“The lesson of the Hungarian experience is clear. Liberty can be delayed, but it cannot be denied.”
“In 1956, in Hungary, the Soviets called us terrorists while the West called us freedom fighters. During that Hungarian uprising, the Soviets claimed that our Molotov cocktails were the cause (and not the consequence) of their occupation.”
Speaking of WMDs that do exist…
For some reason or other, a few dozen Nobel prize-winning scientists and other smarty-pantses are concerned that America and Russia still have enough nuclear weapons on hair-trigger alert to destroy civilization (“Nobel Laureates say ‘Take Nuclear Warheads off Hair-Trigger Alert’“). One of these Big-Brains Who HATE AMERICA!!! (irony alert), Nobel Peace Showoff scientist Professor Sir Joseph Rotblat (aka “the man who walked away from the Manhattan Project”) came up with the idea of raising money from the private sector to dismantle nuclear weapons. To this end, a long fundraising walk has been organized by the Global Nuclear Disarmament Fund. The opening event — which includes a Japanese senator, Nobel prize winners, actor Steven Seagal, etc. — begins Saturday morning in San Francisco: click here for program. The walk starts at noon, heads down the peninsula, and over the next month hits NV, AZ, & NM, ending at the Trinity nuke test site: click here for walk schedule.
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All apologies….
3 months ago (“No Peaking“) I said that I’d answer some of my Peak Oil mail “in the next day or two.” I made a file of many of these e-mails and my replies, and then decided to write an article instead — which I still haven’t done. It’s a shame, ’cause I rec’d a number of good e-mails, both pro and con. When I finish the article I’m working on I’ll post a link to it here. Sorry about that.
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London Bombing: Still No Iraqi Terrorists
Zahid Hussain, the London Times‘ correspondent in Pakistan explains “how Pakistan became a hotbed for terrorists“:
For quite some time, there has been a network of contacts between British extremists and the Jihadi organisations based in Pakistan. Once contact has been made with … young people, they become influenced by them and are encouraged to visit the training camps.
For the last two decades, sections of Pakistan have been under the influence of guerillas who were involved in the war against the Soviet forces in Afghanistan – with, it’s important to say, American support.
They had offices in all of the neighbourhoods and were recruiting people to fight in that war. A culture of jihad developed which has continued to this day. Many are still involved in the fighting in Kashmir and through this they have become battle-hardened fighters while others have gone over to Iraq.
People are getting worked up about peak oil theory. I’ll reply to some of the deluge of mail in the next day or two but first, three things:
(1) Lawnorder, the blogger at Daily Kos who I wrote about in “Oil and Instinct,” has written a follow-up posting (“Peak Oil Myth and the Easter Island ecological disaster“) in which she corrects a previous (and unintentional) misrepresentation of my perspective on peak oil theory, while still disagreeing with my perspective. I guess this shows that it actually is possible to have a polite blog debate.
As to Lawnorder’s new arguments: I’ll repeat that societies that include significant levels of self-ownership and private property, along with a low-friction exchange system (“money”) tend to have a “price mechanism” that creates incentives for producing, conserving and replacing scarce and desired commodities. Unless the economies of Easter Island and North Korea included this price mechanism they’re not counterexamples. And North Koreans didn’t starve because of a shortage of national natural resources. There may even tend to be an inverse relationship between natural resources and wealth-creation; see for example The Future of Freedom: Illiberal Democracy at Home and Abroad by Fareed Zakaria:
“Wealth in natural resources hinders both political modernization and economic growth. Two Harvard economists, Jeffrey D. Sachs and Andrew M. Warner, looked at ninety-seven developing countries over two decades (1971-89) and found that natural endowments were strongly correlated with economic failure. On average the richer a country was in mineral, agricultural, and fuel deposits, the slower its economy grew — think of Saudi Arabia or Nigeria. Countries with almost no resources — such as those in East Asia — grew the fastest. Those with some resources — as in western Europe — grew at rates between these two extremes. There are a few exceptions: Chile, Malaysia, and the United States are all resource rich yet have developed economically and politically. But the basic rule holds up strikingly well.”
(2) Reader Philip Brydon (letter below) has brought to my attention an article by geologist David Deming, “Are We Running Out of Oil?,” that makes some of the same arguments that I’ve made but that contains information that I didn’t know. Everyone interested in the subject should read this short and readable article.
(3) Republicans, Democrats and peak oil theorists seem to agree that “dependence on foreign oil” hurts Americans. As in Bush’s: “Our dependence on foreign energy is like a foreign tax on the American Dream — the tax our citizens pay every day in higher gas prices, higher cost to heat and cool their homes — a tax on jobs. Worst of all, it’s a tax increasing every year.”
