Gas Caps

And the price controls begin in HI...

Hawaii will begin enforcing a cap on the wholesale price of gasoline next week, hoping to curb the sting of the nation's highest gas costs.

The limit would be the first time a state has capped the price of gasoline — a move critics warn could lead to supply shortages.

But many Hawaii residents are just looking for some relief from soaring costs.

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I have to run so a couple of

I have to run so a couple of quick comments:

"You seem to be laboring under the mistaken assumption that PO means that we will wake up tomorrow morning and find ourselves without any energy sources at all because the last gallon of oil has just been pumped."

No, I very specifically denied this. The Peak Oilers claim that the price will rise quickly because of supply technology and high need for consumption as described above, not because we'll be out of oil.

"What we will see is a rise in the price of oil. In fact, as the discussion on James Hamilton’s Econbrowser have covered, we may even see a price rise as we approach PO because people will arbitrage the current value vs. the future, higher value. Unless someone does something completely stupid, like introduce price caps, this will result in a reduction in demand and a rise in alternatives, including but not limited to alternative sources of oil. That may delay the peak and will probably even see to it that we never run out of oil. The geologists seem to miss this over and over: people respond to incentives."

Even JDH is agnostic on the rate of change because he believes we don't have enough information. Did you really read all his posts on the matter and all the comments? I followed that discussion very closely.

It is the rate of price change that is at issue, and so far I've found it hard to oppose the notion that it would be fast given what we know about technology and physics. Even if there is only *some* risk of this, can we afford that risk (of a rapid rate change)?

People do in fact respond to price incentives: I said very clearly that I oppose price caps! It is whether physics allows them to respond *well enough* that is at issue.

I will deal with Julian Simon later as I really must go.

Domestic prices, especially

Domestic prices, especially at places like Wal Mart, would be heavily affected by an Oil drought as the cost of shipping would increase dramatically. There might be an eventual fix, but we shouldn't just wait until the crisis comes. Sure, after the black plague we eventually found a cure but if we knew that a new specific disease was headed our way we wouldn't want to just sit back and say "once it's starts killing people the market will respond and find a cure." In fact this seems to highlight a huge problem with markets in general, as that's a terrible response to the crisis. Even when the crisis comes, I doubt that markets will produce the new substitute my guess is the US taxpayer will have to pony up the R and D costs and then the new technology will be handed off to private company which will charge an arm and a leg for it (which is how major economically-viable developments almost always tend to come about.) I don't think market structures are able to be sufficiently long-sighted as they tend to focus on short-term bottom-line issues. Also, assuming that this issue is likely to affect the next generation (which doesn't have a voice in the market at all) no one will respond to their demands, even under the most generous freemarket theory.

matt

"There is a price point for

"There is a price point for gasoline (I’ve heard $5/gallon, but I don’t have an attribution or anything. For the sake of argument, let’s say it’s $10/gallon) above which it becomes preferable to use alternative fuels, such as hydrogen fuel cells.

Are you saying that we’ll see a “catastrophe” prior to reaching that switch-over price?

If not, then why wouldn’t people, at that point, just start making the conversion to these other energy sources? Why would “billions die” in the agricultural meltdown that’s predicted?"

Let's leave aside the weaknesses of hydrogen as an alternative (esp. since it is only an energy carrier and not a source). If the price/scarcity of oil rises too quickly, the cost of switchover to alternative technologies becomes too high, too quickly. Since the switchover itself would be a massive consumer of oil. Worse, much of modern agriculture depends on fertilizers, pesticides, etc, to get the yields that it does: not sure a non-petrochemical alternative exists for this given the intensity of the farming.

Most of the Peak Oilers are essentially saying that due to the geology and the latest in extraction techniques, not only with the wells fail, they could very well fail quickly, rather than have a smooth downslope in pressure. They are pointing at purported claims that Ghawar is showing signs of decay, and that is the biggest oil field ever---a failure would be catastrophic, and if it turned out that failures start appearing faster than discoveries, the market would panic (the market panic scenario is an essential part of the worst worst case scenario, Matt Savinar's).

Even if it didn't, they claim that the oil extraction capacity downslope would itself cause rapid price increases, ie, much much faster than the overall downward trend of energy on the oil supply upslope. Because on the downslope you have massive unsatisfied consumption capacity created during the upslope, so it wouldn't be a gentle fall symmetric with the relative comfort of the production upslope.

And the reason why it would be catastrophic, quoth they, is that energy is not easily substitutable. And that we deferred the moment at which we should have started planning to beyond the lead time required for affordable conversion. Because we believed folks like you---that the market would save us. Because relying on the market simply defers the date when you finally have to plan ahead. The grasshopper and the ant.

