddenly call crisis? Sure, consumers don’t like it, but producers love it. And those who gambled early on investing in fuel-efficiency or alternative energy, either don’t care, or are breathing a sigh of relief. Those who aren’t efficient enough (like the airlines you cited), will call it a crisis and go bankrupt. So it’s only a subjective “crisis” for some people. It isn’t a crisis in any objective sense. In fact, the solution to high prices is high prices, because they are the means by which scarce resources are most efficiently distributed.

    To Malthus: no, I don’t believe in infinite growth, either of population or of resources. I accept on grounds of theory and empirical evidence (as opposed to “believe”) that scarce resources are efficiently distributed in a free society by means of the market mechanism. Malthus described a simplified model of population and resources in equilibrium, but human population and resource use isn’t that simple. We discover alternatives, we invent better ways to utilise resources, we adjust consumption as prices signal abundance or scarcity. It’s not Malthus’s math that is wrong. What is wrong is imposing this simplified model on human population, because it assumes no resource substitution, no invention, no intelligence. In fact, the price mechanism, as the expression of the intelligent choices based on subjective value judgements of free actors in an open market, is the main reason why imposing a simple Malthusian model on human population is pointless.

    I’m not going to bite on tasty grubs like your view of Iran (which is naive at best), or the legality of the Iraq war (which is simply wrong). They’re beside the point. The point was the motivation of any potential war against Iran. Oil ain’t it. It makes no economic sense and no political sense. But that’s a long discussion for another day.

    You say “prices are 100% inelastic”. Perhaps you’d care to re-read your Econ 101 text book. Elasticity doesn’t apply to price. Demand and supply are elastic. The extent to which they are elastic determines how quickly they change in response to changing prices. There is no commodity, at all, for which demand (or supply) is 100% inelastic. And while inelasticity in demand suggests we feel the pinch more when prices rise, because reducing demand is hard, this isn’t a crisis either. There is always a price at which the commodity in question simply isn’t viable anymore. When that happens to oil, we could always go back to horses, but somehow I doubt it’ll get to that.

    Final point: You asked when will Austrians say, “Sorry, we blew it”? Perhaps when economies actually run along Austrian lines. So far, the world — well, the West — runs according to John Maynard Keynes’s theory of money. He provided a theoretical basis to justify printing money to fund government debt to advance public welfare. He justified the notion of having the state (or a state-mandated monopoly) set the price of money. The central bank interest rate is nothing more than price controls on capital so why are you surprised there are shortages and surplusses, with the attendant economic pain this causes? Why should Austrian economists take the blame for turmoil in the capital markets, monetary inflation, the weak dollar, commodity price rises, or the ups and downs of the business cycle, when they have always argued those are caused by Keynesian statism and the inflationary monetary policy of governments?

    Given all the examples you cite, at what point does the Keynesian economist stick up his hand and say, “Sorry, we blew it”? Because you’re right, 2008 isn’t looking pretty.

  • http://www.sailready.com Rod Campbell-Ross

    Hi Ivo
    Not sure where you got all that from. Quite a lot of assumption sitting in those lines!

    I have never advocated any superior being, what ever that may be, or super scientist or super anything else. And you have taken a rather broad view of “calamity”. Maybe you thought I meant Armageddon, but I do not. I mean calamaity, just like it says. If you want Armageddon go to the mid-west US. There you find folks who will tell you all about the “rupture” – sorry “rapture”.

    Even so I do not believe that humans can work their way out of the mess they are in without serious disruption; and possibly quite a significant contraction in population. Your belief that we can is touching. Go and tell the Maya.

    Israel acts as a proxy for the US. I made that clear in my post. Anyway, there is no evidence Iran is building nuclear weapons and they are acting within the terms of the NPT. Just call me a cynic, but I still have the phrase “WMD” ringing in my ears from the last time the US decided to illegally invade a country that just happens to have some oil.

    Finally, if you have some how missed the news for the last year or so – maybe you should wake up an smell the coffee. The capital markets are stuffed. And the derivatives market hasn’t even begun to tank; and that is trillions. If you knew enough you would be able to connect the dots. Oil lies at the base of much of the worlds financial woes. Sure, there has been super excess to the point of outright criminality, by the boyz on The Street. But I haven’t yet heard anybody saying oil at $140 isn’t a problem.

    No doubt you believe in infinite growth, and that Malthus’ famous 1798 essay was “wrong”. It’s “Malthusian” isn’t it – the term of derision that is used to discredit anybody who looks at the facts intelligently and dispationately and says “maybe there is a problem – the maths doesn’t stack up”.

    Because truly intelligent people belive in price theory. Right?

    25 airlines have gone bust in the last 6 months (definitely the flakey end of the industry), but the big carriers are cutting services, routes and jobs too. There is lots of talk of one of the big US carriers going back into Chapter 11 by year end. It is not known how many will make it through the US summer with many tickets sold at pre $100 prices.

    One or more of the big three in the motor trade could go into Chapter 11 as well. At the moment it is a toss up between Ford and GM, but Chrysler is looking sick too. At what point when the prices are 100% inelastic does Austrian economics stick its hand up and say “Sorry, we blew it”? As I said 2008 is not looking pretty.

  • http://ivo.co.za/ Ivo Vegter

    Your view appears to presume that society is a system that can be understood, or controlled. And because it appears very complex to do so, you fear collapse. Because you don’t understand it, you say I don’t.

    My view, by contrast, is that society is a decentralised system, in which the parts — you and I and other free people — act independently according to their own will. I don’t need some superior being to “understand” the supply contraints of oil. I don’t need some super-scientist or super-bureaucracy to comprehend the entire market from hydrocarbon geology to the billions of people who use it, and to direct its development. I don’t believe that this poarticular supply constraint is in any way unique. Why would it be? Why would it not be resolved by the free and inventive actions of those with an interest in oil supply?

