More thoughts on “peak oil,” and what I’ll call the “peak oil constant,” which seems to be twenty or thirty years (i.e., it’s always predicted to be that far in the future).
[Update mid afternoon]
Manzi has a follow up, in response to a Georgetown professor. Bottom line:
What if we had reacted to the predictions throughout the 1970s and 80s that we would reach peak oil in about 2000? Do you think that some of these proposed changes would have slowed economic growth and prevented the world from being in the current position of paying an ever-dwindling share of total output for oil? What other difficult-to-anticipate changes might some these interventions have had? Could the idea of purposely restructuring the transportation, housing, and agricultural sectors of the U.S. economy based on a prediction for an event that we have proven to be very bad at predicting – and for which the world’s leading experts refuse to provide anything other than very broad guidance – induce a sense of humility? It does in me.
Yes, but they are inane thoughts, because Jim Manzi is not interested in dividing by population. World oil production per capita and world oil production per US capita both look like they have already peaked. No one is credibly predicting that they haven’t.
Paul Krugman has a column on this topic today which is far more mature than the smart-ass remarks such as “Doomsday has been postponed, part whatever”. He explains pretty well what it will actually take for the market to fix the problem.
Why population? How about multiplying by world GDP per capita instead? Are we getting more economic output per barrel oil per person now than before? Is that likely to continue? That’s the only measure of any real concern, especially as regards the more dramatic pronouncements of civilizational collapse coming from the peak oil crowd.
Why population?
Because that’s the only metric allows Jim to practice his sophistry.
Sure, Crispytoast, you can also look at GDP per barrel of oil. What you discover is that the US is in the middle of the pack; it’s not even close to the top of the list. By contrast seven European countries are in the top 12. Which is exactly Krugman’s point. Writing from Europe, he explains that civilization certainly doesn’t have to collapse. The US, however, is more exposed to high oil prices and will therefore have to take more lumps. After taking lumps for a long time, we will eventually live more like the Europeans.
Frankly, “dramatic pronouncements of civilizational collapse” is a smart-ass straw man. It’s pretty typical though. When a fatso is wisely advised go on a diet, he might well whine that he’s been asked to starve, and wear a hair shirt too.
On the one hand, oil is a finite resource, and therefore something that can run out. On the other hand, there are alternative sources of oil in particular (coal gasification) and energy in general.
The policy question shouldn’t be “peak oil” but “clearing cost of energy.” If market forces drive energy costs higher, we’ll use less of it. Again from a policy point of view, if higher energy prices are very likely, then planning to use less energy would seen to be a good idea.
Chris,
Who is your planner? The individual, the businesses, or the central governments?
Well, Leland, who built the roads? Who sends armies to the Middle East? How do you think that it plays out if you’re a socialist when it comes to oil security and road construction, but a libertarian when it comes to tolls and fuel taxes?
Leland – my planner is “all of the above.” Local, state and national governments need to look at policies and incentives for what needs to change if energy isn’t cheap.
Businesses and individuals need to look at what not-cheap energy means to them. Higher gas prices make hybrids and fuel-efficient cars more attractive to individuals. Some businesses may get into the energy business, others may change the way distribution works.
Just an example regarding businesses – currently, paper books are printed in a few central locations, shipped to stores, and unsold copies are shipped back. There is a technology called Print On Demand, which would (in theory) allow paper books to be printed at each store. You still need to ship paper and ink, but there’s less overall shipping involved, because you print less books and return none.
My point is, we can argue about “peak oil” or something more useful, which would be long-term energy costs.
Well Jim, it may be more mature but it’s still Krugman. He doesn’t explain “pretty well”. He just says live like Berliners. Some explanation. The man is great at comparing apples and oranges. The city of Atlanta has a crime rate 3 times that of the suburbs. There’s incentive for you. He claims race is the reason people don’t move to the city. Quality of life is the real reason. Germans have less personal freedom than Americans. Look at their building codes, employment practices and even how they acquire housing. He doesn’t even practice what he preaches from his fancy home outside Princeton. Next, you’ll be quoting that meatball Brad DeLong.
