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Topic: Peak Oil the Third
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arborman
rabble-rouser
Babbler # 4372
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posted 03 August 2005 12:42 PM
I found the discussion of futures to be interesting - the argument being that if Oil traders view peak oil as a real issue, then why aren't they buying high priced futures?I have one question relating to that - how would that be affected if they also foresee dramatic inflation in the near to medium term? Could it be that they aren't willing to spend today's dollars only to receive significantly devalued dollars in the future? I say this because of the other mitigating/complicating factors in the US and world economies. The US has massive budget, trade and current account deficits, that cannot be sustained indefinitely. Oil is largely traded in $USD. If they get some kind of perfect storm - i.e. China dumps their $USD reserves and T-Bills, and trigger a panic sell-off - the $USD could collapse quite dramatically. The US would likely have to raise interest rates a lot to compensate, and this could trigger some unpleasantly high inflation. Would that scenario affect a futures option? Presumably the futures would become more valuable - a $70 bbl would be a $140bbl, for example - but would it have an increase in real value, or might it be a loss? My caveat is that I'm minimally competent at economics. However, it occurs to me that if any industry has an inside scoop on what the US administration really expects to happen in the financial sector over the next few years, it would be the oil industry.
From: I'm a solipsist - isn't everyone? | Registered: Aug 2003
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arborman
rabble-rouser
Babbler # 4372
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posted 03 August 2005 04:13 PM
Ok, I can see that...gropes around in the dark...What about the possibility that oil traders, and others, haven't accounted for all the potential external factors. From an outside perspective, the US economy looks to have some major weak points. From the inside, in the bubble of perceived invincibility, is it possible that they are instinctively discounting any potential threats to their economic predominance? H ubris is a powerful motivator, and the US currently has cornered the market on it. Are they so locked in their schema that they might be avoiding any potential cognitive dissonance by blocking out dissenting views? The tech crash, and I suppose all the crashes before it, were excellent examples of this. When the frenzy is on, even the skeptics tend to ignore their internal doubts and go with the flow - it pays off for awhile. There may even be employment and wealth disincentives for not going along with the prevailing trends (I have a recollection of some financial analysts being sued for failing to advise their clients to buy some of the high flying tech stocks). If an oil trader starts talking about peak oil or anything else that indicates the party might come to an end, does she/he run a risk of unemployment or penury? I don't know, but the fact that a group of vested interests don't take a threat seriously doesn't in itself discount the threat.
From: I'm a solipsist - isn't everyone? | Registered: Aug 2003
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VanLuke
rabble-rouser
Babbler # 7039
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posted 03 August 2005 07:16 PM
ArbormanIf that doomsday scenario held (not that the Chinese *could* cash out of US dollars without hurting themselves incredibly) then the price in US Dollars would shoot through the roof, as somebody observed already. Please don't confuse share prices and their movements (inc the tech crash, or other crashes) with the price of futures. Shares will normally float and be traded as long as the company exists, i.e. has not gone bankrupt or has not been taken over. (Leaving aside that there are sometimes share buybacks and some shares have a time limit and are redeemed at some point in time.) Futures, on the other hand, are traded only for a specific period and then expire. At expiration they are either 'settled' by taking delivery (not very often the case) or are 'rolled over' by buying another piece of paper, which will expire some time in the future, or simply terminated with the acct being adjusted for the profit/loss the transaction made. The following link was provided by Gordon to bolster his (implicit) argument. http://futures.tradingcharts.com/marketquotes/index.php3?market=CL Have a look at the left hand column and you will see that the price increases until *strange, strange* July 06 and then is substantially less and decreases further into the future. Futures traders, in other words, are betting that the price will decline after July 06 at this moment in time, i.e. that can change during the lifetime of the contracts. At the beginning of a contract the price is "determined" by the spot price plus a time premium (to some extent related to interest rates and volatility of the market) to compensate for the length of the contract and traders' expectations (which CAN mean they start their life with a discount compared to the spot price). This time premium/discount shrinks to zero and by the time the contract expires the price will be the same as the spot price. Have a look at the right hand column (of the table, not the graph below)and notice that the "open interest", i.e. all contracts outstanding (half of which are short, half of which are long as there was a buyer for every seller.) is not very large for most contracts after the first 2 months listed (IIRC; I don't have the table in front of me right now while writing this). What Gordon didn't mention is that many positions in later contract months are taken by market makers (who HAVE to buy and sell at all times) to offset other positions. (This has an impact on their margin requirements and hence how 'efficiently' they use their capital. Things get a little more comnplicated with puts and calls on the futures; but let's ignore this for the moment.) What Gordon did not mention as well is that about 90 percent of futures traders lose money (at least that's a statistic I read a long time ago), i.e are wrong in their prediction in spite of their tons of money (as he put it) buying the best advice there is. At the left side of the graph the Sep 2005 contract was trading at about 51 US dollars; spot oil prices were most likely below that price (unless traders expected the spot price to decrease), then moved up, then down and up again. On the third Friday of Sep (I believe) no time premium is left and the settlement price equals the spot price. In the end - and Gordon knows this full well but did not mention it- nobody has a crystal ball. It would seem obvious though that the "hedgers" (e.g. oil refineries which want to have certainty for their input price down the line) know a little more about the likely direction of oil prices than the speculators (the other side of the market vs the hedgers). It's generally true even though they can be very wrong as a Cadbury cacao trader was many years ago, who lost over 50 million in the futures.
One thing that is obvious from the graph of the Sep contract (or any other) is that the price moves over time in tune with spot prices AND expecations of traders. I hope the above makes it a little more understandable. Or is it still clear as mud? [ 04 August 2005: Message edited by: VanLuke ]
From: Vancouver BC | Registered: Oct 2004
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VanLuke
rabble-rouser
Babbler # 7039
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posted 03 August 2005 07:23 PM
As I said "the spot price in March 2005" was most likely below $51.Average for first quarter was 49.77. The difference is the time premium AND traders' expectations. http://www.globalsecurity.org/military/intro/oil.htm
From: Vancouver BC | Registered: Oct 2004
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VanLuke
rabble-rouser
Babbler # 7039
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posted 05 August 2005 02:49 AM
It's incredible: The price of the Sep 05 futures contract is at an all time high and 47 percent of people who expressed an opinion are bullish! Less than 40 percent are bearish.http://futures.tradingcharts.com/chart/CO/M P.S. Sorry Stephen, I only realised after reading your reply that Gordon is your family name. I guess that's not the first time this happened to you.