    And no, I’m not surprised by problems with food supply. I am, however, surprised that you think Israel might attack Iran over oil, as opposed to — to pick one of many possible reasons — its intention to build nukes and to wipe Israel off the map.

    Lucky it won’t matter, if we face “serious calamity” and the “collapse of civilisation”. Possibly before the end of 2008. (And then Peak Oil alarmists protest that they’re not alarmists! Sheesh!)

  • http://www.sailready.com Rod

    Hi Leon, I have read Upside and found much that is relevant in what he says. My take away was the complexity of the Roman Society and its energy needs.

    Things are moving so fast now, it is difficult imagining even getting to the end of 2008 without serious calamity along the way. 2009 will be really interesting.

    My interest is now turning to the psychology of collapse and what happened to previous civilizations. In almost all cases it was clear what was happening; and yet the populations remained stuck in their paradigms, seemingly unable to discern any way of solving the problems. Ultimately events take their course without reference to human wants and desires.

    I think a big part of the problem is the soothing, if baffling, theories put about by people like Ivo. He is no doubt sincere and thinks his understanding of economics provides the answer. Unfortunately he does not even understand the problem, so it is not surprising that he derides Peak Oil. It is a complex issue where economics plays its part, but is driven mainly by the laws of thermodynamics and psychology.

    The kernel of the discussion is energy and our response to it. That is why, if you understand the issue you are not surprised there are problems with food supply and that these problems are intimately related to oil. It is also why the US occupies Iraq and Afghanistan; and why the US and/or Israel (one and the same for these purposes) is about to attack Iran.

  • http://www.leonjacobs.com Leon Jacobs

    @Rod:

    You said
    I actually think that it is too late. Man is in overshoot and a die back is inevitable. I have no agenda with that conclusion, it is simply my understanding of our very human energy dilemma.

    Have you read Upside of Down – by Thomas Homer-Dixon? He reaches similar conclusions about what the energy crisis might bring. You’d probably find his analysis of the demise of the Roman Empire interesting as he bases is on the destruction of their energy resource. He does a beautiful analysis of the grain required to build the Colosseum. Very interesting.

    In any event, I think your conclusion, that basically we are effed, might have been more accurate if we hadn’t gone and invented the internet. I don’t think individually we have enough ingenuity to solve such a complex problem as this energy crisis, but in an open and networked structure, we might get to real answers quicker.

    So a combination of believing what a free, open and networked humanity can achieve, combined with a switch to more responsible consumption might avert a complete wipe-out.

    We can hope, anyway.

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  • http://ivo.co.za/ Ivo Vegter

    Help me out here. Was there any point of substance in that little rant? You layered on the ad hominem stuff quite thick, so I may have missed some intelligent point of fact.

  • http://www.nickvanderleek.com Nick

    Stop the blogs!
    Funny that you believe the media hypes ‘alarmism’ to sell newspapers, but you hype Peak Oil as ‘paranoia’ – great ploy to get traffic to flow to your site and engage in debates designed to show off your brilliance. What’s the diffs Iv? The diffs ought to be bloggers should know better (than the media – who serve a bottom line, whereas you simply serve your ego), especially those who define themselves – as you do – as a voice of reason/intelligentsia.

    Sorry, I have been studying Peak Oil for a much shorter period than you have, perhaps 2 years, and you appear (based on what you have written here)not to have grasped very much since high school, which is a pity.

    I also have faith in man, but it hits the wall…built on the bricks of well-intentioned (I think) ideas from people like you that find their basis in know-better-arrogance. This is blog porn, contriving to be entertaining and informative. Like porn it’s neither really, it’s simply ego masturbation, which makes you the ideal candidate for Best SA Blog etc., and a measure of your audience (which you co-create).

    At least one day we can point to eloquent guys like you for telling us why things – despite overwhelming messages to the contrary streaming in on a daily basis – would never go pear-shaped. Many prove/d how smart they a/were by agreeing. At least you are one identifiable source for all this delusion, and for that, I thank you.

  • http://ivo.co.za/ Ivo Vegter

    Wow, stop the presses. The media actually buys into all this alarmism? Could have fooled me.

    Good on the FT for exploiting you and the gullible masses. They’re following time-honoured media tradition. “Things are mostly just fine” isn’t exactly thrilling news for which you’ll buy the paper, is it?

    As for the rest of your rant, well, I’m not sure what you’re getting at, exactly. But then, that’s no surprise, if you’re a fan of Gnome Chomsky. Like him, you seem a little overwrought. Like him, you can’t do better than accusing those you disagree with of, what, believing in God? You can’t do better than accusing anyone who might dispute global warming orthodoxy, or simply rejects the idea of an expensive big-government bureaucracy to change the climate, of “lavish lifestyles”. Some nerve, and lots of condescension, but not much intelligence in such arguments.

    I don’t believe in God. But I do have a lot of faith in man. If you want to know why, open your eyes and look around you. Unlike you, I’m quite impressed by what we’ve achieved. Unlike you, I’m heartened by how free people deal with scarcity and the challenge of production. Unlike you, what I see doesn’t fill me with misanthropy, or the desire to control other people’s lives lest they harm themselves.

    Life is not a fairy tale. I never claimed it was. That’s why I argue constantly for free people and free markets. Having our lives run by the government won’t improve matters. All that does is destroy prosperity, and dump the misery of other people’s fears and paranoia on your doorstep. Iron-fist control of production and consumption doesn’t sound like a fairy tale to me.

    But when you get to your idyllic energy-free pre-modern world, do send me a ration-card and let me know how you’re doing. I promise I won’t be jealous.

  • http://www.nickvanderleek.com Nick

    I saw this on Ft.com (an important resource for business and opinion leaders) today and immediately thought of you:
    “Climate change – and its wider impact – is incontestably the most important issue facing mankind today – and tomorrow, too. It affects all people, regardless of nationality, faith or colour. In the first of a three part series, the Financial Times looks at the science of climate change.”