:end:

Mandos; You seem to be

Mandos;

You seem to be laboring under the mistaken assumption that PO means that we will wake up tomorrow morning and find ourselves without any energy sources at all because the last gallon of oil has just been pumped. That isn't remotely true because (1) oil isn't the only source, and (2) it isn't going to suddenly dry up. What we will see is a rise in the price of oil. In fact, as the discussion on James Hamilton's Econbrowser have covered, we may even see a price rise as we approach PO because people will arbitrage the current value vs. the future, higher value. Unless someone does something completely stupid, like introduce price caps, this will result in a reduction in demand and a rise in alternatives, including but not limited to alternative sources of oil. That may delay the peak and will probably even see to it that we never run out of oil. The geologists seem to miss this over and over: people respond to incentives. Even clever economists like Jevons seem to mistakenly assume that demand (and demand growth) is a given fact, impervious to price signals, despite the increasing scarcity of the resource they are studying. Prices, demand, and supply are dynamic; you cannot predict demand with a ballistic equation without regard to supply and price. You can try to mask the scarcity with price caps, but this just makes the problem worse. It doesn't send the right signals to existing or potential producers, and it mixes the signal to consumers, who may believe that fuel can still be had at the capped price even though they have to wait in line for hours at a time. If people didn't respond to price incentives, then what in the world is the point of Kyoto, or carbon taxes, or any of the other green tax schemes? Are you saying that Al Gore is completely off his rocker when he says " ... every poll shows Americans decisively rejecting higher taxes on fossil fuels, even though that proposal is one of the logical first steps in changing our policies [emphasis added] in a manner consistent with a more responsible approach to the environment"?

I certainly wouldn't dismiss Julian Simon on the basis of anything on the dieoff.org website. Not only is that intellectual laziness, but site organizer Jay Hanson has a little problem with this thing we call reality. He seems to think that his spaceship analogy trumps all argument; he can't distinguish between policy-induced failure and market failure; he won't acknowledge government failure; he resorts to economic or quasi-economic arguments while simultaneously denying that economists get anything right; while relying on technological measurements or models of environmental problems, he dismisses technological solutions as "faith-based", but denies his own faith in central planning; he dishonestly misquotes; etc. He and the Ehrlichs of the world always claim that their predictions were right, they were just too specific about the dates or some other aspect of their predictions without recognizing the fact that a non-specific prediction is utterly useless. Lindsey Grant appears to share some of these traits in his anti-Simon tirade.

Well, anyhow, the Hawaiians are about to get relief from soaring costs ... as well as relief from abundant fuel supply, productivity, and fast-pay gas stations.

"I’m much more in favour

"I’m much more in favour of redistribution."

Does anybody now have ANY doubts as to where Mandos is coming from?

"It is also technically

"It is also technically possible to move beyond oil dependence without planning. Given the history of central planning efforts, I’d say the burden is on central planners to explain why, in this rare case, a government bureucracy and central planning committee will outperform the market when it comes to dealing with peak oil."

I've gotta run in a few minutes, but I'd mention that while the Soviet Union is mentioned as the greatest failure of central planning (and I partly agree with this), it's also generally cited as an example of very rapid industrialization. I suggest that the solution to a prospective peak oil crisis is very similar to "reindustrialization" and hence something that centrally planned systems are possibly quite good at.

I think the fuse on this

I think the fuse on this thread has just been lit.

Yes, I think my optimism,

Yes, I think my optimism, guarded though it may be comes from the same source. I think markets are better transmittors of information than government.

"if the geology and the

"if the geology and the engineering tells us that waiting can lead to a pessimal outcome "

How can geology explain anything about economics? Or the ability of a given industry to adjust to expensive oil? The fact is that the peak-oil geologists and engineers are making an intuitive leap from "no more oil" to "everyone must die". They may be dead on accurate to the DAY on when peak production will arrive but all their baseless speculation about how society will collapse from it is just that: baseless speculation.

"So given that there is this risk, and given that it is technically possible (with planning) to remove many functions from oil-dependence in advance of the market then, again… "

It is also technically possible to move beyond oil dependence *without* planning. Given the history of central planning efforts, I'd say the burden is on central planners to explain why, in this rare case, a government bureucracy and central planning committee will outperform the market when it comes to dealing with peak oil.

Can *you* show that?