From: Vancouver BC | Registered: Oct 2004
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Contrarian
rabble-rouser
Babbler # 6477
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posted 05 August 2005 05:35 PM
Michael T. Klare notes, among other things, that there has been an American war game about an oil crisis: quote: ...Just how seriously American policymakers view these various energy-related developments is further revealed in another recent event: the first high-profile "war game" featuring an overseas oil crisis. Known as "Oil Shockwave," this extraordinary exercise was chaired by Senators Richard Lugar of Indiana and Joe Lieberman of Connecticut, and featured the participation of such prominent figures as former CIA Director Robert M. Gates, former Marine Corps Commandant General P. X. Kelley, and former National Economic Adviser Gene B. Sperling. According to its sponsors, the game was conducted to determine what steps the United States could take to mitigate the impact of a significant disruption in overseas production and delivery, such as might be produced by a civil war in Nigeria and a terrorist upsurge in Saudi Arabia. The answer: practically nothing. "Once oil supply disruptions occur," the participants concluded, "there is little that can be done in the short term to protect the U.S. economy from its impacts, including gasoline above $5 per gallon and a sharp decline in economic growth potentially leading into a recession."Not surprisingly, the outcome of the exercise produced a great deal of alarm among its participants. "This simulation serves as a clear warning that even relatively small reductions in oil supply will result in tremendous national security and economic problems for the country," said Robbie Diamond of Securing America's Energy Future (SAFE), one of the event's principal sponsors. "The issue deserves immediate attention." ... ...In setting the stage for its simulated crisis, Oil Shockwave identified a set of conditions that provide a vivid preview of what we can expect during the Twilight Era of Petroleum: *Global oil prices exceeding $150 per barrel *Gasoline prices of $5.00 or more per gallon *A spike in the consumer price index of more than 12% *A protracted recession *A decline of over 25% in the Standard & Poor's 500 stock index *A crisis with China over Taiwan *Increased friction with Saudi Arabia over U.S. policy toward Israel...
From: pretty far west | Registered: Jul 2004
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VanLuke
rabble-rouser
Babbler # 7039
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posted 06 August 2005 08:54 PM
I think it's going to be a lot slower than suggested in this piece.Fuel efficiency has been going down for almost 20 years. Congress just refused a law that whould have identified tires re their fuel efficiency. Cars can get a lot smaller. Look at the (very safe albeit small) SMART (never mind their recall troubles, that happens with all sorts of models). Sugar did a lot in Brazil to increase domestic energy independence. (I do have problems about using food for transportation though while so many are dying every day of starvation.) Ethanol -made from food again_ but it will be used to a greater extent eventually in the US will stretch out US supplies of oil. Maybe sugar too. Electric cars, less reliance on the private car, hybrids and other technologies will reduce the demand for oil. So does increased 'tele commuting'. i.e working at home via the net, etc., I think it will be less dramatic than suggested in the article. I'm not denying that these processes will/might take place but it seems a bit too rapid in the article and at the same time the suggestion of effects -especially the projected inflation rate- seem understated. 'Might' because I do not have a crystal ball. But some reps can be kicked in the rear and some allleviating measures will be adopted. [ 06 August 2005: Message edited by: VanLuke ]
From: Vancouver BC | Registered: Oct 2004
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rsfarrell
rabble-rouser
Babbler # 7770
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posted 23 August 2005 03:13 PM
quote: I don't share Matthew Simmons's angst, but I admire his style. He is that rare doomsayer who puts his money where his doom is.After reading his prediction, quoted Sunday in the cover story of The New York Times Magazine, that oil prices will soar into the triple digits, I called to ask if he'd back his prophecy with cash. Without a second's hesitation, he agreed to bet me $5,000. . . . And while I'm at it, I'll extend Julian's challenge and consider bets from anyone else convinced that our way of life is "unsustainable." If you think the price of oil or some other natural resource is going to soar, show me the money.
[/quote] http://www.nytimes.com/2005/08/23/opinion/23tierney.html?oref=login
From: Portland, Oregon | Registered: Dec 2004
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maestro
rabble-rouser
Babbler # 7842
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posted 25 August 2005 07:07 AM
In that famous bet, Erlich failed to take into account the amount the industrialized nations spend stealing the resources from the owners.He was taking the capitalist economists at their word that the market operates by 'supply and demand'. No market in raw materials operates by that rule. If it did, raw materials would be a much greater percentage of the cost of a manufactured good. It was Marx who suggested that the price of raw materials would tend to go down as the intensity of manufacturing increased. It is the military's of the G8 that guarantee it.
From: Vancouver | Registered: Jan 2005
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rsfarrell
rabble-rouser
Babbler # 7770
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posted 25 August 2005 09:47 AM
quote: Originally posted by maestro: In that famous bet, Erlich failed to take into account the amount the industrialized nations spend stealing the resources from the owners.He was taking the capitalist economists at their word that the market operates by 'supply and demand'. No market in raw materials operates by that rule. If it did, raw materials would be a much greater percentage of the cost of a manufactured good. It was Marx who suggested that the price of raw materials would tend to go down as the intensity of manufacturing increased. It is the military's of the G8 that guarantee it.
You have a nice faith-based thesis there. If prices go up, it's because of resource scarity. If prices stay the same or go down, it's because of Imperialism. For the record, I happen to think Imperialism is a major problem. But the question here is about oil and whether it's going to get suddenly a lot more scarce and expensive. History does not support that premise -- and by shrugging off the data with a genulflection in the direction of Marx and Noam Chomsky, you've articulated an unfalsible and unverifible theory -- mythic rather than rational. [ 25 August 2005: Message edited by: rsfarrell ]
From: Portland, Oregon | Registered: Dec 2004
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Policywonk
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Babbler # 8139
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posted 25 August 2005 02:33 PM
quote: For the record, I happen to think Imperialism is a major problem. But the question here is about oil and whether it's going to get suddenly a lot more scarce and expensive. History does not support that premise -- and by shrugging off the data with a genulflection in the direction of Marx and Noam Chomsky, you've articulated an unfalsible and unverifible theory -- mythic rather than rational.
History is not particularly relevant with respect to the price and supply of oil, because humans have never been in this situation before. Whether oil is suddenly going to become a lot more scarce and expensive depends on your definitions of sudden, expensive and scarce. There is plenty of oil left in the ground, but the point is that most of the easy to extract oil has been exhausted and demand continues to increase. Ehrlich lost his bet essentially because he failed to understand that the market price of commodities such as oil and copper may have little to do with how much is left in the ground, but how much is being produced and on the market in realtion to demand. In the case of copper the reasons why prices fell include recycling and substitution of other materials and technologies such as fibre optics. In the case of oil, what is left in the ground may be starting to have an impact, but it certainly didn't in the last couple of decades even as demand increased dramatically with economic growth in China and India in particular.
From: Edmonton | Registered: Feb 2005
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rsfarrell
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Babbler # 7770
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posted 25 August 2005 05:29 PM
quote: History is not particularly relevant with respect to the price and supply of oil, because humans have never been in this situation before.
Humans have never wished they had a greater supply of a natural resource readily accessible to them? What history book are you reading?
From: Portland, Oregon | Registered: Dec 2004
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maestro
rabble-rouser
Babbler # 7842
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posted 25 August 2005 08:41 PM
quote: You have a nice faith-based thesis there. If prices go up, it's because of resource scarity. If prices stay the same or go down, it's because of Imperialism.
Of course that's not what I said at all. However, having tangled with you before I am aware that you ignore anything and everything that is relevant up to the point where you position is completely unsustainable, then you run and hide until you think everyone has forgotten. I said that raw materials prices don't operate on a supply and demand basis. The fact that oil prices have remained stable while demand has skyrocketed, coupled with the fact that productive capacity has changed very little over the last twenty years should be an indicator that something other than market forces is at work. Headroom in oil production in the 80's was close to 30%, now it is about 1.5%. The government of the largest oil producer in the world (Saudi Arabia) is a creature of the US State Dept, and their constant refrain is they will increase supply to meet demand. The only time they deviated from that was in the early 70's when they instituted an oil embargo against the US. However, the king at the time had the good sense to get assassinated, and it was back to business as usual. Saddam Hussein was acceptable also until the moment he deviated from US policy. When he too tried to instigate an oil embargo against the US, he fate was sealed. Meanwhile, Venezuela, which is the fifth largest oil exporter in the world is under constant military threat from the US. Remember when the US announced Chavez had been overthrown - slightly prematurely? Ever wonder why the G8 nations spend 75% - 80%of the world expenditure on military? Ever wonder why they consistently support third world dictators in countries with significant supplies of raw materials? Ever wonder why the US was loathe to criticize South Africa - why they supported that dictatorship for years? Apparently not.