    In your indisputable wisdom though it’s a hoax. I suggest you write to FT.com and let them know about your superior intellect.

    Great resources for Peak Oil paranoia include:

    http://www.theoildrum.com and http://www.kunstler.com
    My blog also happens to be virtually dedicated to the subject (Peak Oil).
    I think you guys are all neo-cons right? Think that’s what Heinberg and Hirsch and Chomsky effectively group you guys into. When reality doesn’t have a ‘positive’ spin, it’s alarmist or pessimistic…never mind it doesn’t actually suit (y)our lavish lifestyles.

    But I am sure we have yet to learn that you and the majority are right, and life really is a fairy tale sanctioned by God and common sense, one that ends happily ever after (whatever we do), where you get something for nothing and find rewards in heaven for all our good (or bad but forgiven) deeds. Either way, we’re all due to be enlightened.

  • Kriek Jooste

    Three years ago ‘everyone knew’ that property is a great investment and exactly where you should put your money. Now ‘everyone knows’ that oil is going to run out soon.

    Both are issues where the water comes through the holes in the dam wall that the governments and central banks have put up to try to hide inflation from us.

    Just like it can be argued that property will always gain value since as the population grows there will be more demand for finite space, it can be argued that as the population grows demand for oil will be higher than the ability to supply a finite resource.

    However, neither of these will happen as suddenly as the prices for property and oil reacted in the pronounced business cycles we are experiencing at the moment. This is because the currencies that the price signal was sent in was distorted, which brought the amplification we see.

    With either resource we won’t run into a sudden brick wall. If a pair of people were confined to 25 square meters of space they would become more cautious about halving that by giving birth to two children. So would people suddenly consider being more efficient with their fuel use and finding energy from other sources when using fossil fuels become more expensive than, well, the alternatives.

    Oil prices react very suddenly to supply issues, and retail fuel prices usually react in around half a year after that, the effects on demand takes much longer but eventually happens. This is the not very mysterious way the price mechanism works its way with oil, and we’ve already seen it with oil price spikes in the 70’s where many changes happened that curbed demand, for example people, even Americans, switched to more efficient lighter and front wheel drive cars from Japanese manufacturers and switched from heating oil to gas.

  • Perry Curling-Hope

    Nice post Ivo!
    For once the comments strive to outdo the topic.

    I do not share the views of the Malthusian catastrophists for two reasons.

    1) Wealthy developed nations stop growing.

    Their populations stabilize and increases in energy efficiency result in ‘high’ living standards being sustained while per capita energy consumption actually starts to drop.

    For purposes of argument, I draw my comparison between the most consumptive country, at 8.35 TOE (Tonnes oil equivalent per person) the U.S., which is still growing, and the ‘mature’ economies of Old Europe, such as Switzerland at 3.7 TOE
    I also appreciate that there are many ways by which prosperity may be measured.

    There are two caveats: efficiency improvements are subject to diminishing returns, and these economies remain heavily dependent upon fossil energy for which viable and sustainable substitution is anything but certain.
    While a rather more ‘efficient’ relationship between persons and the energy resource base appears possible, the scope for such improvement is necessarily limited.

    This implies that technology may not be able to deliver some things regardless of the intensity of the economic imperative and freedom of the market. People forced to live a less energy intensive lifestyle may be compelled to do without some goods and services which they really would want, i.e. a drop in ‘prosperity’

    From an economic policy perspective, high income developed countries can afford complex taxation and subsidy systems and considerable welfare statism without too much ill effect….precisely because they are no longer driven by the growth imperative.

    It is dangerous and catastrophic for developing nations to entertain such policy, as the imperative for growth and its rate determine of how long it will take to reach a stable and developed state.
    ‘Habits of highly effective countries’ by Leon Louw is an empirical analysis in which it is suggested, amongst other things that “everything gets better with growth” and “in freer economies,’ the rich get richer and the poor get rich faster’” (If they follow growth sustaining policy)

    As a side issue, it is a rather illuminating fact that a previous history of colonization has nothing to do with a countries potential for growth and ‘success’… it depends rather upon choice of economic policy. Perhaps Africa, which is the only continent going backwards economically, suffers under a ‘legacy of Marxism’ born out of decades of communist sponsored liberation struggles and leaders in Soviet hosted exile rather than from a legacy of colonization.

    The above is all good and well providing one realizes that growth and stability are predicated upon an energy resource base large enough to sustain such at a given level of technological ‘efficiency’ and ‘prosperity’

    2) The ‘Fossil energy Spike’

    For almost the entire history of humans on this planet, life (the economy) was sustained upon solar energy alone. The explosive growth in population, technology and prosperity was literally fuelled by the exploitation of fossil energy, the ‘solar capital savings’ stored in the ground, and occurred over a bit more than a century.
    Unlike monetary capital however, it accrues no interest, and investing it cannot create more energy, as such. It can only be consumed to produce goods and services, once only…. and that’s it.
    Sooner rather than later, the down side will come, and ‘The Spike’ will be over. (he hee)

    What kind of human society can be supported in the post ‘Spike’ era?

    Apart from a smattering of fissile materials, which will certainly make a contribution, its back to solar. I do not share the view that this entails a return to the stone age with half a billion people eking out a miserable existence as before. The Gaia death cult even thinks this would be great for the planet, as we assumed our ‘rightful’ place again!

    The pre spike era was constrained by solar photosynthesis alone.

    In the post spike era has the potential to exploit solar energy in other ways, expanding the energy base. The potential limits of such expansion are not yet known.

    While the theoretical available solar energy is in the order of some 89,000 terawatts, and global consumption is a paltry 15 terawatts (according to Wikipaedia, no need to disbelieve them, as other estimations differ by less than an order of magnitude) no technology yet exists to exploit more than a miniscule percentage.
    While the potential may be large, electricity is not oil, and many things will change dramatically. I think of the role of plastics and petrochemicals in the food production and distribution chain, for one.