Bill Maron – I haven’t been to Atlanta in a while, but here in the Chicago area I’m seeing higher-density housing getting built in the suburbs close to (in our case existing) interurban train stations. The inhabitants thus get suburban living while reducing the expense of getting downtown.
Atlanta doesn’t have the interurban rail in place, but it could build it. Considering Chicago’s rail system runs on freight lines, Atlanta may be able to do the same.
Regarding the mid-afternoon update – well, Europe seems to have taken the approach in the 1970s / 1980s of artificially boosting oil prices via taxes. This has made them much less vulnerable to the recent oil price shocks, by driving consumption down.
The Europeans are not without fault – their hiring and wages practices slow economic growth something fierce – but it’s hard to fault them for trying to reduce their dependence on a finite resource that they don’t control.
Europe seems to have taken the approach in the 1970s / 1980s of artificially boosting oil prices via taxes. This has made them much less vulnerable to the recent oil price shocks, by driving consumption down.
The Europeans are not without fault – their hiring and wages practices slow economic growth something fierce – but it’s hard to fault them for trying to reduce their dependence on a finite resource that they don’t control.
Actually, it’s easy to do so. Do you imagine that those high fuel costs aren’t at least part of the reason that their economic growth has been sluggish?
Well, Leland, who built the roads? Who sends armies to the Middle East? How do you think that it plays out if you’re a socialist when it comes to oil security and road construction, but a libertarian when it comes to tolls and fuel taxes?
Eyeballs rolling.
Okay, leaving aside the inconvenient facts that not all roads are built by the government and oil companies do hire private security guards….
The problem, Jim, is your assumption that if the government does *some* things, then it should do *everything*.
That does not logically follow.
Libertarians as far back as Thomas Jefferson recognized the concept of a *limited* government performing a *limited* set of functions and that national defense was one of the legitimate functions of government. Jefferson said, “a wise and frugal Government… shall restrain men from injuring one another [and] shall leave them otherwise free to regulate their own pursuits of industry and improvement.”
Of course, we could turn this around, Jim. How does it play out that you want the government to do everything for you *except* providing for the common defense?
I suspect that employment practices are a lot more to blame, but I’ll concede that point. Sometimes the choice isn’t between flying and crashing, it’s between making a hard landing and crashing. The Europeans chose a hard landing. We seem to be cruising for a crash.
I do think the bottom line is this. Oil is a finite resource. More importantly, even if we lift all drilling restrictions, there’s not enough oil in the US to meet our needs. Add to that millions of Chinese and Indians getting their very first car, I don’t see how oil is ever going to be cheap again.
Lastly, as I’ve stated before, some alternative fuels could actually stimulate the economy. Making coal into oil is an industrial process, which means jobs.
So, what’s wrong with trying to reduce our dependence on a finite resource we don’t control?
Chris, there is nothing wrong with that. The problem is the government keeps trying to control how it happens. They started with subsidies for coal bed methane back in the 70’s and 80’s. Now, the ethanol supports are killing people, literally, world-wide. It’s a two pronged attack. Global warming zealots are trying to stuff economy-ruining CO2 changes through a congress that may well rank as one of the worst ever and environmentalists are keeping us from using resources we already have. Innovation comes from meeting a need for new products, not government mandated limits that benefit a favored few.
Bill Maron – which is actually why I like a straight tax vs. subsidies. Keeping the price for oil (preferrably imported oil) high will allow for alternative fuel development.
Might even reduce the deficit, too, but that might be too much to ask… 😉
Oil is a finite resource. More importantly, even if we lift all drilling restrictions, there’s not enough oil in the US to meet our needs. Add to that millions of Chinese and Indians getting their very first car, I don’t see how oil is ever going to be cheap again.
Oil will be cheap again when the cost of energy comes down due to new technologies (or widespread implementation of old ones, such as nuclear). Oil isn’t necessarily a finite resource–if we had cheap power, we could manufacture it. The important thing is to not pauperize ourselves now against false crises, so we can’t afford to deal with real ones in the future.