From: Vancouver | Registered: Jan 2005
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rsfarrell
rabble-rouser
Babbler # 7770
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posted 25 August 2005 08:52 PM
quote: Of course that's not what I said at all. However, having tangled with you before I am aware that you ignore anything and everything that is relevant up to the point where you position is completely unsustainable, then you run and hide until you think everyone has forgotten.
When you have no argument, there's nothing like a little ad hominem to lubricate the wheels of your rhetoric. It's kinda obvious and kinda slimy, but I guess you don't have anything better to offer. The idea that I "run and hide" is particularly silly. Typically I'll post five, ten, or fifteen posts on a single thread. If I have a fault as a babbler, it's that I trade posts with people like you, who announce from their very first sentence that they have nothing to offer but whining and personal attacks. [ 25 August 2005: Message edited by: rsfarrell ]
From: Portland, Oregon | Registered: Dec 2004
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rsfarrell
rabble-rouser
Babbler # 7770
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posted 25 August 2005 09:03 PM
quote: Originally posted by Policywonk:
I think you missed the point, but I was perhaps a little obscure. The history is somewhat relevent in a general sense. Humans have exhausted natural resources, particularly renewable ones, locally and regionally, by using them unsustainably. But squandering oil and other non-renewable resources is enabling us to do it on a global scale, and that has never happened before. And oil is becoming less accessible (more difficult to extract) as time goes on.
The argument is whether we really are exhausting a non-renewable resource, and whether it will truly become harder to extract as a function of cost, or whether new technologies (including conservation technologies) will cause the resource (oil) to remain relatively inexpensive. That is what the "bet" was about. I recommend the article. I should point out, as I have before on these threads, that we are doing catastrophic damage to our enviroment with fossil fuel extraction and CO2 release, and we need to dramatically cut our use. However, that is a seperate question from whether or not oil is going to become drastically more expensive. On that question, it is worth noting that an "oil peak" has been predicted continiously since oil was first commercially extracted (when it was believed oil would never be found outside Pennsylvania). Also, no non-renewable resource -- not oil, tin, iron, lead, gold, whatever -- has ever run out. Ever. Hence the bet. I encourage people who think different to contact the journalist and set up a wager of their own. [ 25 August 2005: Message edited by: rsfarrell ]
From: Portland, Oregon | Registered: Dec 2004
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DrConway
rabble-rouser
Babbler # 490
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posted 25 August 2005 09:29 PM
PS. I must step in to remind people to try and not lob too many barbs at each other.On peak oil: One thing that has been used, apparently with some success, to extend the availability of petrochemicals is to recycle automotive and machine oils. Since the oil can be redistilled after filtration, this cuts down on the amount of new engine oil demanded out of crude, expanding the supply of gasoline (well, this is an oversimplification since engine oil contains different organics than gasoline, but there are processes known as cracking and reforming which can be used to further process crude oil).
From: You shall not side with the great against the powerless. | Registered: May 2001
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maestro
rabble-rouser
Babbler # 7842
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posted 26 August 2005 03:08 AM
Also worth pointing out that peak oil was predicted for the US by Hubbert. He predicted production would peak in the early 70's.He was correct. All the denial that such a thing could happen turned out to be untrue. We know that peak oil will be reached. We don't know exactly when. Also worth remembering that we won't know when the peak has been reached until several years after the fact. And finally, while corporate leaders and their shills in the media are denying the peak is anywhere near, the US is spending hundreds of billions of dollars in Iraq to secure those reserves. That fact by itself should tell people what the leaders of the US believe about peak oil. They're certainly not waiting to see when it will happen.
From: Vancouver | Registered: Jan 2005
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Rufus Polson
rabble-rouser
Babbler # 3308
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posted 26 August 2005 05:12 PM
quote: Originally posted by rsfarrell:
For the record, I happen to think Imperialism is a major problem. But the question here is about oil and whether it's going to get suddenly a lot more scarce and expensive. History does not support that premise.
Possibly not. Geology, however, does. And the guy with the betting column is basing his bet on a fundamental misunderstanding. In the 1970s, the price of oil did not go up because of shortness of supply. It went up for entirely political reasons--some owners formed a successful cartel and kept their production low. Then the price went down because this cartel was essentially broken, not because of technological ingenuity or new discoveries. I have seen nobody of any political slant suggesting that the current price rise of crude is a result of anybody deliberately suppressing production. Doubtless there is political monkeywrenching going on, and I won't say anything about the price of gasoline at the actual pump. But commentators from all sides agree that all producers are currently going pretty close to full steam--there is effectively no artificial constraint on supply. And everyone on all sides also agrees that demand is continuing to rise, especially in China. So there can be no similar political solution this time around. Finally, in the longer historical picture, "human ingenuity" (trumpet fanfare, please) does not always overcome scarcity problems. Communities and countries have died or shrunk drastically both in size and quality of life due to using up resources or shifts in the weather that take resources away. Which is not to say that I think it would be impossible to overcome the problems that are going to result from scarce oil. Unfortunately, we have pollyanna idiots like that columnist saying that "human ingenuity" is some magical thing that will just happen, sort of like "the market", so we don't actually have to use any "ingenuity" or, indeed, old fashioned brains by, like, making plans or changing our lifestyles or doing research in or beginning to deploy alternative energy and materiel sources. It's kind of weird when you think about it. There's people who say there's a problem and we need to use our brains to deal with the problem. And then there's people who say there's no problem so we don't need to use our brains, because our ingenuity will solve it while we sleep, or something.
From: Caithnard College | Registered: Nov 2002
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rsfarrell
rabble-rouser
Babbler # 7770
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posted 26 August 2005 09:44 PM
quote: Finally, in the longer historical picture, "human ingenuity" (trumpet fanfare, please) does not always overcome scarcity problems. Communities and countries have died or shrunk drastically both in size and quality of life due to using up resources or shifts in the weather that take resources away.
You're talking about enviromental resources -- that's a different story. Ecosystems are easy to exhaust. But dead stuff we dig out of the ground -- what have we ever run out of?
From: Portland, Oregon | Registered: Dec 2004
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rsfarrell
rabble-rouser
Babbler # 7770
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posted 26 August 2005 09:47 PM
quote: Originally posted by VanLuke:
How can history support something that hasn't happened yet?
It's called rational deduction, and it's based on the premise that the future will resemble the past. If you don't buy that, then you have no earthy reason to worry about oil scarcity -- even if it was hard to find yesterday, there is no reason to think we won't find a billion barrels two feet down tomorrow.