    Robert Malthus was essentially correct in his analysis, i.e. that population is constrained by its resource base; he was simply not aware of the impending fossil energy explosion.

    To this, I suggest a list of things technology may achieve in the post spike era.

    Genetic enhancements to photosynthesis.
    A doubling will make substantial difference; an order of magnitude will make the ‘EROI’ of that canola patch potentially equal conventional crude. Committed alarmists may scoff derisively at such an idea, maybe it is fanciful, but who knows.

    A dramatic increase in solar thermal conversion efficiencies.
    Stirling Energy Systems already claim a 31.5% solar to grid efficiency with existing technology and a 500MW solar thermal plant is under construction. Again, electricity is not oil, and you need the technological and energy infrastructure to build this stuff in the first place, but it is hardly Stone Age.

    Thermonuclear containment.
    The monumental technological challenges of this energy system may indeed never be overcome. The world’s technology potential may dip too low too quickly to ever realize this dream. Yet it is a brave or foolish man who claims he knows such a thing is absolutely impossible.
    With such technology, the energy base is expanded to such a degree that large scale synthesis of virtually any organic compound becomes feasible, including completely synthetic jet fuel. Even Arnold Schwarzenegger’s ‘Hydrogen Highway’ wouldn’t be so ludicrous, and the notion of the energy base being determined by ‘markets’ rather than by resources may no longer be completely false.

    The emergence of an as yet unknown branch of physics.
    Any person who subscribes to the scientific method would not simply discount such a possibility.

    Do I have ‘faith’ in any of this, as our fellow blogger Rod suggests?
    No I don’t, as a scientist I don’t ‘believe’ things, so faith is not my game.

    My best guess is that due to poor economic policy, resource problems are going to be unnecessarily exacerbated. Many developing countries are going to overshoot their resource base, leading to widespread instability, both socially and in the global economy. This is not absolutely necessary; it is inevitable because people cling to beliefs which are convenient but untrue. They wait for a crisis to develop before changing course (madam the polish is finished!…Eskom?…) and serve vested interests when forcing their planning decisions onto others.
    The transition to stability in the post fossil era will be unnecessarily bumpy.

    What such an era will look like is anyone’s guess. What is for sure is it will be nothing like the pre fossil era, and very much different from today.

  • http://www.sailready.com Rod

    And I will leave you with some great quotes:-

    “The era of procrastination, of half-measures, of soothing and baffling expedients, of delays, is coming to a close. In its place we are entering a period of consequences…” —Winston Churchill, November 1936

    “Data always beats theories. ‘Look at data three times and then come to a conclusion,’ versus ‘coming to a conclusion and searching for some data.’ The former will win every time.” —Matthew Simmons, ASPO-USA conference, Boston, MA, October 26, 2006

    “First they ignore you. Then they laugh at you. Then they fight you. Then you win.” —Gandhi

    “The infrastructure of suburbia can be described as the greatest misallocation of resources in the history of the world.” —JH Kunstler

    “No civilization can survive the physical destruction of its resource base.” —Bruce Sterling

    “What people need to hear loud and clear is that we’re running out of energy in America.” —George W. Bush, May 2001

    “I’d put my money on solar energy… I hope we don’t have to wait til oil and coal run out before we tackle that.” —Thomas Edison, in conversation with Henry Ford and Harvey Firestone, March 1931

    “It’s difficult to get a man to understand something if his salary depends on him not understanding it.” —Upton Sinclair

    “We have only two modes—complacency and panic.” —James R. Schlesinger, the first US energy secretary, in 1977, on the country’s approach to energy

  • http://www.saiready.com Rod

    OK Man. You win. It’s your site. You can have the last word. I will go to the Mises church and beg repentance. Oil doesn’t matter. It is just another commodity like orange juice, but not so tasty. If orange juice gets too expensive I will just drink apple juice.

    No problem!

  • http://ivo.co.za/ Ivo Vegter

    Well yeah, I guess if you can’t show why oil is somehow a unique resource that is not subject to the normal principles of economics, and if you can’t support claims of a crisis, you can always precipitate one by breaking the price mechanism and taxing the cheapest, most abundant energy resources the world has. That’ll teach developing countries to have the temerity to try to prosper. Can’t have the poor masses using the West’s fossil fuels and bidding up their price, now can we?

  • http://www.sailready.com Rod

    “It isn’t just the media which appreciates the attention-grabbing value of hyperbole. Lobbyists for government action routinely use this technique. Peak Oil alarmists are no different, and it would appear, neither are you.”

    Humans have always used metaphor to convey the essence of complex thinking.

    What is clear, is that this subject is too big and too complex to adequately discuss on a blog.

    There are reams of other topics that fit under the same genaral heading of “Sustainability”. Economics (resource economics) is just one. For instance, you mentioned food. In 2007 half the world was urbanised for the first time ever. Most of this half of the worlds population rely on mechanised agriculture in some form or another. It has been calculated that the western diet includes 10 joules of oil and natural gas for every joule of food. population will not keep growing for this simple fact alone. What about aviation. I can run my car on chicken tallow (biodiesel).

    There is no such choice for aviation. Already 25 airlines have gone bust in the last 6 months. IATA met in the last couple of weeks – in Istanbul I think. The conclusion of the conference was one of panic. The airlines are using terminology like “fundamental restructuring”. Qantas has cut flights, aircraft and staff. American has grounded many of its older aircraft and cut services. Yet we in Australia have the idiotic minister of tourism in the Queensland Government planning for passenger numbers to double by 2020.

    If you want a cheap holiday in Mauritius you better get it in now.

    You can ignore these facts and signs and continue to believe in technology, or not. It is up to you. Peak Oil people for the most part are only trying wake people up. All I want is for people to look at the facts so that they can better and more informed choices, including who they choose to be their political leaders.