The Theory of Comparative Advantage is hard to understand but how hard is it to understand that oil companies import oil into the USA because foreign oil is cheaper than domestic? If oil companies depended on only domestic suppliers (all things being equal) oil would be more expensive for American consumers, so depending on foreign suppliers is like a tax rebate.
I’ve received about a dozen replies to “Oil Supply and Demand.” About half of the replies were hostile and insulting, which would seem to be a strange reaction considering that all I suggested is that oil production is not peaking and that if it were government intervention wouldn’t help. These letters reinforce my suspicion (expressed in “Oil and Instinct“) that economics is counter-instinctual. The worst ones I’ve ignored.
Here’s a message from Melvin Hoffman (italicized) and my replies:
I find it fascinating that the human brain could reach conclusions such as those posited by Mr. Koritz. First, obviously fossil fuel sources are finite. No one has ever argued otherwise.
I’ve repeatedly defined the peak oil debate in terms of a current production decline or a near-term decline. The fact that fossil fuels are finite is not necessarily relevant. If there were, (to use an absurd example) say, ten million years’ worth of oil to burn, the amount of oil would be finite but it would be absurd (rather than just incorrect) to argue that governments need to prepare us for the coming shortage.
Second, usage of fossil fuels have increased dramatically.
Yes, as has production of fossil fuels and just about everything else.
Third, no alternative practical replacement is available for such fuels…
There has been little incentive to replace fossil fuels because they are relatively cheap and plentiful.
and trends indicate that the major economies of the world will continue to use such fuels at rate which will result in competition and conflict.
People and their aggregates, national economies, constantly “compete” for goods and services; this competition is called “price.” Goods that are scarce and desired are valued more highly than goods that are cheap and plentiful. The price mechanism thus creates incentives to increase the efficiency of production of scarce and desired goods, as well as to conserve them, and to replace them with similar goods. When this occurs (actually, it’s an ongoing process) the formerly scarce and desired goods become less scarce and desired, and the price falls. This is the system of wealth-creation that has caused the unprecedented increase in human health and wealth that began with the industrial revolution. As for “conflict” over fuel, that could happen, and economic ignorance increases the chance of this.
If Mr. Koritz has a practical solution, I believe such a genius should patent it and he will immediately become the world’s richest person. How does he suggest we will replace our current means of transport? How does he suggest we will heat our homes? Come on, Sam, give us the answers.
I don’t believe that there’s a fuel shortage problem that needs a solution.
We now have our children in Iraq using the full force and killing power of our wealth to support our greed and excess. If we have such readily available alternatives and the shift will be made so seamlessly, then why are we in Iraq? Why are we spending hundreds of billions of dollars (trillions over a period of decades) to protect sources of energy and oil shipping lanes?
You don’t provide any polling data or anything else to indicate that Americans were primarily motivated by greed in supporting the invasion of Iraq, but even if that were the case, that doesn’t mean that military aggression actually succeeds in making a country rich. The people who’ve gotten wealthier so far from the invasion are (1) those taking US tax dollars (wealth created by Americans) and (2) those (oil companies, for example) who have benefited from the increased price of oil the invasion caused (the “risk premium“). Both of these things make Americans, on average, poorer. I also didn’t notice an influx of Haitian, Serbian, or Panamanian goods after those interventions.
Fools are born every day. That is unfortunately a fact which cannot be denied.
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Dominic Schmelzer writes:
Peak Oil certainly has nothing to do with Easter Island. But it also has nothing to do with whether a geologist gets a job. Many peak oilers would argue the oil companies’ present exploration attitude like this: Finding and extracting new oil is becoming expensive. But how expensive cannot be measured in dollars. It has to be measured in energy. How much energy does it take to supply 1 unit of energy to the consumer? With existing reserves, this is about 1:20. With not-yet found reserves, it could be 1:5. Tar sands are much more efficient than that at the moment. Until the two catch up with each other, however, oil companies are not going to be willing to spend too much money on exploration. Until then, Tom Lowe is going to be out of a job. In the end, however, (and this might take a century) energy expense to energy gain is going to be 1:1. At this point, it does not matter how much a barrel of oil costs. It’s simply not worth it to explore.
The cost of producing oil can be measured in dollars, since all relevant costs (including the energy costs) of oil production are tradable, and their exchange ratios are measured in dollars. Over time, each unit of fuel is producing more and more wealth, which would not be the case if a higher and higher percentage of the economies’ resources were required to extract the fuel. According to a pdf file provided by peak oil advocate Marty Sereno, “Total energy per capita peaked in 1980.” Yet per capita wealth has grown over the same time period (the very poor have done especially well. See “India and China Are Poised to Share Defining Moment“: “According to the World Bank, their combined growth can be credited with cutting the share of the world’s population living in extreme poverty to 20 percent in 2001 from 40 percent two decades earlier”). This means that percentage of resources (including energy) required to produce a given unit of fuel is decreasing not increasing.