From: Portland, Oregon | Registered: Dec 2004
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maestro
rabble-rouser
Babbler # 7842
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posted 27 August 2005 01:12 AM
quote: You're talking about enviromental resources -- that's a different story. Ecosystems are easy to exhaust. But dead stuff we dig out of the ground -- what have we ever run out of?
I would like you to clarify this statement. Is it your contention that resources are infinite?
From: Vancouver | Registered: Jan 2005
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rsfarrell
rabble-rouser
Babbler # 7770
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posted 29 August 2005 01:19 AM
quote: Originally posted by Policywonk:
The premise that the future will resemble the past is testable, since the present was once the future. It is obviously false.
No, sorry, it's not. All scientific and most non-scientific thought is based on the premise that the future will resemble the past. For an experiement (which took place in the past) to provide any useful information, it must be true that the future will resemble the past. Of course, "resemble" does not mean "identical to." The point is this. Any arguement about the future, including the one over peak oil, is based on the evidence of the past. Different people identify different parts of the past as important, interpret that evidence in different ways. Mr. VanLuke challenged my statement of the grounds that peak oil is something totally different than anything we have experience of in the past (I am actually making his comment a little more intelligent, it was more like a contemptious sneer at the idea of arguing from past experience). But if that is true, it cuts all ways, since all the arguements in favor of the idea also rely on what has happened in the past. I think Einstein said "The release of atomic power has changed everything except our way of thinking" (before saying that he should have been a watchmaker). And it's not the only thing that has changed to make the present very different from the past. And it's not a question of rational deduction based on a flawed historical premise but rather one based on geology that explains why we likely probably won't find another billion barrels two feet down.[/QUOTE]
From: Portland, Oregon | Registered: Dec 2004
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rsfarrell
rabble-rouser
Babbler # 7770
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posted 29 August 2005 01:33 AM
quote: Originally posted by maestro:
I would like you to clarify this statement. Is it your contention that resources are infinite?
The statement was actually a question. Speaking natural resources and not ecosystems (not "natural resources" in the sense of plants, animals, habitat, etc.) in there any resource which we have run out of or which has growing vastly more expensive (as is being predicted in the case of oil)? The implication is that, although it may seem obvious that we are bound to run out of this or that natural resource, the fact that that has never happened ought to make us cautious in anticipating such an outcome. Are resources infinite? My response didn't imply anything about that one way or another. Resources do not need to be infinite, since our consumption of them is finite. In practice, what a resource is and whether or not we can get at it is a function of human creativity, so we cannot say "there is such-and-such an amount of natural resources." For the same reason, there is no telling how long we may want a particular resource or how much we may come to rely on it. If we continued with exactly the same technology we have today, never developing a resource-extended technology like cheap spaceflight or fusion or great recycling; then, yes, we would eventually run out of something. But, needless to say, those conditions don't apply to the real world.
From: Portland, Oregon | Registered: Dec 2004
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Contrarian
rabble-rouser
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posted 29 August 2005 01:45 AM
quote: Originally posted by rsfarrell: ...Resources do not need to be infinite, since our consumption of them is finite...
I'm sorry, but this does not compute. If I need eight glasses of water per day, and the available water resources is finite as in 6 glasses of water per day, then I am going to die of thirst.Furthermore, is our consumption finite? The world demand for oil is going up and up. Do you not see that there will come a time when demand exceeds supply? [ 29 August 2005: Message edited by: Contrarian ]
From: pretty far west | Registered: Jul 2004
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maestro
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posted 29 August 2005 04:47 AM
quote: Are resources infinite? My response didn't imply anything about that one way or another.
That's why I asked the question. quote: Resources do not need to be infinite, since our consumption of them is finite. In practice, what a resource is and whether or not we can get at it is a function of human creativity, so we cannot say "there is such-and-such an amount of natural resources."
Huh??? quote:
For the same reason, there is no telling how long we may want a particular resource or how much we may come to rely on it. If we continued with exactly the same technology we have today, never developing a resource-extended technology like cheap spaceflight or fusion or great recycling; then, yes, we would eventually run out of something. But, needless to say, those conditions don't apply to the real world.
This is the longest non-answer to a simple question I've ever seen.
From: Vancouver | Registered: Jan 2005
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Rufus Polson
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posted 29 August 2005 05:26 PM
quote: Originally posted by rsfarrell:
You're talking about enviromental resources -- that's a different story. Ecosystems are easy to exhaust. But dead stuff we dig out of the ground -- what have we ever run out of?
Globally, nothing I can think of. But then, resource extraction on a global-economy level is a relatively new thing--there is very little historical precedent. Countries and regions have certainly run out of various stuff (metals, coal) in the past, and indeed had this impact their economies at a serious level. Meanwhile, don't forget that oil is unusual in that, while pulled from the ground, it is not something like an element (iron, copper) present to some degree or other almost everywhere, but the result of ecosystems in action. Given enough energy, you could get metals by vaporizing seawater or separating them out of sand. But oil is (a) an energy source, so the ability to get it given enough energy is irrelevant--it's probably synthesizable, but only at a loss, and (b) the outcome of a bunch of living critters from particular periods in prehistory being squished real hard by geological processes. The limitations on how much there can be are ecosystem-level limitations, not "well, it's a small percentage of the earth's crust, but there's a lot of crust" limitations.
From: Caithnard College | Registered: Nov 2002
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MasterDebator
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Babbler # 8643
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posted 29 August 2005 11:20 PM
For what it's worth I have been told that the present high oil prices are a bit of a temporary thing. Over the next five years, prices can be expected to decline to more moderate levels. So the urgency of some arguments about resource depletion will seem to diminish over the medium term at least.Also, while conventional oil is getting harder to find, the Canadian tar sands are now profitable at about $15 to $20 a barrell, so there will be plenty of new production there, and not production that needs subsidization.
From: Goose Country Road, Prince George, BC | Registered: Mar 2005
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DrConway
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posted 30 August 2005 01:01 AM
quote: Originally posted by Stephen Gordon: I suppose it would be nice to have a concrete past example of when an important natural resource ran out that could be used as a guide. But that doesn’t mean we can’t try to think things through on our own.