Rand – I think we agree that there are plenty of sources of energy available. Where I think we disagree is:
1) When should we take action? I agree that it’s not right this instance a crisis, but I think that the sooner we take action the better we’ll be.
2) Cost. I think that making oil from whatever source isn’t going to be as cheap as pumping it from the ground, so the sooner we adjust to that set of circumstances, the better we’ll be.
Related to the above, moving to a manufactured-fuel economy can be an economic stimulus, because the factories need to be built and staffed.
When should we take action? I agree that it’s not right this instance a crisis, but I think that the sooner we take action the better we’ll be.
I’m not sure why you think that, unless you don’t understand the concept of the time value of money.
…moving to a manufactured-fuel economy can be an economic stimulus, because the factories need to be built and staffed.
Of course it’s an economic stimulus for the people who get to build and work in the factories. But it’s an economic destimulus for the activities that aren’t performed because the resources for them are being diverted to less-productive activities. Have you ever read Bastiat? The goal should be the production of wealth, not merely jobs.
The problem, Jim, is your assumption that if the government does *some* things, then it should do *everything*.
No, that’s not my “assumption”. My advice is that government actions should be balanced by the responsibility of paying for them. If the government builds roads, then that should be paid for by gas taxes or tolls. If the government sends armies to the Middle East to protect the oil supply, then that should be paid for by taxes on oil. The government should also think ahead before rushing forward to subsidize an indulgent vision of “freedom”. That isn’t an “assumption” either, it’s just advice.
It’s advice that the US hasn’t always taken. Time and again, pioneers have rushed forward to claim some new “freedom” that wouldn’t be sustainable without government help. They have then pulled that help out of the government like a magnet. That wasn’t always a bad thing, e.g., not if the help in question was public vaccination. But it is bad to summon a public debit or liability, and then turn around and claim that taxation is theft.
The problem is, oil exploration since the oil spill of 1969;(the one that occassioned Esso’s change to EXXON) has been encumbered a great deal.
Environmental concerns drove the diminishing of
oil exploration off the California, and later the
Florida Coast. Oil exploration was limited to the Gulf Coast (and we know how well that worked out;
apres Katrina & Rita). Meanwhile Perez Alfonso’s
adaptation of the Texas Railway Commission (OPEC)
along with factions of the Saudi ulemma took the
opportunity to ‘hold us up’ over the price of crude, which along with the 1979 oil spike,
triggered the ‘silent depression’ in worldwide wages, occasioned the rebellion of the Ilkwan
in the Grand Siege; which was asuaged with patronage and the establishment of the Afghan crusade; which ultimately led to Bin Laden. In Latin America, it destabilized the Venezuelan and Ecuadorian economies; leading to the eventual rise
of Chavez & Korea. In Russia, it briefly filled the coffers of Brezhnev era, but that ultimately
was for not. This is all to point out how conveniently ‘the peak’ in a period when political
not material constraints, suppressed further exploration.
I do seem to remember a discussion of time-value of money back in my MBA class. (Remarks like that do tend to get my hackles up.)
I also think that, since it takes time to build coal-oil factories, and they only make economic sense at a certain price of oil, some government intervention may be needed to get the ball rolling.
I submit that spending the money burnt with our useless “economic stimulus checks” would have been better spent on such a project. I also think loans and loan guarantees are better then flat-out subsidies.
I submit that spending the money burnt with our useless “economic stimulus checks” would have been better spent on such a project.
Well, that’s damning it with faint praise. I’ll take it as a concession that it isn’t a good expenditure. 😉
Hmm. If Harris still believes that the Iraq war was a mistake, his “govt does that” argument is actually an argument against govt intervention.
No, that’s not my “assumption”. My advice is that government actions should be balanced by the responsibility of paying for them.
Jim, does that statement make sense, even to you?
If you were willing to pay for the things you want, you wouldn’t need government to provide them for you.
If the government builds roads, then that should be paid for by gas taxes or tolls.