“Regardless, both economic theory and history suggest that the market is capable of adjusting, without major crisis, to commodity depletion.” I am an historian. Economic theory (and the last 300 years) may suggest that that the market is capable of adjusting. History does not. There is still no wood on Crete. China has suffered centuries of famine again and again. Iraq still hasn’t recovered from over-irrigation in the Middle Ages. Resources run out. My question to you is: What do you consider a major crisis? And I’m not talking about Easter Island.
By “market” I meant an economic system consisting of (among other things) self-ownership, private property, and a low-friction medium of exchange (money). None of your examples qualify. By “major crisis” I mean one large enough to justify this debate.
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Tjalf Boris Prößdorf writes:
…[T]he fuel efficiency of industrial plants is a function of money invested — with marginal increase in efficiency costing increasing capital investment. Thus, at given fuel prices, economic efficiency over the lifespan of the plant is to be balanced against technical efficiency. Again, dramatic increases in fuel prices may be absorbed by the market as a whole, but may needlessly ruin those, who planned on less dramatic fuel price increases. Planning on dramatic price increases however means constructing plants that cannot function economically here and now, as capital investment will be too high. Therefore it seems to me, that your optimism is not entirely founded.
Fuel-dependent companies often hedge their fuel costs using futures contracts. It’s true that companies that make poor capital investment decisions are punished for those decisions. That’s fine by me, and no cause for alarm.
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Bill Meyer writes:
Only an economist would claim that capital can create energy.
I’m not an economist and I didn’t claim that capital can create energy, though the market system has certainly increased the usefulness of given quantities of energy.
A physicist knows that energy can be neither created nor destroyed. Oil is running out now. At $50 a barrel it’s twice the price that it was in the fall of 2003.
Yes, and cheaper than what you paid 25 years ago. Has anything happened recently that might explain a rise in gas prices? Oh yeah, the US invaded Iraq, al-Qaeda threatened Saudi and Iraqi oil fields, and demand for oil rose in China, India and the US.
Oil use probably increases exponentially like the planet’s population so the price will double every 18 months until it’s gone. That means oil will be $100 a barrel in the fall of 2006, $200 a barrel in the spring of 2008 and $400 a barrel in the fall of 2009.
You can become very rich if your predictions are accurate by trading oil futures contracts. As it happens, the people who trade these contracts for a living are betting on sub-1980 prices.
I got an e-mail from Marty Sereno, professor, Cognitive Science, University of California, San Diego, regarding “Oil and Instinct.” What follows is his e-mail message (minus a last paragraph about helium) interspersed with my replies.
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Marty Sereno: I received an undergraduate degree in geology (currently I study the brain). As evidence against an eminent peak in petroleum production/ extraction, you recently (April 13, ’05) cited the fact that another geologist wasn’t able to get a job as a well logger (yes I read through all the original posts and only just failed to repress the urge to email). Why not also consider some physical data besides prices and one geologist’s employment history?
Sam Koritz: Actually, I posted without (relevant) comment an e-mail I had received from a former well logger. I didn’t cite it as evidence, and I’m aware that anecdotes make poor arguments.
MS: In the past year, world oil use increased 2.5 million barrels/day. This one-year increase is more than the entire current output of Iraq (1.5 million barrels/day), and almost as much as the output of Iraq in the halcyon days of the ’80s (3.5 million barrels/day). We are not close to finding an Iraq’s worth of oil every year (could this have something to do with the employment picture for geologists?). Iraq is generally assumed to contain perhaps 12% of the remaining oil on the planet. I don’t see how energy sources “have changed relatively painlessly since the dawn of the industrial age.”
SK: What I mean by “relatively painlessly” is that during the time in question the world experienced an unprecedented increase in health, wealth, liberty and longevity.
MS: After the deforestation of Europe (just after the time of Malthus, incidentally), coal was first mined and then oil and gas were drilled and pumped. Where’s the change? The so-called ‘production’ of coal, oil, and gas continues faster than ever (for now!). I’ve assembled a bunch of graphs and data on oil production and reserves, and the current status and prospects for alternative energy sources (hydrogen is not an energy source) here [PowerPoint] or here [pdf file].