It seems to me if the Peak

It seems to me if the Peak Oilers were as confident in their predicitions as they claim to be, they would put their money where their mouths are and invest in the equivalent of selling oil short and make gobs and gobs of cash. If enough of them did this, they would be sending a market signal - a real, believable signal (ala Patri's Hope vs. Belief paradigm) - that oil is destined to rise in price, and it would rise accordingly before any shortage occurs. The fact that they don't put their money where their mouths are leads me to trust those who do - and those who do don't think we have much to worry about any time soon.

That's a slightly better

That's a slightly better argument, but my guess is you'll still end up talking past most people when you "challenge" them, especially if you do so at certain blogs, like this one. They might not share your givens. I, for instance, don't.

Removing ourselves from a resource has costs, too: that is, presumably, the reason we haven't done it yet.

Florida's thinking about it

Florida's thinking about it too.

I love local news.

You may be right (and we'll

You may be right (and we'll leave aside the nature of utopia), but if the geology and the engineering tells us that waiting can lead to a pessimal outcome (the worst pessimists estimate a multibillion death toll with the collapse of industrial agriculture), AND the solution is to remove ourselves from a resource that carries that risk, then...

I mean, with the available information, an ugly picture emerges, one I haven't seen challenged very well---a challenge I keep fishing for here and there. So given that there *is this risk*, and given that it is technically possible (with planning) to remove many functions from oil-dependence in advance of the market then, again...

At the moment, according to

At the moment, according to the worst pessimists (I'm not), no one. We are doomed, since the window for action given the time it takes to retrofit the economy closed when Reagan was elected.

Since I'm not a worst pessimist, I think we still have time to make the political investments in preparing for the Peak. That means, at least, doing no harm. That means that the latest Energy Bill was a terrible mistake.

I'm not an expert on

I'm not an expert on petroleum, and I don't have an opinion on this, but I will point out that Mandos' comments have a feeling to them that seems suspiciously utopian.

It may be that we are headed towards some oil catastrophe, but even assuming that, that alone doesn't say anything about whether we should attempt a market-based solution or other. There are a variety of alternatives to any problem and one should pick the best of them. Incoming catastrophe is no reason to abandon the market unless one thinks the alternative will be superior (or perhaps, depending on your views, you should place the burden of proof on the pro-marketers: regardless, the point stands).

And to tie this back in to the topic of the original post, I think a similar problem arises in political circles. People assume that just because something bad is happening something must be done, and so they do something, in this case impose rationing, that makes the problem even worse. It should be remembered oftentimes the best solution (even if that solution is none too attractive) is do nothing at all.

Utopia is not an option.

And the term "Holy Market" is a little too precious for my tastes.

"can the Holy Market respond

"can the Holy Market respond quickly enough to bring the alternatives online, BEFORE the cost of the oil to implement the alternatives (due to supply reduction) rises too far to prevent catastrophe."

Well who else is going to?

nmg

I've read that article and a

I've read that article and a number like it. Here's the problem: it does not refer at all to the basic argument behind Peak Oil theories, which are geological and have to do with well capacity problems---and on the demand side, refer to inelasticity and, in particular, the inelasticity caused by the immaturity of the technology to replace petroleum.

I'd be really happy if that article were correct in its optimistic pronouncements. I like technology too, and am far from being a "back to nature" kinda guy. But most of the optimists fail to respond to the basic problems. The basic question being, *whenever* (now or later) the Peak hits (and it must, physically), can the Holy Market respond quickly enough to bring the alternatives online, BEFORE the cost of the oil to implement the alternatives (due to supply reduction) rises too far to prevent catastrophe.

Mandos, you might want to

Mandos, you might want to read this before you start saying the sky is falling.

I've brought this up before,

I've brought this up before, and I lost the thread where I was arguing it. But I'm more convinced than ever that these things are going to become more common as its shown that Saudi Arabia is losing capacity and is not able to replace it.

The Holy Market had better come up with a cheap replacement fast enough to be affordable before oil prices skyrocket and *real* rationing is instituted.

I'm glad it's Hawaii doing

I'm glad it's Hawaii doing it first and not California where I live. That way I can point and laugh from far away rather than from up close as I ride by on my motorcycle.

Have these people learned

Have these people learned nothing from economic history? But I suppose if it takes a run on gas in Hawaii to convince the rest of the country that this would be a horrible idea, let them screw themselves and be an example.

Doug - I was worried that I

Doug -

I was worried that I was a being little bit too obscure. Glad that I was mistaken!

Mandos (Hands of Fate?) An

Mandos (Hands of Fate?)

An MST3K (RIP) fan, I assume. I salute you. :grin:

Mandos (Hands of Fate?)