The closest thing I can think of might be whale oil, and perhaps kerosene (?) (before new extraction methods came about, I imagine). In the case of whale oil I have no firm historical documentation but it is my understanding that as the price went up people eventually did switch to things like petrochemicals and/or coal, but I don't know if there was substantial social or economic dislocation that can be directly traced to the loss of this particular energy source. (As a scientist I am a bit uncomfortable about saying 'source' of energy since it implies that the energy comes out of nowhere, when in reality it should be described as a particularly useful compact form of potential energy. But I bow to the needs of not overcomplicating my sentences ) It should be kept in mind that around the time whale oil started running out (late 19th century), there was a civil war in the USA followed a decade later by a severely bruising economic depression (the "Panic of 1873") which lasted for about seven years. It is likely that the aftermath of the Civil War in the US and the economic depression may well have curbed the demand for energy (see, there I go again ) and made it unfeasible in any case to hunt whales. So we may actually be reversing cause and effect, in that it wasn't the whales dying out that forced the change to other fuels, but the long collapse of demand that led to people trying to find cheaper and longer-lasting fuels such as coal. [ 30 August 2005: Message edited by: DrConway ]
From: You shall not side with the great against the powerless. | Registered: May 2001
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maestro
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posted 30 August 2005 04:51 AM
Say what you will, oil is absolutely central to an industrial economy. If there was anything even close, it would have already arisen.Oil use in some industrial economies has been relatively stable as their industrial capacity has shrunk. However, oil use elsewhere has risen in the countries with expanding industrial capacity at the same time. Here (perhaps) is a way to think of the oil resource, and also a reason why it is both hard to get a handle on, and yet totally predictable at the same time. Imagine spilling a can of paint onto the ground from a height. There will be larger and smaller patched of paint, ranging from quite large to very tiny. Now cover the ground on which the paint has spilt, and drill through the cover to find the paint. The largest pools will be relatively easy to find. When searching for the smaller ones, you have to work much harder. In the normal course of events, you will find the largest pools early on. You may not find all the large pools right away, but the odds are you will find more of them than the smaller ones. Now, as the ground is covered, you don't really know how much paint is there. You can make guesses, and based on what you know about existing pools, your guess may be pretty accurate. At the same time, you always stand a chance of discovering a medium or larger pool, so it's difficult to tell where you are at any given moment. At the same time, the logistics of the situation tell you that it will become increasingly difficult to find more pools, and they will be ever smaller. In the case of oil, ever greater technology allows a certain stability in maintaining reserves. However, there must be ever more drilling to find ever smaller pools of oil. At some point, it will take a barrel of oil to recover a barrel of oil. At that point, all the oil is gone, regardless of how much is left in the ground.
From: Vancouver | Registered: Jan 2005
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rsfarrell
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posted 01 September 2005 11:45 PM
quote: Originally posted by Contrarian:
I'm sorry, but this does not compute. If I need eight glasses of water per day, and the available water resources is finite as in 6 glasses of water per day, then I am going to die of thirst.Furthermore, is our consumption finite? The world demand for oil is going up and up. Do you not see that there will come a time when demand exceeds supply? [ 29 August 2005: Message edited by: Contrarian ]
Resources would only need to be infinite if the demand were infinite. Thus the relevent question is not "Are resources infinite?" but rather "are resources sufficient for our needs?" If our society were going to last forever with exactly the same resource usage, then, logically, be would need infinite resources. But our society is neither permanent nor technologically stagnent, so neither of those conditions apply. When you ask "Will demand exceed supply?" you are asking the right question, but in too simple a form. The reality is that demand and supply interact dynamically through the mechanisms of price and availiblity. If, say, the supply of oil dropped by 90% over five years it would be a major crisis and many people would starve. If it dropped by 1% a year for the next 95 years it would be a minor inconvinence -- it would slow economic growth a bit (but in the medium to long term, it would save us a lot of enviromental damage.) As long as oil is reasonably cheap demand for it will grow. As it gets more expensive, or alternatives become cheaper, demand will fall. Demand is not infinite, nor will it grow forever.
From: Portland, Oregon | Registered: Dec 2004
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rsfarrell
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posted 01 September 2005 11:49 PM
quote: Originally posted by maestro:
This is the longest non-answer to a simple question I've ever seen.
And you have got to be the most boring troll I have ever seen. Get a clue: this is a conversation about an issue, not an opportunity for you to get into a rhetorical pissing match with me. Besides, you've tried that before and you always lose anyway. Go away. The grown-ups are talking.
From: Portland, Oregon | Registered: Dec 2004
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rsfarrell
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posted 01 September 2005 11:54 PM
quote: Originally posted by DrConway: [QB]The closest thing I can think of might be whale oil, and perhaps kerosene (?) (before new extraction methods came about, I imagine). In the case of whale oil I have no firm historical documentation but it is my understanding that as the price went up people eventually did switch to things like petrochemicals and/or coal, but I don't know if there was substantial social or economic dislocation that can be directly traced to the loss of this particular energy source.
There might have been. This is another example of a ecosystem being put under too much strain, which is very easy to do, as opposed to running out of magnesium deposits, which is very hard. Kudos for putting your finger on the real issue, which is it what extent the scarcity of a resource, sudden or otherwise, causes economic dislocation (a nice term for something that could include everything up mass starvation.)
From: Portland, Oregon | Registered: Dec 2004
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rsfarrell
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posted 01 September 2005 11:59 PM
quote: Natural resources have certainly been exhausted locally and regionally e.g. Easter Island, Indus Valley.
Two more examples of ecosystem failure, very important subject, totally different issue from the ability to dig stuff out of the ground. On that subject, an editorial comment; we have our own Easter Island scenerio developing, and people would be better served worrying about that rather than fantasizing about an apocalyptic crisis that will force the world to change its ways!
From: Portland, Oregon | Registered: Dec 2004
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maestro
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posted 02 September 2005 02:15 AM
quote: Originally posted by rsfarrell:
And you have got to be the most boring troll I have ever seen. Get a clue: this is a conversation about an issue, not an opportunity for you to get into a rhetorical pissing match with me. Besides, you've tried that before and you always lose anyway. Go away. The grown-ups are talking.
Just answer the question, or admit you don't have an answer. Is it your contention that resources are infinite?
From: Vancouver | Registered: Jan 2005
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Stephen Gordon
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posted 02 September 2005 01:28 PM
In other news, does anyone know anything about oil shales? (Here's a Rand report - biggish pdf file.) quote: The largest known oil shale deposits in the world are in the Green River Formation, which covers portions of Colorado, Utah, and Wyoming. Estimates of the oil resource in place within the Green River Formation range from 1.5 to 1.8 trillion barrels. Not all resources in place are recoverable. For potentially recoverable oil shale resources, we roughly derive an upper bound of 1.1 trillion barrels of oil and a lower bound of about 500 billion barrels. For policy planning purposes, it is enough to know that any amount in this range is very high. For example, the midpoint in our estimate range, 800 billion barrels, is more than triple the proven oil reserves of Saudi Arabia. Present U.S. demand for petroleum products is about 20 million barrels per day. If oil shale could be used to meet a quarter of that demand, 800 billion barrels of recoverable resources would last for more than 400 years.
quote: Shell Oil Company has successfully conducted small-scale field tests of an insitu process based on slow underground heating via thermal conduction. Larger-scale operations are required to establish technical viability, especially with regard to avoiding adverse impacts on groundwater quality. Shell anticipates that, in contrast to the cost estimates for mining and surface retorting, the petroleum products produced by their thermally conductive in-situ method will be competitive at crude oil prices in the mid-$20s per barrel. The company is still developing the process, however, and cost estimates could easily increase as more information is obtained and more detailed designs become available.
Encouraging news, I suppose, but does anyone know more?
From: . | Registered: Oct 2003
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maestro
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posted 02 September 2005 04:47 PM
Here's an article that seems fairly informed on oil shale. http://tinyurl.com/d7qoc quote: The term "oil shale" is a misnomer. It does not contain oil nor is it commonly shale. The organic material is chiefly kerogen, and the "shale" is usually a relatively hard rock, called marl. Properly processed, kerogen can be converted into a substance somewhat similar to petroleum. However, it has not gone through the "oil window" of heat (nature’s way of producing oil) and therefore, to be changed into an oil-like substance, it must be heated to a high temperature. By this process the organic material is converted into a liquid, which must be further processed to produce an oil which is said to be better than the lowest grade of oil produced from conventional oil deposits, but of lower quality than the upper grades of conventional oil....During and following the oil crisis of the 1970’s, major oil companies, working on some of the richest oil shale deposits in the world in western United States, spent several billion dollars in various unsuccessful attempts to commercially extract shale oil. ...Perhaps oil shale will eventually find a place in the world economy, but the energy demands of blasting, transport, crushing, heating and adding hydrogen, together with the safe disposal of huge quantities of waste material, are large. On a small scale, and with good geological and other favourable conditions, such as water supply, oil shale may make a modest contribution but so far shale oil remains the "elusive energy".