SK: Where’s the change? The change is in the types and amounts of fuel used since the dawn of the industrial age. As your “World Primary Energy Mix” chart shows, oil was not used as fuel in significant quantities a century ago, but by the late 20th century it had surpassed coal (which had previously surpassed biomass) as the most-used fuel source. It’s true that worldwide coal production has increased in an absolute sense but it has declined on a per capita basis, and large, modern nations have reduced coal consumption on an absolute basis, while increasing per capita wealth. For example, according to the British government’s 2001 document, “Trends in coal production and consumption“: “Coal consumption in the UK has declined at an average annual rate of 3 per cent from its peak in 1956.”
MS: The current ratio of renewable energy sources such as oil + gas + coal to photovoltaic + wind is currently 1400 to 1. Changing that ratio to something closer to 1 to 1 doesn’t sound “relatively painless” to me. For one, replacing world electrical generation with photocells would use use up three times the total amount of silver currently thought to exist on the planet. Running your $50,000 20 kWh/day roof top solar cell system for a day would generate the equivalent amount of energy to what is found (yes, found) in about a half a gallon of gas (a car is a 100,000 watt device). And that’s assuming you used the energy immediately. Storing the energy in batteries or hydrogen and then getting it back out of them involves substantial losses both ways. I can hear people groaning, Who wants to actually learn something about the difference between kilowatts and kilowatt-hours, or silver deposits, or how to grow food? Well tough luck. Endless bloviation about money isn’t going to fix things. The data seems pretty clear to me. If you have other data suggesting a different conclusion, I’d like to see it. Where is the “junk science”? Money doesn’t make the current world go: oil, coal, gas, biomass, nuclear, hydroelectric, human and animal muscle (remember horses and slaves?), and photocells do, in that order. …
SK: Money, or rather economics, has everything to do with which of the things that make the world go are used and in what quantities. Economics explains, for example, why the amount of wealth created from each unit of fuel is increasing over time — even as the total quantity of the fuel on Earth decreases.
There are two parts to the peak oil debate: (1) that oil production is, or will soon be, in decline, and (2) that unless governments prepare for this decline it will lead to a significant crisis. I don’t believe oil production is in decline because: oil production keeps increasing, previous estimates of oil and other commodity shortages have been consistently wrong, and the price of oil does not appear to be in a long-term up trend, as one might expect if there were a supply shortage. The (inflation-adjusted) price of oil is lower than it was 25 years ago but higher than it was few years ago. The recent price rise is unsurprising, considering the surge in demand for commodities caused by China’s economic boom. Compare for example this oil price chart — here — with this iron ore price chart: here.
Regardless, both economic theory and history suggest that the market is capable of adjusting, without major crisis, to commodity depletion.
I’ve received some replies to my blog entry of April 3. Unfortunately, most of them rehash issues I’ve already addressed. I did provide a link to the pre-April 3 debate but I don’t blame people for not going back and reading all that before e-mailing in their criticism, questions, and mockery; it’s quick and easy to send an e-mail, while reading is time-consuming and brain-tiring. In this same spirit I’m going to refrain from replying to the rehashing e-mailers. I find myself unable, however, to refrain from replying briefly to an essay titled “Is Peak Oil a myth? Just so long as we can catch the goddamn monkey,” posted on the (apparently popular) Daily Kos blog by a self-described “Mom of 2, Ex-Yuppie, 3rd Generation Democrat, Engineer, MBA, Silly Goose” calling herself Lawnorder. Her first sentence introduces one of her (long) essay’s main themes:
“AntiWar.com editor Sam Koritz thinks Big Oil and imperialist neocons are fooling us all into believing the world’s supply of oil is ending and that the end of Oil would amount to such a big crisis.”
Nope. I never wrote that anyone was fooling anyone else into believing in peak oil theory (POT). Erroneous economic beliefs — from the lump of labor fallacy to the potty “lump of fuel” fallacy of our current debate — are the norm; no conspiracy required. (My guess is that much of this economic ignorance can be explained by natural selection: we intuit our ancestors’ world of warring tribes and privation.)
The strange thing is that, before writing her piece, Lawnorder actually did bother to go back into the archives and read my “Economics of Oil, Part 2” posting in which I answer a similar mistaken criticism from a reader named Joseph O’Ruandaidh, and in which I explicitly deny having claimed that any oil conspiracy exists. Lawnorder, in her Kos essay, prominently quotes O’Ruandaidh’s criticism but not my reply.
I just want to rebut again this misrepresentation of my argument: I have not claimed that there is a conspiracy of any sort involving oil. I’ll leave the rest of Lawnorder’s essay alone, except to point out that evidence for POT (the theory that oil production has peaked or is about to peak, and that this will cause a major world crisis) does not include ecological disaster on Easter Island, North Korean famine, global warming, or the fact that fuels are not free.