Mandos (Hands of Fate?) -

There is a price point for gasoline (I've heard $5/gallon, but I don't have an attribution or anything. For the sake of argument, let's say it's $10/gallon) above which it becomes preferable to use alternative fuels, such as hydrogen fuel cells.

Are you saying that we'll see a "catastrophe" prior to reaching that switch-over price?

If not, then why wouldn't people, at that point, just start making the conversion to these other energy sources? Why would "billions die" in the agricultural meltdown that's predicted?

It seems to me if the Peak

It seems to me if the Peak Oilers were as confident in their predicitions as they claim to be, they would put their money where their mouths are and invest in the equivalent of selling oil short and make gobs and gobs of cash. If enough of them did this, they would be sending a market signal - a real, believable signal (ala Patri’s Hope vs. Belief paradigm) - that oil is destined to rise in price, and it would rise accordingly before any shortage occurs. The fact that they don’t put their money where their mouths are leads me to trust those who do - and those who do don’t think we have much to worry about any time soon.

this seems intuitive enough, but I'm not sure if this is right... When risks are so major you don't need to think that they are likely in order to be worried about them. Suppose you walk aound in Colon Panama at night- it's not likely that you'll get mugged but the risk is great enough that it's worth being concerned over. You wouldn't want to bet someone that you'd get mugged (because you don't have good odds) but you would want to take precautions. Someone could say that taking precautions without betting was not "putting your money where your mouth is", but I think they'd be missing the point.

I’m claiming that I am

I’m claiming that I am more willing to believe those who put their money where their mouths are over those who don’t.

and my opint was simply that your test for whether they "put their money where their mouths are" was not a reasonable test. As shown with my analogy, it would be possible to both be concerned about something (you could in fact be convinced that it was inevitable you'd be mugged if you went out every night for 10 years) and not consider it likely enough to bet on, which was your example for "putting your money..."

matt

Peakzilla vs. the Holy

Peakzilla vs. the Holy Market
Ooops, I did it again! Well, at least, this is the second time I've done it. I diverted yet another Catallarchy thread into a discussion of Peak Oil. (I didn't blog the first time.) Thing is, philosophically and empirically speaking,

And bringing this back to

And bringing this back to HI, I also oppose blanket price caps too, for the record. I'm much more in favour of redistribution :evil:

"I think the “doom &

"I think the “doom & gloomers” have a point - but not what they think. There is a possiblity that they could be right, but I am of the opinion that almost always there has to be a huge catastrophe before anyone does anything about “it".

Cases in point: 9/11, Pearl Harbor and I can’t think of anymore because it’s 1:30 in the morning and I have class in 9 hours.

We won’t run out of energy because people will see us running out of oil (when we eventually do) and do something about it, either go nuclear or invent widespread hydrogen fuel cells. In other words, its like the guy asleep in his car going 30 miles an hour. He’ll feel himself drifting and jerk the steering wheel. Then he’ll drift somemore and go the other way."

Let's leave 9/11, etc, out of it at least for the time being. I'm not sure if the analogy is correct.

The problem with waiting for the huge catastrophe is that, well, the catastrophe is the unavailability of energy itself. Your ability to invent and implement stuff to fix the problem is, unfortunately, tied to the energy you have available to do it. If energy becomes quickly expensive, you won't.

"Mandos, for excellent

"Mandos, for excellent arguments in favour of a market solution to what you speak of, I highly recommend “The ultimate resource 2? by Julian Simon R.I.P. I have seen nowhere else a better refutation of that which has been argued by environmentalists and doom & gloomers for the last two centuries.. Furthermore, has it occured to anyone that since price is an indicator of scarcity, it should be our main gauge on the lasting power of oil? Prices aren’t great, but they’re not catastrophic either. I would trust actual price over any amount of blabbing on"

Well, quotes people have given me about that book make me less inclined to spend my time on it than I would otherwise have done. This in particular makes me worried about it:

http://dieoff.org/page45.htm

I realize that global warming is not popular around here, and you can ignore those parts. But I think a good summary paragraph is here:

"These expressions of faith (for they are only that) reflect a belief in infinite substitutability that Simon probably acquired from the academic economists. The assumption is not based on any systematic rationale, nor is it buttressed by any evidence other than the fact that the industrial world has been doing pretty well, so far. It is simply an assumption required by the economists to run their models. Biologists and ecologists have been trying, without success, to persuade the economists that the assumption is terribly dangerous in a finite world on which human economic activity is pressing ever more heavily. There are no practicable human substitutes for clean air and water or a functioning ecological system. Energy itself can be dangerous, and the evidence (as distinct from one's hopes) suggests that it will become more expensive, rather than less, as Paul Werbos discusses [in this volume]."