The keyword there is “if.” Not all roads are built by the government. Your belief that only government can build roads is yet another quaint idea with no basis in fact.
If the government sends armies to the Middle East to protect the oil supply, then that should be paid for by taxes on oil. The government should also think ahead before rushing forward to subsidize an indulgent vision of “freedom”. That isn’t an “assumption” either, it’s just advice.
Why is freedom “indulgent,” beyond the fact that you don’t happen to like it?
Your “advice” is rather interesting, and I wonder why you don’t follow it. Why do you choose to remain in the US and pay taxes to support “indulgent” capitalist freedoms? You seldom have anything good to say about the United States, or negative about the rest of the world, so why are you still here?
It’s advice that the US hasn’t always taken. Time and again, pioneers have rushed forward to claim some new “freedom” that wouldn’t be sustainable without government help.
That’s a typically bizarre Jim Harris way of putting it. The Founding Fathers phrased it somewhat differently: “to secure these rights, Governments are instituted among Men.”
I don’t see why freedom is a bad thing, or why defending freedom is not a legitimate use of government. It’s at least as defensible as providing handouts.
They have then pulled that help out of the government like a magnet. That wasn’t always a bad thing, e.g., not if the help in question was public vaccination. But it is bad to summon a public debit or liability, and then turn around and claim that taxation is theft.
Huh? Public vaccination has nothing to do with protecting freedom, Jim. It’s to protect the public health.
There’s no contradiction between maintaining that taxation is theft and supporting national defense. Prof. David Friedman explaining it very simply 30 years ago when he said that if his money was going to be stolen through taxes, he would prefer his taxes go to Washington rather than Moscow.
You’re in a poor position to complain about “public debt or liability” because only about 20% of the Federal budget goes to defense spending. 80% goes to pay for all those social programs that you never, ever complain about.
If we eliminated all defense spending and kept all non-defense spending, it would have a modest effect on Federal spending (and we would soon end up paying far more money as tribute to foreign foreigns). If eliminated all non-defense spending and kept all defense spending, we we would have no public debt or liability and taxes would be much lower than they are today.
spending the money burnt with our useless “economic stimulus checks” would have been better spent on such a project.
Why is money that taxpayers get to keep always “useless,” Chris, while money government gets is always “useful”?
You could have taken your check and invested it in a coal gasification project, couldn’t you? Or donated it outright?
Wouldn’t $1 invested or donated directly by Chris Gerrib be just as useful to someone building a plant as $1 filtered through the Federal government?
I don’t see why freedom is a bad thing, or why defending freedom is not a legitimate use of government. It’s at least as defensible as providing handouts.
The point, Ed, is that “defending freedom” is often just a euphemism for a subsidy. And road freedom is one of the best examples of that. Look at the way that Bill Maron put it. We wouldn’t want to live like those unfree Germans in apartment buildings. We want the freedom to drive far and fast on freeways past large houses on large lots. That’s a sweet freedom to enjoy, all the sweeter if the government doesn’t make you fully pay for those roads with gas taxes.
Likewise it’s all well and good to defend the freedom to burn oil by sending troops to the Middle East, but again, it should be paid for with oil taxes. Those of us who burn less oil shouldn’t have to pay as much for it.
If Harris still believes that the Iraq war was a mistake, his “govt does that” argument is actually an argument against govt intervention.
Two friends and longtime roommates, Dan and Ron, discuss the problem of buying beer from a liquor store which sits in a dangerous neighborhood. Dan says, “I know that you want to use our car to go to that store, but I’d really rather not get involved. It’s not safe and you want the beer more than I do.” But Ron says, “Haven’t we always shared the car? You know that the thugs around that store are a menace to everyone. Besides, you drink beer too sometimes.” Six months later, Dan is fed up. Ron has stirred up a hornet’s nest by fighting muggers around the liquor store. Attackers have inflicted thousands of dollars of damage to the car, which is a bill that they will have to split equally. Dan says, “if you keep driving to that liquor store, I want you to pay one dollar extra per beer bottle to help fix the car. I’ll pay too, if and when I want beer.” But Ron responds, “Pay you extra for the beer? Why? You said that you didn’t want to get involved.”