    Turning full circle, and returning to oil: The consequences of oil supply peaking with our current living arrangements is going to be very, very difficult. I do not know how it will play out. I have no doubt that government will in some manner take control of oil supply (probably for the worse). However the sooner we as a society start to deal with the issue, the better.

    My only suggestion is that we should switch taxation from labour/income to carbon on a dollar for dollar basis. The tax should be applied at the well or pit head and be based on the grade of fossil fuel in question. Easy and cheap to apply (less job for me – I am an accountant) and it will insentivise the replacement of our current energy sources (oil, gas & coal) most effectively, hitting coal the hardest.

  • http://www.sailready.com Rod

    We can argue until the cows come home, if I remember the saying correctly. It will not make one jot of difference. Much of what we say is at cross purposes anyway – I have never suggested that people do not respond to price signals – of course they do.

    The problem is one of scale. No combination of all of the alternatives to oil, including used french fry oil, will make up for the fact that oil production has stopped growing (since 2004) ie a production plateau, much less decline. Decline will set in some time before 2020. It is a fundamental problem that the Austrian school has no answer for.

    On population we are unlikely ever to see 8bn. Already famine is becoming a bigger problem than ever it was, in Africa and parts of Asia. We might see 8bn, but it is unlikely. There will never be 9bn people. The 10-12bn figure you quote is based on the assumption that energy growth is unlimited. It isn’t.

    You can choose to be sanguine about the future based on Austrian school theory. My view is that this belief is faith based. I believe in individual freedom including religious freedom so I can try and persuade you to broaden your views, but ultimately if that is what you choose to believe, you can. I personally am not religious at all. I do not believe in God. I believe in facts and trends. And I do not believe that humans have the collective intelligence to fix this problem. But I suppose that is a religious statement too.

  • http://ivo.co.za/ Ivo Vegter

    The two scenarios Peak Oil advocates are feeding the South African presidency doesn’t suggest the work of smart investors or knowledgeable executives. As I repeatedly pointed out from the start, that oil production will become more expensive, at least, and peak, probably, is not something I dispute. Nor do I dispute that there are people who are — especially when their research and knowledge is combined — in a position to know a lot more about the geology, technology, economics or future of oil production than I do. Not that exalted titles in themselves impress me much. Appeal to authority does not constitute reason, nor fact. Undoubtedly, some of the people who believe they know more than the market knows, actually do. Those are the ones most likely to profit from finding solutions to whatever production or consumption problems might arise.

    What I dispute — and the basis for my unkind characterisation of Peak Oil alarmists (as opposed to those who don’t seek to impose their views of future oil production, however correct, on others) — are the scenario alternatives posited in the FM article I quoted: that a country must choose between either mass starvation and war, or wrenching government-led restructuring of the economy. And you accuse me of positing extremes? I argue that the one extreme is unlikely, because people do respond to price signals, and the other is unnecessary, ill-advised, and probably even more dangerous.

    When the oil price was at $20, Peak Oil alarmists used to argue that the oil price doesn’t respond to scarcity. Now I hear you argue that people don’t respond to the oil price quickly enough for your liking, therefore the price mechanism doesn’t work. I’ve given examples in both production and consumption, and could cite dozens more. If you don’t think moving house is a sufficiently extreme measure, I’m fairly sure that same person would sell his three-litre car if the petrol price continued to rise, and perhaps buy an electric alternative or a bicycle if it continued even further. I can’t predict what price would constitute the changeover point in his case, or in anyone else’s case. In my case, that point would probably come be a lot later, because I use a lot less fuel than he does. But eventually, a rising fuel price forces everyone to reconsider a whole range of activities.

    Why would such adaptation not continue? Why would I not put solar heating in my house, if solar heating is less expensive than electricity? Or ditch my plasma (if I had one) for a more energy-efficient alternative, should electricity become more expensive? Or buy an electric car, if its performance is adequate and it costs less to run than a petrol car? Or buy products made of materials that are less dependent on expensive fossil fuel derivatives, should the latter become unaffordable? We all switched from wood and clay and metal to bakelite to plastic, didn’t we, without much trauma, and without a Manhattan Project. At worst, if innovation in materials science fails us, we could move back. Why would energy companies not develop alternative sources of oil production, or research alternative forms of energy, if those are more efficient and could ensure future competitiveness and profitability? Nothing you’ve said suggests that people don’t, won’t or can’t respond to price signals, or that oil is somehow a special case.

    Food is just as necessary a commodity, on which our lives are at least as dependent. Without it, we really would die. Yet people have throughout history responded to price signals brought on by scarcity, whether by developing more efficient crops, better farming techniques, less expensive substitutes, changing staples altogether, or even migrating to regions that offer better climate or food production possibilities. Moreover, countries with freer markets, less onerous taxes, less interfering bureaucrats, and better trade relations, have been able to make these changes more easily, and prosper accordingly, than those where government was to a greater extent responsible for food production or distribution.

    Sit around starving, unless the government uses our money to saves us from ourselves, doesn’t strike me as the sort of thing people in a free society tend to do. Perhaps I’m too optimistic about human nature, but if so, I still can’t see why government would be any smarter than multiple competing companies acting in their own best judgement.

    Finally, on population growth, it stands to reason that populations can only grow to the extent their production can sustain them. If production becomes more expensive, population growth will naturally decline. Moreover, the more prosperous societies get, the less they appear to procreate. Some reasons I can think of are because they have more reason to expect children to survive to adulthood, because they’re in a better position to choose how they live, and because they’re better able to provide for themselves rather than depend on children, later in life. As a result, most reasonable projections of population growth I’ve seen, based on forecasts from organisations such as the UNDP or US Census Bureau, do not postulate unrestricted growth until the population collapses (unlike Paul Ehrlich, who did predict Malthusian growth and warned of pretty specific timing — panic, now! — despite knowing all about the Green Revolution). Instead, those forecasters observe that the global population growth rate has been steadily declining for 50 years, and project that this trend will continue for the foreseeable future. Therefore, far from drawing scary exponential curves captioned “panic”, they (the UNDP, in this case) draw an S-curve, which predicts a stable plateau or peak in population numbers of around 10-12 billion by 2200. Inventing scary numbers (“one human per square metre” or “weight equal to the mass of the earth”) based on fictitious assumptions (in particular “at current growth rates”) does make your argument appear more alarming, but it doesn’t make it any more credible.