And that's the problem really. Ehrlich might have lost the famous bet with Simon, and that's because he made the mistake of being too specific. But the fact that these things *can* happen is still physically possible, and it's even more possible that with every bullet you dodge, you actually increase the likelihood of being hit by the next one.

I think the "doom &

I think the "doom & gloomers" have a point - but not what they think. There is a possiblity that they could be right, but I am of the opinion that almost always there has to be a huge catastrophe before anyone does anything about "it".

Cases in point: 9/11, Pearl Harbor and I can't think of anymore because it's 1:30 in the morning and I have class in 9 hours.

We won't run out of energy because people will see us running out of oil (when we eventually do) and do something about it, either go nuclear or invent widespread hydrogen fuel cells. In other words, its like the guy asleep in his car going 30 miles an hour. He'll feel himself drifting and jerk the steering wheel. Then he'll drift somemore and go the other way.

It will sort its self out, the people in this world aren't completely stupid. Just mostly.

"It seems like there is a

"It seems like there is a significantly high chance that we will run out of oil, given that it is a fixed, nonrenewable resource. So I’m not claiming it isn’t likely we will run out of oil - I’m claiming that I am more willing to believe those who put their money where their mouths are over those who don’t."

It's not a question of running out of oil, although I'm probably preaching to the choir on this point. It's a problem of *peaking*. This is an event whose prediction is fundamentally statistical due to the nature of the science: what is the maximum capacity that geology and engineering can pump out.

Some of the more pessimistic HAVE gone long on oil, in particular, IIRC, Matt Simmons. For the medium-pessimists (this is what I think I'm tending towards), the peak will be experienced bumpily with lots of local minima and maxima. Some of us don't exactly have a lot of money (unlike Simmons), and we can't afford to invest what little liquidity we have if we need to pull our money out during a local minimum.

"Further, the Peak Oilers aren’t claiming that there is tiny chance that we will run out of oil, but if we do the costs will be great, so great that we should spend money on prevantative measures which will cost less than the catastrophe multiplied by the low risk. No, the Peak Oilers claim that the chance is enormous, verging on the inevitable. And markets show why they are wrong, or at least not believable enough to be worth listening to."

Two problems with this:

1. This presupposes a belief in the ability of markets to use information efficiently to plan ahead for catastrophe, which is, if you restate the peak oil position, quite exactly what they are challenging. It's worth noting that Matt Savinar's (IMO too specific) Life After The Oil Crash scenario of collapse actually doesn't seem to depend directly on the peak but instead on the what he believes will be the reaction of the market upon realization that the peak has arrived but that they didn't plan for it. In other words, the market will realize *too late* and will act *too drastically*. I mean, the whole argument is specifically that the markets will not react when there is sufficient lead time to physically implement alternatives. So your response here assumes the opposite from the get-go---not logical.

Now why would someone claim that the market wouldn't encode the correct information. Peak oilers have a panoply of explanations for this, from cultural factors to game-theoretic ones.

2. The fact is (and this may actually be positive news) is that information *does* appear to be percolating through the market about the problem. You may notice that the price of long-term futures was, a few months ago, much less than the price of short-term futures, as speculators seemed to assume that the high price was a temporary phenomenon. Well, now the market no longer believes the Saudi oil officials: long-term futures are now at parity with the high price of short-term contracts. The question is, can it reach a level high enough (but not too high), early enough, to create the transition necessary for the actual peak, whenever it comes, to have much less of an effect than it ordinarily would on the North American and Chinese economies in particular.

Mandos, for excellent

Mandos, for excellent arguments in favour of a market solution to what you speak of, I highly recommend "The ultimate resource 2" by Julian Simon R.I.P. I have seen nowhere else a better refutation of that which has been argued by environmentalists and doom & gloomers for the last two centuries.. Furthermore, has it occured to anyone that since price is an indicator of scarcity, it should be our main gauge on the lasting power of oil? Prices aren't great, but they're not catastrophic either. I would trust actual price over any amount of blabbing on

Mandos, for excellent

Mandos, for excellent arguments in favour of a market solution to what you speak of, I highly recommend "The ultimate resource 2" by Julian Simon R.I.P. I have seen nowhere else a better refutation of that which has been argued by environmentalists and doom & gloomers for the last two centuries.. Furthermore, has it occured to anyone that since price is an indicator of scarcity, it should be our main gauge on the lasting power of oil? Prices aren't great, but they're not catastrophic either. I would trust actual price over any amount of blabbing on and on about macro trends and "ineveitable" catastrophes.