The point, Ed, is that “defending freedom” is often just a euphemism for a subsidy. And road freedom is one of the best examples of that. Look at the way that Bill Maron put it.
Jim, you’re hallucinating. I just did a search on this thread, and the first mention of roads was from Jim Harris. Bill Maron said nothing about roads.
That’s a sweet freedom to enjoy, all the sweeter if the government doesn’t make you fully pay for those roads with gas taxes.
Reality check: The average automobile pays far more in gas taxes than the cost of its road use. It’s trucks that are subsidized, not cars. But don’t let a few facts stop you from dropping your usual load of hateful bile. 🙂
Likewise it’s all well and good to defend the freedom to burn oil by sending troops to the Middle East, but again, it should be paid for with oil taxes.
I’d be glad to pay for the military through oil taxes, Jim, as long as you’re willing to give up all that lovely social spending that makes up 80% of the Federal budget. Then we could eliminate the income tax, too.
I’m not going to hold my breathe waiting for the Left to agree to that.
Chris,
I’m a little worried about what you learned in your MBA classes about economics…
You said: Keeping the price for oil (preferrably imported oil) high will allow for alternative fuel development.
So your idea of planning is for the government to artficially set the price of oil high in order to lower demand on oil and stimulate alternative resources?
What you are proposing is a “sin tax”. Such a tax no longer allows individuals and companies to plan, but rather allows the government to socially engineer the habits of the other players in the market. The result will be that poor individuals will be forced out of the market, because they can’t afford the artificially high prices. Oil companies will lose profit from sells while their supply increases, thus they’ll close production lines to bring supply back to the demand. Job losses will increase, and the US economy will slow. That’s prior to the ripple of effect of increasing transportation costs for delivery of other goods and services.
You then said: I also think that, since it takes time to build coal-oil factories, and they only make economic sense at a certain price of oil, some government intervention may be needed to get the ball rolling.
Government intervention will only be necessary, because you devastated the US economy. If oil is a scare resource, and its value is increasing because demand is outpacing supply, then a laissez-faire society would allow for companies to seek out ways to meet the needs. If government levies tariffs on the supply for the sole purpose to lower demand, then companies will leave the market.
You might consider this a short term situation that we must endure for the benefit of the long term. But then you said: Add to that millions of Chinese and Indians getting their very first car, I don’t see how oil is ever going to be cheap again.
So while the US, and Germany, artificially raise the price of oil in their country, what will China do? US demand for oil will decline while supply is backlogged, which will lower the overall worldwide price. This makes oil cheaper for China and India, which stimulates their use of it. Energy companies will move to the demand in markets which are not controlled by the government.
You said: Might even reduce the deficit
So you might reduce deficit, but you have devastated the US economy with price controls that negatively impact US citizens and companies.
What you didn’t suggest was government intervention by stimulating alternative energies via subsidizing. So perhaps there is hope for you yet. We’ve seen what US subsidizing of ethanol has done to the US food supply. Gas isn’t any cheaper, and food prices have risen.
There are effective and ineffective ways to stimulate the production of alternative fuels. Subsidies (ethanol in particular) are generally ineffective. As far as sin taxes not allowing planning, companies (including mine) are able to plan around taxes quite nicely. The current uncertainty about oil prices is also detrimental.
In truth, I don’t really care what the Chinese do for oil. My suspicion is that any reduction in oil prices due to American demand reductions will be small and a long time coming. At the end of the day, that’s not my concern.
I do care that large chunks of my gas expenditures are going to tin-horn dictators and religious extremists. Much like taxes – if I have to pay, I’d rather it went to Americans then non-Americans.
There’s an interesting article on peak oil in this month’s National Geographic.
Another interesting article on peak oil and alternative fuels in today’s Wall Street Journal. Here’s a link that I think will bypass the subscriber’s firewall.