    It isn’t just the media which appreciates the attention-grabbing value of hyperbole. Lobbyists for government action routinely use this technique. Peak Oil alarmists are no different, and it would appear, neither are you.

  • http://www.sailready.com Rod

    I was wondering whether I had strayed across an outpost of the Austrian school.

    The Club of Rome was writing about the period we are living in now. I suggest you read Limits and the follow up, much was remarkably prescient. Thomas Mathus and his famous 1798 essay merely made a mathematical point that is obvious. He didn’t predict any particular timing, though I doubt he would have anticipated the green revolution.

    I could also point out that at current growth rates that in 300 years there will be 1 human per square metre of land on earth, including the Artic. That seems unlikely, to say the least. The impact of global warming wasn’t mentioned, but there could be less land, so we might have less than a suare metre each. That seems unlikely, but I am glad I will not witness it. In 700 years at current growth rates the mass of humnans on earth will equal the mass of the planet. I am 100% condifident this will not happen. So growth will stop sometime.

    I have noted that in your writing you always state the extreme. For instance, I mention a die-back and you interpret that as “the end of the world”. Die backs have been very common in human history. Why should one now be “the end of the world”? I have absolutely no doubt that humans will survive the end of oil. Whether 6.7bn will is a different question. Also I know many in the Peak Oil camp. I wouldn’t describe any one of them as an “assorted environmentalist, socialist, economic illiterate and special-interest lobbyist”. Many are from the oil industry. One is a Professor of political science. Several are highly paid engineers, consultants, actuaries and accountants (me). I also have a Masters degree and one of my majors was resource economics. Matthew Simmons, one of the best known, is an investment banker. Boone Pickens is an oilman to his boots and a multi-billionaire. Jeff Rubin is chief economist at CIBC. Is he an economic illiterate? Are any of the others? In short not one would fit your ill-mannered description. Dr Robert Hirsch, author of the 2005 EIA report on the impact of Peak Oil did call for a Manhattan style project, which would obviously be government run, but I haven’t heard any more about it.

    Though I hesitate to pitch myself into such exalted company, they like me have looked at the data and are worried. What is more they have said so. Boone Pickens has made several billion making the right calls.

    There is no point in quoting me any more Austrian school stuff. I have read the same things that you say, but written by other people. Oil is over $130. It went up $11 on June 6 alone. Despite this rising trend, apparent now for 12 years, new production or substitutes are not being brought on line fast enough to halt the price rise. It should be apparent by now that at least in respect of oil that Austrian school theory about price signals are wrong. Using less, even with a few people moving house (extreme?) will not cut it. Humans are highly energy intensive. Especially the ones who like flat screen TV’s. They need their energy in very precise ways. Oil for transport, food to eat; and electricity for the the rest. And we are using more, not less. So when we find that we cannot get more (about now) we are in for a rude shock.

    There is a major problem; and if SA is as energy intensive as your article suggests, it is in big trouble. Add to that the volatile racial equation that I remember only too well and I, for one am very glad to be living near Sydney.

  • http://ivo.co.za/ Ivo Vegter

    You aren’t the first to make such predictions about the fate of humanity, and you won’t be the last. The end of the world (as we know it) is always said to be nigh. Usually by people who seek to change the behaviour of others to their own advantage.

    Paul Ehrlich famously predicted mass starvation in the 1970s, based on exactly the same resource depletion and Malthusian population growth arguments. He isn’t the only one, but he makes an eloquent and instructive case study in economic theory, or what Ludwig von Mises would call praexeology: the theory of human action.

    Now you might argue — as Ehrlich and the Club of Rome appear to keep doing — that one day the coin toss must come up heads. That you can’t draw blackjack forever. But if or when that happens, all you and I need to know about it will be contained in the price signal. That is after all the real sum of all knowledge, as opposed to just the sum of your knowledge or mine. If you think the market is wrong, you have every incentive to put your money where your mouth is. And that goes for everyone, whether they be producers or consumers, potential or actual. Even if I disagree, and even if I had the right to stop you, it would not be in my interest to do so. If you’re right, you’ll serve the market better than it has hitherto been served, and if you’re wrong, well, it’s your money yo’re risking. Either way, I will have learned how to spendor not spend my own limited resources, and via the price signal, so will everyone else.

    All this is not just faith (unlike the typical doomsday prophesy). It is sound logic about how free people act and interact in society, in order to maximise subjective value in the face of scarce resources and imperfect, incomplete information. This logic is supported not only by well-considered philosophical theories about human behaviour, by also by endless reams of empirical observation.

    That, ultimately is the point: who is right about Peak Oil does not matter, whether it’s you, me, the government, oil companies, or aspiring competitors of oil companies. The sum of all knowledge is contained in the price signal, given that it is free to move as it will. All interested parties have a motive and incentive to respond however they subjectively think maximises their interest, be it by increasing production, decreasing supply, developing alternatives, preferring alternatives, raising consumption or reducing demand. And none has the right to impose their judgement by force on others, even if they’re right.

    (This is probably worth a follow-up post on its own…)

  • http://www.sailready.com Rod

    In addition I feel compelled to comment that my understanding of the situation is based on an empirical basis of known information. I have studied resource economics, political science and psychology. I know and understand what has happened and how it has happened. I also understand energy and the sum of all this knowledge leads me (and many others like me) to extreme concern.