Often times the 'cost' of producing tar sands and shale oil is discussed, but it is very difficult to get a handle on the energy requirements for production. Alberta tar sands producers use close to a billion cu/ft of natural gas per day to make the oil. As the above article mentions, the energy demands for making oil from shale are large. The point is, that once you get close to using a barrel of oil equivalent to produce a barrel of oil, you might as well give up. The cheapest and easiest energy to produce is the energy you don't use. The real answer to energy production is to reduce the amount of energy used.
From: Vancouver | Registered: Jan 2005
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MasterDebator
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posted 02 September 2005 05:01 PM
quote: Originally posted by maestro:
Just answer the question, or admit you don't have an answer.Is it your contention that resources are infinite? By the way, for anyone who contends that oil supply is not a problem, I recommend you read the newspaper over the last couple of days.
Maestro, I have combined two of your messages here, I hope that's alright.
To the first, obviously resources are not literally infinite, but I have been told by physicists that hydro-carbons in a more general sense than simply "oil" are practically infinite, that even radically increased world consumption could not possibly deplete them except in geologic time. Which is a bit beyond the normal planning cycle. The catch, as always, is price. Also, you say read the newspaper over the past couple of days. Good point. And you could say, look at the gas pump prices directly, go fill the tank. But oil industry analysts who have been following the prices for years say they are unable to explain the present price level based on normal supply and demand factors. They believe it's the result of speculative excess. My point earlier was that this is a temporary phenomona and within a very few years oil and gas prices are expected to be falling back to levels we saw a few years ago. I don't have a precise figure on this, but probably what they mean is crude back to $40 per barrel or less, or gas at Canadian pumps back to 70 cents a litre or thereabouts. The IMF did a report on this subject this Spring. Yes, I know, a lot of people, don't think much of the IMF, and if you have a similar long run forecast of oil and gas prices from, say, The Sierra Club, by all means please let me know. For what it's worth, their projection was that to the year 2030 oil prices would range between $36 and $55 per barrell. One could object that $55 has already been exceeded, but that is a price over a few months. Averaged over the entire year, it's probably still $55 tops. From the IMF's "WORLD ECONOMIC AND FINANCIAL SURVEYS: World Economic Outlook, Globalization and External Imbalances, April 2005, it's in their: Chapter 4: Will the Oil Market Continue to be Tight? Just a reminder. In the last century, er, ... dating myself a bit here, ... I mean in the century before last, many authors wondered what would happen to Britain's industrial economy when all the usable coal ran out. The concensus of opinion among all the Rudyard Kipling types was that, rather than conserving and trimming production, Britain should be a truly Great Power and just bloody well keep on rolling to the last wheel barrow full of coal and "go out in a blaze of glory", with all the lights of the Crystal Palace shutting down at once. I wonder it this sounds a bit like the Dick Cheney School of Energy Policy?
From: Goose Country Road, Prince George, BC | Registered: Mar 2005
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DrConway
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posted 02 September 2005 07:21 PM
quote: Originally posted by MasterDebator: To the first, obviously resources are not literally infinite, but I have been told by physicists that hydro-carbons in a more general sense than simply "oil" are practically infinite, that even radically increased world consumption could not possibly deplete them except in geologic time. Which is a bit beyond the normal planning cycle. The catch, as always, is price.
This chemist will point out that most of the usable carbon is in a form that is practically unusable to us as a portable energy source ready to go into the gas tank without a lot of up-front work. For example, were there a cheap process to catalytically break down carbon dioxide into carbon and oxygen, we would in effect have a renewable supply of coal. Wave bye-bye nuclear, wave bye-bye natural gas for electric power. This is, of course, pie-in-the-sky, but you can bet there's at least one fella out there who did transition-metal chemistry who's trying to find that elusive catalyst that'll do just that. (We've effectively discovered the reverse process already, since the platinum catalyst in a car's catalytic converter will assist the oxidation of carbon) Were we to overcome certain practical and ethical considerations, we could disintegrate our house pets and our own bodies for the carbon content and, voila, once again, coal. Riiiiiiiiiiight. And so on, and so forth. [ 02 September 2005: Message edited by: DrConway ]
From: You shall not side with the great against the powerless. | Registered: May 2001
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Policywonk
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posted 02 September 2005 07:32 PM
quote: As long as oil is reasonably cheap demand for it will grow. As it gets more expensive, or alternatives become cheaper, demand will fall. Demand is not infinite, nor will it grow forever.
Obviously neither demand nor supply is infinite; it is supply relative to demand that is important. Of course one of the reasons oil is so cheap is that it is subsidized, and people are encouraged more to squander it than to conserve it. The cheapest alternative is conservation, and relatively inexpensive fossil fuels are required to build a sustainable energy infrastructure. quote: Two more examples of ecosystem failure, very important subject, totally different issue from the ability to dig stuff out of the ground.On that subject, an editorial comment; we have our own Easter Island scenerio developing, and people would be better served worrying about that rather than fantasizing about an apocalyptic crisis that will force the world to change its ways!
We are part of the ecosystem, therefore our ability to dig stuff out of the ground is totally related, as it is part of our environment. There are obviously social and physical as well as economic aspects to Peak Oil. We are not fantasizing about an apocalyptical crisis, we are living through a real and growing one with various aspects.
From: Edmonton | Registered: Feb 2005
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rsfarrell
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posted 02 September 2005 11:53 PM
quote: Originally posted by maestro:
Just answer the question, or admit you don't have an answer. Is it your contention that resources are infinite?
Asked and answered, troll. If you're too slow to understand the answer, that's not my problem.
From: Portland, Oregon | Registered: Dec 2004
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rsfarrell
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posted 03 September 2005 12:07 AM
quote: Originally posted by DrConway: [QB] For example, were there a cheap process to catalytically break down carbon dioxide into carbon and oxygen, we would in effect have a renewable supply of coal. Wave bye-bye nuclear, wave bye-bye natural gas for electric power. This is, of course, pie-in-the-sky, but you can bet there's at least one fella out there who did transition-metal chemistry who's trying to find that elusive catalyst that'll do just that. (We've effectively discovered the reverse process already, since the platinum catalyst in a car's catalytic converter will assist the oxidation of carbon)
You might be able to find a cheap way to do that, but you would always need an outside energy source (nuclear, wind, coal, whatever) because CO2 --> O2 + C is an endothermic, that is to say an energy-requiring, reaction; a catalyst can speed the reaction (by lowering the activation energy) but doesn't lower the overall energy requirement. (The reverse reaction is exothermic and spontaneous.) So we're stuck with power plants or some equivelent of same until and unless the Second Law of Thermodynamics is struck down on appeal. Fortunately there are a lot of ways to generate energy.
