Peak Oil – Geologists VS Economists
You may have noticed that I don’t refer to Peak Oil but Peak Cheap Oil. Our economy is dependent on cheap oil for transportation. Eaun Mearns explains that Peak Oil is more about economics than geology but that the economists don’t get it right either.
For a number of years there has been an arid debate between economists and geologists about Peak Oil. The geologists maintain that Peak Oil (maximal production) is a geological imperative imposed because reserves are finite even if their exact magnitude is not, and cannot be, known.
In contrast many economists maintain prices will resolve any sustained supply shortfalls by providing incentives to develop more expensive sources or substitutes. The more sanguine economists do concede that the adaptation may be slow, uncomfortable and economically disruptive.
They are both correct…..
…..but that Peak Oil is, in fact, a complex but largely an economically driven phenomenon that is caused because the point is reached when: The cost of incremental supply exceeds the price economies can pay without destroying growth at a given point in time.
So what is that price? WTI has been in a range between $80 and $90 bbl. We have seen at best anemic economic growth. Any thing above $90 will result in stagnation or even negative growth – recession.
The economists say that we can adapt to higher oil prices.
As adaptive responses come through in terms of more efficient vehicles, social and organisational changes such as more home working and the improving economics of energy alternatives, economies will become better able to cope with higher oil prices and suffer less economically.
But it’s not happening nearly fast enough in large part because of successful resistance by big oil and coal and I’m not sure it even applies to transportation. The result is oil the economy can’t afford and low or no growth. What you won’t hear from the politicians or CNBC:
Since there will never be a return to low oil prices during periods of sustained economic growth, the chance of there ever being sustained economic growth is approaching zero.
You won’t hear this from the politicians not because it’s not true but it’s not what the voters want to hear. Some of the politicians are in denial but many know what we face. They also know there is little we can do about it. So all we get from the politicians are attempts to blame the other tribe.
15 Responses to “Peak Oil – Geologists VS Economists”
We are a species trapped on an island floating in a vast sea of lifeless nothing. To young in our sailing knowledge and to stupid to count our limited resources.
Instead, we collect the shinny bangle, jealously guard our turf and fuss with each other over everything and anything.
We think we’re so cool.
My god Allen – that’s even more depressing than my post although pretty accurate and certainly more poetic.
Ron you and I are in the final epoch of our lives. Considering history before our birth and the bleak predictable future, by stroke of fate, we may just have lived in the best years of mankind on earth.
No reason to be depressed. I had a ball.
@Allen
Keep in mind that the sustained growth of the industrial revolution, which was almost all fueled (double entendre intended), is the reason people even thought that things like an expanding Social Security program and global interference were even possible.
What are you saying Prof?
We have to go back to letting our old folks starve to death when they can no longer make a buck for the man?
@Allen
I suppose in a black-and-white world that might make sense. Back in this one, it would say that the program is heading for disaster far faster than the predictions would say, since projections, even to this day, assume at least 3% continual growth for the coming decades.
All it takes is funding Prof. The Europeans and Canadians don’t seem to have any problems with their social security programs.
What is increasingly obvious to many continues to be off the radar of most. And of course there are those (even at TMV) who choose to blame the messengers rather than the actual causes of the problems.
The greatest threats to humanity have long been humans. Pogo was right. For a species with so much potential, we are rapidly succombimg to our age old enemies, which are ignorance (which has become institutionalized and willful), GREED, and tribalism (which makes it possible to demonize and dehumanize those we are afraid of – or have learned to hate).
Why face up to genuine problems that are racing toward us at great speed when you can turn the other way and pretend they don’t exist? Or rationalize? Or obfuscate? Why be honest about the magnitude of our collective sins of unchecked consumption when we can blame the very people who have warned against the rapacious excess (for decades) instead?
Marc has talked about this, so has Hart, and of course you Ron have been a stalart advocate of looking at these issues honestly, but for most poeple it won’t become real until the sh!t hits the fan.