"How can geology explain

"How can geology explain anything about economics? Or the ability of a given industry to adjust to expensive oil? The fact is that the peak-oil geologists and engineers are making an intuitive leap from “no more oil” to “everyone must die". They may be dead on accurate to the DAY on when peak production will arrive but all their baseless speculation about how society will collapse from it is just that: baseless speculation."

You are partially right in that I myself find some of the worst doomers (say, Matt Savinar) are too specific in their scenarios of collapse and do not allow for the heterogeneity of responses that may occur.

But there are a few crucial things about the economy that the Peak Oilers CAN make pronouncements about (and can also be wrong):

1. The level at which the economy is dependent on cheap petroleum (ie, the input required and the efficiency).

2. The relative importance of sectors of the economy to human survival.

3. The characteristics of known replacement technology (their efficiency, in particular).

4. The minimum time it takes to retrofit the economy with the replacents.

And so on.

Within these kinds of parameters, of course, you can construct any number of specific economic scenarios for the oil endgame. But the fact is, these are physical constraints and they limit all scenarios, and the only way to propose an scenario that exceeds these constraints is to expand one of the parameters. All that Peak Oilers are claiming is that these parameters are severely constricting on any scenario that could play out. Physics is prior to economics.

Micha, if you think

Micha, if you think availability of oil is going to decline and demand is going to increase, driving the price up, why would you sell short? If the price of a commodity is going to go up, you want to be long, not short.

Those making bets on the increasing price of oil--via futures contracts, commodity index funds, natural resource funds, etc.--are doing quite well with them.

Well, that's one way to run

Well, that's one way to run outta gas.

Matt, It seems like there is

Matt,

It seems like there is a significantly high chance that we will run out of oil, given that it is a fixed, nonrenewable resource. So I'm not claiming it isn't likely we will run out of oil - I'm claiming that I am more willing to believe those who put their money where their mouths are over those who don't.

Further, the Peak Oilers aren't claiming that there is tiny chance that we will run out of oil, but if we do the costs will be great, so great that we should spend money on prevantative measures which will cost less than the catastrophe multiplied by the low risk. No, the Peak Oilers claim that the chance is enormous, verging on the inevitable. And markets show why they are wrong, or at least not believable enough to be worth listening to.

"I’d mention that while

"I’d mention that while the Soviet Union is mentioned as the greatest failure of central planning (and I partly agree with this), it’s also generally cited as an example of very rapid industrialization. I suggest that the solution to a prospective peak oil crisis is very similar to “reindustrialization” and hence something that centrally planned systems are possibly quite good at."

One time, in the face of nazi domination, some communists rallied and rapidly built up a war machine for defense.

That's hardly a stirring argument for abandoning the market and relying on central plannign to address peak oil.

You keep reiterating that it's too risky to leave to the market, but the same reasoning could be applied to government, with more force in my opinion. It's far too risky an issue to place in the hands of venal, stupid bureucrats with no accountability.

"The fact is (and this may actually be positive news) is that information does appear to be percolating through the market about the problem. You may notice that the price of long-term futures was, a few months ago, much less than the price of short-term futures, as speculators seemed to assume that the high price was a temporary phenomenon."

Exactly. All this hysteria about the market failing us and the need for a centrally planned "apollo program" for energy is simply wrong. Every day the market is moving toward a post-petroleum energy paradigm.

Sure there are risks and hurdles but I don't know why anyone thinks a govt bureucracy is better equipped to handle them.

It's wierd that so many just take the leap from "there's a problem that must be addressed" to "the government must step in".

Basically, none of the problems posed by peak oil point to the need for central plannings. They problems exist, the risks are there but the need to address it with central planning is not.

nmg

PS: why is that the most ardent peak oil types always turn out to be ardent socialists?

Matt - You wouldn’t want

Matt -
You wouldn’t want to bet someone that you’d get mugged (because you don’t have good odds) but you would want to take precautions.

If I were a betting man, and the odds of me being mugged were 1%, I'd take any bet offering me better than $99 for every $1 I put in. If I take precautions (at my own expense!) then I'm still putting up.

I am always skeptical of folks who claim the sky is falling and have a plan for spending other people's money.

I’ve gotta run in a few

I’ve gotta run in a few minutes, but I’d mention that while the Soviet Union is mentioned as the greatest failure of central planning (and I partly agree with this), it’s also generally cited as an example of very rapid industrialization. I suggest that the solution to a prospective peak oil crisis is very similar to “reindustrialization” and hence something that centrally planned systems are possibly quite good at.