    On the other hand, neo-classical economics believes in Adam Smiths “hidden hand”. It is a faith based discipline. Economists simply believe price theory, without bothering with the facts. Somewhat arrogantly they claim anybody who fails to have the same understanding as them “do not understand the situation”. It reminds me of the people of Tanna, who have faith that one day John Frum will return and bring them all the stuff they could ever want. Look him up in Wikipedia.

    Note that I am not a socialist. However if an environmentalist is someone who is concerned about the human impact on our environment, then you can count me in. And I do not believe that government can fix the problems, though I have extreme doubt about the market too. On the basis of flawed neo-classical economic theory they have spectacularly failed to value oil correctly. They respond to short term criteria, whereas energy has a very long development cycle. Our energy orgy of spectacular obesity, Hummers and cheap flights is drawing to a rapid close.

    I actually think that it is too late. Man is in overshoot and a die back is inevitable. I have no agenda with that conclusion, it is simply my understanding of our very human energy dilemma. If you think that isn’t possible Google “St Matthew Island reindeer” for a simplistic metaphor. And do not tempt me with a comparison of human intelligence vs. reindeer intelligence.

  • http://ivo.co.za/ Ivo Vegter

    Aye, indeed. I give up. That apology came from my cellphone in a rather noisy venue, during the five minutes I actually had network access tonight. Again apologies, and please accept that greater events than peak oil happened this day. A certain football team secured its quarter-final spot by putting to the sword the supposed “group of death”. If the government forces me to walk to work tomorrow, so be it. Oh, yes, tomorrow is Saturday. And I work from home. Still, good intentions count for the socialists, don’t they?

  • http://www.sailready.com Rod

    OK – I am not Rob. Moving on.

    That is why I said you need to understand energy, particularly the laws of thermodynamics.

    There are no substitutes for oil – except using less energy.

  • http://hardrain.iblog.co.za Hard Rain

    It’s Rod, not Rob :p :p

  • http://ivo.co.za/ Ivo Vegter

    Re Rob and Rick: Just been able to log on and check — it’s been bothering me for an hour. You’re right, Hard Rain. Was in a hurry with that last comment. Please accept my apologies, Rob, and consider only the substance of my response. *blush*

  • http://hardrain.iblog.co.za Hard Rain

    My apologies, “Rod”, not Rob… I guess names with R flummox us both!! :p

  • http://hardrain.iblog.co.za Hard Rain

    I think Rick is the “fucktard” commenter… Rob the debator is someone else?

  • http://ivo.co.za/ Ivo Vegter

    You have some nerve, calling me a fucktard and then wanting to have a debate.

    But since you insist, permit me to correct you: You can’t think of substitutes for oil. Only very arrogance (and stupid) people conclude, from the fact that they can’t think of a solution, that no solution exists.

    The notion of free markets is not simply faith in human innovation and productivity. You’d have to be obtuse or mean-spirited or both to deny this trait in humans, but after all, your blind faith in government wisdom is based on exactly the same human character, intelligence, successes, failures, strengths and weaknesses.

    Free markets depend on the very simple concept that given a problem that is urgent enough for consumers to want to pay for a solution, it is far better if many people or companies, all of whom are prepared to put their money where their mouths are, try to solve the same problem in parallel. They are more likely to succeed than one appointed person or committee trying one solution after another, using money they don’t care much about because it is the public’s money. Sure, some or even many of the parallel entrepreneurs might fail, but they’re risking only their own capital, and you wouldn’t have to wait for them to fail before others can succeed, to compete to be the best and the cheapest.

    You don’t have to be able to think of substitutes for oil. Neither do I. Neither does the government, and neither does some arbitrary association of alarmists or special-interest lobbyists. Neither you, nor I, nor the government, has to be infallible. That’s the point of free markets. Capital gets allocated where investors with a direct interest in success think it will be the most productive, as measured by the value attributed to that production by consumers who voluntarily act in their own interest.

  • http://www.sailready.com Rod

    I just read your post again. There are no substitutes for oil. None. It is the pinnacle of mans energy endeavour. Until fusion that is, but I am not going to hold my breath.

    That is why understanding energy is important. You may believe neo-clssical economic mantra and think substitutes will roll smoothly in as the price of oil increases. That’s the problem with neo-classical economics – it has no scientific basis, it is merely the observation of human behaviour; and the faith that technology can win all, whereas the laws of thermodynamics are immutable.

  • http://www.sailready.com Rod

    OK then. Only look at one figure. Look at global exports. Once you know that information – the reason oil is over $130 should be clear. To help you out I suggest you read Jeff Rubin’s (chief economist at CIBC) article on the subject at http://research.cibcwm.com/economic_public/download/sjul07.pdf “Cheap Gasoline in Producing Countries Will Have The Rest of the World Paying More”

    “billions into exploration”? Dunno. In many years the total OOIP discovered is less than the exploration budget. If I was an IOC director I would certainly think hard about each $200m dollar well sunk in deep water. Besides, the IOC’s are quietly liquidating themselves. Annual share buy-backs often exceed exploration budgets. This is quite a strong message that the directors of these companies cannot invest shareholders money profitably in the oil business. As they say – watch what they do, not what they say!

  • http://ivo.co.za/ Ivo Vegter

    Uh, no, I heard about Peak Oil as a schoolboy, probably on a visit to the Atomic Energy Corporation (or maybe it was Sasol). However, at the time the South African office of the president hadn’t commissioned scenario-planning work from ASPO, the oil price wasn’t yet $130, and the FM hadn’t yet published last week’s cover story. So I didn’t have a good excuse to blog it. Oh, and I didn’t have a blog. Or a modem.

    But since you say this is garbage and I know nothing, I trust you can explain why oil company shareholders permit their companies to sink fortunes into exploration, invest billions developing new extraction techniques for hard-to reach reserves, and risk their capital on massive speculative oil or gas ventures that end up at the mercy of kleptocratic governments? I trust you can explain why the only solution to this particular problem — if indeed it is a problem — is for government to use taxpayer money to forcibly restructure the economy? I trust you can explain why all those smart Peak Oil people who know all those things you presume I don’t know are sowing panic, instead of quietly investing in clever ways to steal the oil companies’ lunch? That would, after all, be the usual way one would solve problems in a free society.