From: Portland, Oregon | Registered: Dec 2004
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rsfarrell
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posted 03 September 2005 12:18 AM
quote: Originally posted by Policywonk: [QB]We are part of the ecosystem, therefore our ability to dig stuff out of the ground is totally related, as it is part of our environment.
You are using the word "enviroment" in a different global sense, i.e. "everything around us" aka "the universe." I am talking about the biosphere; food webs, ecological niches, preatation, etc. There is a radical and fundemental difference between a lump of gold and a condor. These differences make it useless to compare losing the one to running out of the other; it's apples and oranges; completely different conditions apply. The only thing they have in common is the linguistic fact that they are both sometimes call "resources" although this is an almost uselessly narrow way to look at the condor. Beyond that, there is no comparsion. quote: There are obviously social and physical as well as economic aspects to Peak Oil. We are not fantasizing about an apocalyptical crisis, we are living through a real and growing one with various aspects.
And the crisis is . . . ? Oil gets a little more expensive? So what? There is no evidence that we have a) Reached a theorectical limit to our oil production, or; b) that such a limit, when and if we get there, will happen in time to have any impact on our rapidly changing societies, or c) that if such a change happened, and happened very soon, that it would be anywhere near drastic enough to cause anything other than a mild to moderate drag on growth as we shift to alternative sources of power and use less. There is no crisis today. There is no good evidence to suggest one is coming.
From: Portland, Oregon | Registered: Dec 2004
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Policywonk
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posted 03 September 2005 03:23 AM
quote: You are using the word "enviroment" in a different global sense, i.e. "everything around us" aka "the universe." I am talking about the biosphere; food webs, ecological niches, preatation, etc.
Bisphere: Part of the Earth system in which life can exist, between the outer portion of the geosphere and the inner portion of the atmosphere. (i.e. not just the life itself). Ecosystem: The interacting system of a biological community and its non-living environmental surroundings. (one of a number of definitions). We are part of a biological community and all of what we call resources are part of our living (whatever that means) and non-living surroundings. Even a condor uses minerals, albiet unconsciously. You were discussing ecosystems, not the biosphere. The biosphere would be in trouble if the ozone layer were to disappear totally. Preatation: ??? Perhaps you mean procreation. quote: And the crisis is . . . ? Oil gets a little more expensive? So what? There is no evidence that we have a) Reached a theorectical limit to our oil production, or; b) that such a limit, when and if we get there, will happen in time to have any impact on our rapidly changing societies, or c) that if such a change happened, and happened very soon, that it would be anywhere near drastic enough to cause anything other than a mild to moderate drag on growth as we shift to alternative sources of power and use less.
The case for Peak Oil is essentially that the rate of extraction from individual oil fields follows a bell curve, with the most easily extracted oil coming first. Hubbert theorized that the same curve applied to continental US production and predicted successfully that it would peak in the early 1970s (actually 1970) and that there was no reason to belive it wouldn't apply globally. It is a known fact that oil discoveries peaked globally in the 1960s. It doesn't take a great deal of imagination to see what will happen when the market realizes that the demand curve has crossed. Industrialized societies are based on cheap oil, and depend on other resources that require cheap oil to exploit (including our food supply and most other alternatives to cheap oil). The main uncertainly is the unreliability of reported oil reserves. Unless of course you believe in abiotic oil, for which there is absolutely no evidence. Even if there were there is a little thing called global warming. quote: Fortunately there are a lot of ways to generate energy.
There are a number of ways to generate energy, but few are truly sustainable, including photovoltaic cells and wind turbines (which require a fossil fuel infrastructure to produce), and especially hydrogen, which is an energy sink rather than a source. If you don't believe we have an impending crisis, then you aren't paying attention.
From: Edmonton | Registered: Feb 2005
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maestro
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posted 03 September 2005 04:05 AM
From an interview with Matthew Simmons. Simmons is the President of Simmons & Company International, a company which engages in financing and investment banking in the energy industry since 1974. Matthew Simmons was also energy advisor to President Bush. The interview was done in Aug. 2005. http://tinyurl.com/exdj4 quote: MATT: Absolutely. But so many oil experts got giddy, by seeing the return to high flow rates, they started believing that we were actually now finally getting a vastly higher amount more oil out of these fields than we could produce before, and therefore we were headed to an era of unbelievably plentiful oil, at unbelievably low prices. And I’ll tell you, as we speak right now, ironically the same week that Twilight in the Desert (Simmons latest book) began shipping, Cambridge Energy Research Associates, Daniel Yergin, who, I think, a lot of people think is one of the more respected – or maybe most respected – oil analysts on Earth, began producing a report saying effectively – and there was a big editorial piece in the Washington Post this Sunday – that the world, between now and 2010 – which is not very long away – is going to add 16.4 million bpd more oil, and create a massive oil glut, and collapse the price again. Now, I’ve read carefully through Daniel Yergin’s detailed field-by-field bottom-up report, and basically, it is a really flawed piece of analysis in my opinion. But the fact that they obviously believe it’s correct – they’re doing talk shows – shows you the depth of limitation of people that really understand how serious this is. Cambridge Energy Research Associates also, in 2001, were unbelievably pooh-poohing the idea that the United States had now entered a major natural gas crisis. But by 2004 they got the religion. I expect by 2009 they’ll issue a magnificent tome saying, “gosh! it looks like the world is now past sustainable peak oil supply.” But what’s dangerous is how many of the optimists really believe we won’t ever have any oil problems. I hope I’m actually wrong in my dire predictions, but I hope people actually take them seriously and figure out a way to prepare for them, since if we do that we win either way. [27:24] ...MATT: We can all clamor for energy data reform. That’s the one thing that can happen before the end of this year, and where are mandated field by field quarterly production reports, and the number of well bores each of those fields have; some data on proven reserves we don’t even need. That’s the only thing we can do and effect in 2005, and that system being mandated would allow less than 30 people in less than 30 days to come up with a realistic supply assessment over the next 3 years, and pretty well prove or disprove we’ve actually now exceeded peak oil, or it’s right ahead of us. That’s the one thing that every person in the world has a role in demanding that happen. And if people say, “Naw, that’s not important,” we fully deserve every bit of pain we’re going to get. [1:02:29]
[ 03 September 2005: Message edited by: maestro ]
From: Vancouver | Registered: Jan 2005
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rsfarrell
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posted 03 September 2005 01:27 PM
quote: You were discussing ecosystems, not the biosphere. The biosphere would be in trouble if the ozone layer were to disappear totally.
And your point is? Ecosystems, biosphere, food webs; they are all commonly used words to describe the overall system of living things. Of course they interact with non-life -- that's a given. The ingot is still different from the condor. quote: Preatation: ??? Perhaps you mean procreation.
No, I meant predation, but good guess. quote: The case for Peak Oil is essentially that the rate of extraction from individual oil fields follows a bell curve, with the most easily extracted oil coming first. Hubbert theorized that the same curve applied to continental US production and predicted successfully that it would peak in the early 1970s (actually 1970) and that there was no reason to belive it wouldn't apply globally. It is a known fact that oil discoveries peaked globally in the 1960s. It doesn't take a great deal of imagination to see what will happen when the market realizes that the demand curve has crossed. Industrialized societies are based on cheap oil, and depend on other resources that require cheap oil to exploit (including our food supply and most other alternatives to cheap oil). The main uncertainly is the unreliability of reported oil reserves.