Soviet industrialization came at a cost of huge numbers of people dead from purges, political imprisonement, and privation. I do not know why anyone in his right mind would ever suggest that Soviet industrialization was in any way successful - the plain fact of the matter is that Soviet industrialization was what was *left* after Lenin and Stalin decimated the agricultural sector.

If I were a betting man, and

If I were a betting man, and the odds of me being mugged were 1%, I’d take any bet offering me better than $99 for every $1 I put in. If I take precautions (at my own expense!) then I’m still putting up.

I'm not sure what the specifics are on shorting gasoline prices or something, but my guess is that these sorts of odds aren't being offered. I'd be curious to know if they are because, I think it'd make a pretty damn good bet that in oil shortage will happen within 20 years. Perhaps not a catastrophic one, but there probably will be one, simply as a result of the projected rates of use and the (admittedly quite rough) estimates ot the world's remaining reserves. It's plausible that if Russian Oil is made somewhat more cost-effective we could extend our Oil resources, but at what figures to be quite a cost and the effects would mirror those of an oil shortage (drastic price increases, etc.)

Soviet industrialization came at a cost of huge numbers of people dead from purges, political imprisonement, and privation. I do not why anyone in his right mind would ever suggest that Soviet industrialization was in any way successful - the plain fact of the matter is that Soviet industrialization was what was left after Lenin and Stalin decimated the agricultural sector.

This is a common confusion among Libertarians, as you guys often assume that to say something was economically succesful implies some kind of positive value judgement. Slavery was economically succesful. I think it's just the case that libertarians make so many arguments which constantly jump back and forth between (and simply confuse) the economically succesful/efficient and the ethically right. That Stalin's 5 year plans drastically increased growth is simply a fact. That Russia is considered one of the few (some consider them the only) countries in modern times to have broken the barrier and become a 2nd world country after having been a third world one is simply a fact as well (assuming relatively standard definitions of "third world" etc.) The fact that Stalin was a brutal monster who murdered millions of people is also a fact (insofar as perjorative terms like "monster" can said to be facts.)

What might be worth considering is whether economic growth coupled with massive numbers of deaths is better than massive numbers of deaths without incredible economic growth. I bring it up only because capitalism in Russia in the 90s is estimated to have caused 10 million extra deaths, yet produced no economic miracle, and I don't see anyone putting togther "days of rememberance" for the victims of capitalist atrocities like that one.

Matt

This is a common confusion

This is a common confusion among Libertarians...

That paragraph is filled with so much sheer bullshit that to untangle it could take weeks...

Abe

perhaps you could try an

perhaps you could try an untangle at least a single thread of it?
till that day,
matt

Good column re: Russia since

Good column re: Russia since the 1990s.

http://capmag.com/article.asp?ID=3931

Russia left communism, but it never truly left authoritarianism. The fall of communism in Russia did not mean the embrace of the principle of individual rights. After the communism's collapse, the Russian mafia first filled the power vacuum. Now Putin is. Through all this, one thing remains constant: in Russia, might always makes right.

"Soviet industrialization

"Soviet industrialization came at a cost of huge numbers of people dead from purges, political imprisonement, and privation. I do not know why anyone in his right mind would ever suggest that Soviet industrialization was in any way successful - the plain fact of the matter is that Soviet industrialization was what was left after Lenin and Stalin decimated the agricultural sector."

And this differs from almost every industrialization...how, exactly? I mean, you guys have an incredibly rosy picture of the history of "capitalist" industrialization yeah, but out here in the real world, we know the massive human suffering and displacement it wrought in order to bring about industrialization at a slower pace than the Soviets.

Luckily I think that switching energy sources, though while a challenge, is less of a challenge than /de novo/ industrialization. But it does, in fact, require coordination simply because of the massive and integrated way in which oil-dependence is woven into our economy. It may require coordination, as well, because of the time frame that we have. Markets don't respond quickly to catastrophe---we usually call out the military or something.

I didn't think that was a

I didn't think that was a very good column. For one thing, he says "advocating for capitalism" which (I think) is grammatically incorrect. More to the point though, this guy reminds me of a vulgar marxist arguing that Cambodia couldn't succesfully convert to communism because the people weren't properly "socialized." The Russian conversion was done under the supervision of the leading capitalist economists of the day(including the loveable Jeffery Sachs) and miracles were predicted. Of course Russia had a problem with corruption- that's a problem exacerbated by capitalism, as (especially under capitalism) people have strong incentives to use whatever means available to achieve their ends.

I think it's pretty racist to just pretend that the Russians aren't good enough for capitalism, and that their puny russian brains can only understand authoritarianism which is what's implied by this "blame the victim" position that guy's espousing.