The oil shale boom has changed the peak oil dynamic somewhat. I was surprised to learn U.S. domestic production is up, and imports are down (“energy independence”, anyone?
).
http://seekingalpha.com/article/256204-u-s-oil-production-to-increase-25-by-2016-is-there-a-way-to-play-it
But here’s the rub: there are costs associated with it, sure (to the Ron’s point about economics), but there’s also the problem of poisoning people’s drinking water.
Then there’s the Keystone pipeline controversy, running right through the nation’s breadbasket:
http://www.npr.org/2011/09/01/140117187/for-protesters-keystone-pipeline-is-line-in-tar-sand
It’s just interesting how our quest for oil is now directly harming us, threatening water and food supplies.
Now I am a believer in technology and science, and I’m sure ways can be found to make all of this safe. I’m positive nuclear power can be made safe as well, including safe disposition of nuclear waste. I’m also positive we can have viable alternative energies and microgeneration.
What I am not positive of is man’s ability to make any of this work. We are lazy, cheap, shortsighted, and far too incompetent to be trusted with any of this.
We are, indeed, digging our own graves, even if there is other work that could be done.
@Allen
I don’t see how you can even talk of funding with our current debt/deficit situation. The SS umbrella is due to consume the entire budget, including defense, on its current trajectory (which again, assumes the 3% average growth of the cheap oil years). You think that the massive tax increases that you’re talking about wouldn’t wrench us (and the world) into another depression?
And yes, even with its tiny lobbery, Canada is also going into debt. Their old age benefits come from their general fund, which is a more honest approach than ours that pretends the money is somehow magically separated, so the solvency of the country and the solvency of OAS are the same. There are similar stories in China, Japan, and Europe, due to aging demographics.
In addition, most private pensions are also in trouble, because they also assumed constant growth. The problem really isn’t the lack of growth per se, but the fact that the rate of growth has permanently changed, when so many systems were built on the assumption that it would continue forever.
“My god Allen – that’s even more depressing than my post although pretty accurate and certainly more poetic.”
Made me think of this…
“One of the most profound tragedies of human existence is to live at the end of a golden age – and know it.” – M.K. Wren, A Gift Upon the Shore
Ah you old geezers are always going on about the end of the world and how the future is going to be a disaster. We’ll have a rough decade or so then pull out of it. Here’s whats going to happen with SS. We’ll come to brink of collapse, then realizing there is no way to just simply get rid of it, politicians will raise the tax rate and up the age at which it kicks in to make it work again. Each will point fingers at the other before they do that saying the other party hates old people, then after its enacted both parties will struggle to claim credit for fixing SS. We should and could do that now, but honestly no one on either side of the isle has the even 1/10th the balls to try pulling that one off, so we will wait and argue until is HAS to be done.
As far as oil and energy goes, we have the technology and the resources to use solar, wind, mass scale bio fuels from solar reactors, and when we get enough electricity production, hydrogen for energy storage and use. What we don’t have is the will to implement it in the face of still cheap fossil fuels. As those dry up we will simply be forced to use the alternative energies, which will work when implemented broadly and with likely gov’t backing in a project similar to the 1950′s of building a national highway system. We have the solutions, they are just inconvenient and being obstructed by the current energy companies because they can get away with it for now and its in their interests. In another decade making the change will obviously be in any nations interest to do so, and it will happen. I’m not saying its going to be easy, but when backed into a corner people, especially Americans, get a LOT of work done in a very short time.
Prof’s opinion on Social Security bears absolutely no resemblance to reality. It also doesn’t take much research to find that out.
How about the official trustees’ report:
More specifically, from the full report.
Okay, Mr. Research, can you show me your source?
Prof-
No, the “sky is not falling”. We can easily fund Social Security and we always could. The problem lays with Republican borrowing practices that has created a debt debacle. Concentrate on buying back those bonds and get back to where Bill Clinton had us, in surplus. Then we are back on track long before the supposed Social Security calamity.