    On the other hand, perhaps I should also lobby for some measures I would like. Anyone who knows anything about the media knows that print is past its peak, never to recover its 20th century money-spinning glory, thanks to the internet, right? Problem is, most journalists still make the bulk of their income from print, rather than from their blogs, for example. So perhaps it’s worth lobbying the government to force people to pay bloggers for their effort, or force advertisers to support them on a non-discriminatory basis, or better yet, just to lavish taxpayer money on bloggers. Maybe we can get them to just ban newspapers altogether, in the interest of restructuring the media industry. That would show those geriatric tycoons! Would you back me? You can be chairman of the Public Initiative for Emerging Media, as long as I can remain treasurer.

    I just attack Peak Oil alarmists because I’m jealous, you know. I also want my share of the public purse.

  • http://www.sailready.com Rod

    Ivo – my mate. Whats wrong man? Have you just woken up, like Brigadoon after 100 years, and heard the term “Peak Oil” for the first time? Jislike man! (forgotten how to spell that – been out of SA too long). Forget about economics and all that theory about prices. It is BS (for oil, when production is in decline).

    Go away and study the history. Don’t look into the future. Make no fancy calculations. No hocus-pocus theorizing about what might happen! Look only at known facts that have actually occurred in the past. Get to know the oil industry well. Find out about oil production, where the oil is produced, how much is produced and when, how much existing oil field production is declining every year. Find out what new projects are coming on stream, where, when and how much. Find out about what has happened in the North Sea, Mexico, Russia and many other countries recently. Look at the trends. Find out how much is exported, where and when. Find out in particular about how much oil was exported, in total, globally, last month compared with November 2005. Understand the trends in exports, particularly since 2005.

    Understand energy. Understand the laws of thermodynamics. Find out about oil from tar sands. Learn about biofuels. Find out what the total photosynthetic gain is for a country such as the US and how that compares with that countries energy use.

    Find out about the political science surrounding oil. Understand the response of governments and corporations. Find out about the role of energy in our economy and in our society.

    I repeat, look only at the history; and only at the facts.

    When you have done that, come back and write your article again. Because this one is garbage.

  • Chris

    Rick,

    What I like the most about your comment is that, after implying that only geologists should speak about “peak oil”, you make a very economic argument about “price inelasticity of demand” ;-)

    Just one note about that so-called price inelasticity, much of that has to do with the fact that places like China and India try to soften the price hike for their consumers which means that their demand does not taper off as much as it should. Luckily for the rest of us, at some point they will learn that it is bad for their balance of payments and then the price mechanism can do its work again. But that is just the neo-liberalist pig in me thinking aloud ;-)

  • http://hardrain.iblog.co.za Hard Rain

    Rick must clearly be a highly-qualified geologist. He just told us getting oil involves drilling downward through rock! Unbelievable.

  • http://ivo.co.za/ Ivo Vegter

    It’s true, Milo, I was, and he did. That was just after he became superior to everyone else despite his coarse manners and functional illiteracy.

    Witness, dear reader, the lesser spotted Peak Oil alarmist in his natural habitat.

  • Milo

    Yes, Ivo was personally responsible for apartheid and you did a great thing by personally stopping him. Good job, sir!

  • http://cnbcsucks.wordpress.com Rick

    Why is it always non-geologists who dispute peak oil? Why don’t you get a PhD in geology first, then do some field work before commenting on this topic and glibly adding to the noise? You say ASPO is economic illiterate…are you literate in geology, engineering, or science? What exactly is your technical background beyond blogging? Frankly, it doesn’t matter if it’s 85 mbpd (that means million barrels per day), or 90, or 95, or 100, or a bit more as BP opined earlier this week. That oil is going to be expensive. It’s called price inelasticity of demand, which happens when the world’s two most populous nations (that would be China and India) increase their per-capita consumption of energy fivefold over a period of 10 – 15 years. Add Russia, Brazil, the Middle East, other developing countries. This trend is irreversible unless you can convince these 3 billion people and their governments to go back to their pre-industrial lives (maybe you can do that through this great blog, fucktard). Another factor on the supply side is that you either have to drill through miles of rock for much of the offshore oil or in the case of certain onshore fields, deep down vertically and then also horizontally. These will be capital and energy intensive processes on fields that are largely unproven. But in any case, it’s not peak oil that is the question. It’s whether oil will ever be a cheap source of energy in the way it has been for more than a century.

    I am just glad we made you end apartheid.

  • http://ivo.co.za/ Ivo Vegter

    I did credit the Americans with stupidity. And it’s not just squirrels, or other cuddly creatures that don’t really need the kind of protection from oil companies that only a ban on drilling can buy. American oil outfits are not even allowed to drill offshore. Maybe they’re afraid San Francisco will fall into the sea or something. It’s like refusing to spend your money because you fear germs on your banknotes. Insane. If you’re really that worried, wear gloves. Otherwise you belong in a mental institution.

  • http://hardrain.iblog.co.za Hard Rain

    Aye, Ivo, unfortunately in times of “crisis” (i.e. prices the consumer side of the market dislikes) the masses bay for blood and the spinmasters conjure up a suitable sacrificial lamb. Here in the US it’s hauling oil companies before committees to account for why their businesses are successful! Otherwise the lamb becomes the scapegoat for lobbyists eager to punt their special interests, such as “green legislation”, selling their version of solutions to us with our own money no less!

    Meanwhile, how much oil, coal, natural gas and nuclear material lies beneath my feet in the continental US at this very moment, unextracted because of some bungo legislation or litigation for the protection of squirrels? I guess it’s just easier to fund some Saudi emir’s opulent desert “oas-estate”.