I can certainly tell you that if I were a communist trying to defend millions of deaths attributed to Stalinist with arguments like those I would be crucified on this board.

matt

"I certainly wouldn’t

"I certainly wouldn’t dismiss Julian Simon on the basis of anything on the dieoff.org website. Not only is that intellectual laziness, but site organizer Jay Hanson has a little problem with this thing we call reality."

Of course, I'm being lazy in not directly going out and buying Simon's book and reading it and providing you a thorough debunking and publishing that and making oodles of cash or something. It's not like I have to be sort of selective about my time or something or that I can't rely on a collective effort. Lazy is me. I am lazy, hear me fail to roar.

"He seems to think that his spaceship analogy trumps all argument; he can’t distinguish between policy-induced failure and market failure; he won’t acknowledge government failure; he resorts to economic or quasi-economic arguments while simultaneously denying that economists get anything right; while relying on technological measurements or models of environmental problems, he dismisses technological solutions as “faith-based", but denies his own faith in central planning; he dishonestly misquotes; etc."

Technological solutions are faith-based in that they rely on something that

a. doesn't exist; and

b. has no particular guarantee of existence.

Whatever you think of the weaknesses of central planning (some of which I agree with, by the way), most central-planning solutions rely on technology already in existence whose energy characteristics we can actually compute. Yes! For real! Not hypothetical! I'd say that gives his arguments an advantage right out of the gate.

" He and the Ehrlichs of the world always claim that their predictions were right, they were just too specific about the dates or some other aspect of their predictions without recognizing the fact that a non-specific prediction is utterly useless. Lindsey Grant appears to share some of these traits in his anti-Simon tirade."

Non-specific prediction is useless? Huh? Here's the facts:

1. We know that we depend on a finite energy supply, and, of more immediate importance, one that must have a Peak.

2. We know that there are energy sources with less of a risk of a Peak. Far, far, less. Like, in terms of hundreds of millions of years less.

3. We know that it takes energy to switch to these sources.

Without knowing anything about the date of the Peak, we're left with two choices right here:

1. End ASAP our dependence on the less risky resource (ie, defer growth until we've mitigated the risk...assuming that the change isn't itself a growth-inducing endeavour).

2. Wait until a later date for the risky resource to Peak (maximize growth in the short run---subject to the same assumption above---while also maximizing the risk of encountering a steep Peak without preparation).

This informative choice is posed to us without any knowledge of the date of the peak whatsoever. Ehrlich need not tell us anything about the specific date for us to have a good evaluation of our options. "Utterly useless"? I think not. It's a mistake to put specific dates on events that tend to be defined by a probability distribution.

"But it does, in fact,

"But it does, in fact, require coordination simply because of the massive and integrated way in which oil-dependence is woven into our economy"

This is not a given. Can you explain why you think this is true?

nmg

"This is not a given. Can

"This is not a given. Can you explain why you think this is true?"

Because our systems of goods-distribution, agriculture, and so on, are tightly tied into petroleum-based technology and petroleum distribution systems---this is a result of the market optimizing over a long time for the best solution, given, of course, the expectation of abundant oil reserves.

Let's take goods-distribution (like, say, the distribution of the food products of industrial agriculture, without which it appears that much of our population would starve). In the US, trucking makes a very essential component of this system. Trucking is, alas, totally dependent on the price of oil. Trucking cannot be electrified: we are barely reaching the point where we *may* be able to make electric passenger cars feasible (leaving out the switchover time, again!).

So that gives us trains (either to use less oil---or to electrify, and there are people working on this). However, the US doesn't (apparently) have the train infrastructure to handle the volume of goods and area that are currently handled by trucking, as anyone who has driven on a major interstate could probably tell you.

Now it's possible to claim that the market could replace the trucking infrastructure with the electric train infrastructure. It probably could, given time. But given the lead time required to handle rapid peaking effects, can it do it? Can it divert resources used in other parts of the economy (used there more efficiently at that moment in time) to building electric freight trains in sufficiently advanced time? If the peak is indeed upon us, then very likely not: it involves the conversion of a very large and integrated component of the US economy, as above, and that's just TRUCKING.

And note again that this is just one component of the consumption-satisfaction chain. One component. Can you switch over all of it, controlled by various different forms, in time, via market processes?

If were lucky, yes: there is one scenario in which this is conceivable. It's the scenario that the peak is far away, that the prices will ramp up gradually even after the peak, but high enough to promote investment in rail---while not being high enough to choke off the distribution of food. Can those conditions be met? At the moment the physical evidence I've seen seems to show to me, no. Which is the whole point of the peak oil argument.