Reported oil reserves essentially always show about twenty years of oil remaining, because once you know where twenty years' worth of oil is, it becomes uneconomic to look for more. If you look at the reported oil reserves from 1950, 1960, and 1970, I think you'll find that under the peak oil model we should have been out of oil long ago. Also, there is no indication from this that discovery of new fields will follow a bell curve. If we continue to find new fields, the fact that oil fields eventually peak will be irrelevant. Many people on this thread, including you, have claimed that alternative sources of energy require "cheap oil" and our whole society is based on "cheap oil," but to respond in the most respectful terms possible, I don't see any evidence of that. Whether oil is cheap or expensive, you can build a nuclear power plant, although with expensive oil it will cost more. Food should be quite sensitive to oil shocks, since it Western food production is based heavily on fertilizers, but, again, the effect would merely be to make food more expensive, something society could cope with in any number of ways (eat less meat and grow more grains, for example.) quote: Unless of course you believe in abiotic oil, for which there is absolutely no evidence. Even if there were there is a little thing called global warming.
Come down to Portland and I'll cook you up a little abiotic oil in the lab. It's no big deal. All it takes is energy. Or did you mean something different? quote: There are a number of ways to generate energy, but few are truly sustainable, including photovoltaic cells and wind turbines (which require a fossil fuel infrastructure to produce), and especially hydrogen, which is an energy sink rather than a source. If you don't believe we have an impending crisis, then you aren't paying attention.
No one said replacement power had to be sustainable! Coal and natural gas will be the big winners in any oil crisis, followed by nuclear, and some wind, and God willing a little solar. But you're confusing the two problems -- the enviromental and the productive. The enviromental one is a serious crisis and getting worse. But this thread is about a theoretical crisis in oil production -- which is a different problem entirely. Society is not going to collapse because burning more coal is not "sustainable." As for the snarky "you're not paying attention" line; you are among a long line of prophets of doom that see a world that is not unfolding according to their values and, appalled by that disconnection, believes the end must be at hand. Since your values and beliefs are modern, instead of invoking divine wrath you turn to psuedoscientific predictions of natural disaster which serve the same emotional purpose. From "peak oil" to "Left Behind" it's all about the comforting fantasy of a future in which everyone is forced to admit you were right all along. [ 03 September 2005: Message edited by: rsfarrell ]
From: Portland, Oregon | Registered: Dec 2004
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Policywonk
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posted 03 September 2005 06:06 PM
quote: And your point is? Ecosystems, biosphere, food webs; they are all commonly used words to describe the overall system of living things. Of course they interact with non-life -- that's a given. The ingot is still different from the condor.
You are using a scientifically unsound, restrictive definition on ecosystem and biosphere. quote: Reported oil reserves essentially always show about twenty years of oil remaining, because once you know where twenty years' worth of oil is, it becomes uneconomic to look for more.If you look at the reported oil reserves from 1950, 1960, and 1970, I think you'll find that under the peak oil model we should have been out of oil long ago. Also, there is no indication from this that discovery of new fields will follow a bell curve. If we continue to find new fields, the fact that oil fields eventually peak will be irrelevant.
The point is that discovery of new fields has already followed a bell curve. And just as existing oil fields will become more difficult to extract oil from, new discoveries will in general be more difficult to exploit (offshore and frontier) or be in even more politically unstable regions such as central Asia. We may find new fields, but whether they will be brought on line in time to satisfy demand is the question. quote: Come down to Portland and I'll cook you up a little abiotic oil in the lab. It's no big deal. All it takes is energy. Or did you mean something different? [QUOTE]As you say, it takes energy. Producing it (whatever you are referring to) in the lab is not the same as finding it in nature, and there is no evidence or even much of a theoretical basis to the hypothesis that it exists in nature. [QUOTE] No one said replacement power had to be sustainable! Coal and natural gas will be the big winners in any oil crisis, followed by nuclear, and some wind, and God willing a little solar. But you're confusing the two problems -- the enviromental and the productive. The enviromental one is a serious crisis and getting worse. But this thread is about a theoretical crisis in oil production -- which is a different problem entirely. Society is not going to collapse because burning more coal is not "sustainable."
Conservation must be the big winner in any oil crisis; nuclear is a dead end, for both economic and political reasons. Coal gasification and carbon sequestration may have a future, but they are not without problems. And it is acknowledged that natural gas will have serious supply problems soon, not just because the production curve is similar to oil, but because it is difficult to transport by sea. Sustainablity has a number of aspects, production and environmental impact being two of them. If burning more coal caused global warming to be worse than the consensus IPCC position (and contrary to what Margaret Wente seems to believe, the consensus is probably breaking down at the other end of the range) the possibility that society will collapse certainly exists. And the solutions to global warming are essentially the same as those needed to address Peak Oil. quote: As for the snarky "you're not paying attention" line; you are among a long line of prophets of doom that see a world that is not unfolding according to their values and, appalled by that disconnection, believes the end must be at hand. Since your values and beliefs are modern, instead of invoking divine wrath you turn to psuedoscientific predictions of natural disaster which serve the same emotional purpose. From "peak oil" to "Left Behind" it's all about the comforting fantasy of a future in which everyone is forced to admit you were right all along.
Sort of like your comforting fantasy that there is no major problem and that solutions will be easily found? It is a fantasy to expect that continually increasing the scale of human activity on Earth will lead to anything but disaster. Although I am hopeful that it will not be total. It is more than plausible that the invasion of Iraq indicates that the Bush administration believes in Peak Oil, and conflict over energy and other resources are nothing new. You have no idea what my motivations are and are totally misrepresenting my values. I will be quite happy to have been proved wrong and prefer to work for solutions rather than accept that there is no hope. Unfortunately, I don't think we will have long to wait before the predictions of Peak Oil are confirmed. Then we will see who is right, not that it will matter.
From: Edmonton | Registered: Feb 2005
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rsfarrell
rabble-rouser
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posted 03 September 2005 11:04 PM
quote: You are using a scientifically unsound, restrictive definition on ecosystem and biosphere.
You simply don't have the slightest idea what you are talking about. I've tried to explain the difference, but you just don't get it. By your logic, computers are part of the enviroment, and therefore computers will fail, just as the ecosystem on Easter Island failed. The problems of maintaining enviromental balance are different from (though important to) the problems of finding stuff in the ground and pulling it out. quote: The point is that discovery of new fields has already followed a bell curve.
Evidence? You yourself said that the thesis was about the capacity of given fields. Now you're changing the story. Sources please. quote: Conservation must be the big winner in any oil crisis; nuclear is a dead end, for both economic and political reasons. Coal gasification and carbon sequestration may have a future, but they are not without problems.
Fantasy again; supposing there is an oil crisis, there is no reason to think that people will reject nuclear power; when oil prices go up, it will automatically become more cost effective, and as people pay more for energy, political objections would wane. The rest of your objections are of the same type; poisting a globe-shaking crisis and then assuming nothing put the price of oil will change. In this as in many ways, you show you haven't thought the matter through. quote: Sort of like your comforting fantasy that there is no major problem and that solutions will be easily found?
Having failed to make your argument, you now resort to putting words in my mouth. In fact there is no oil production crisis, and, on the evidence, there is unlikely to be one in the future. That doesn't mean there are no major problems: the problems of enviromental devestation and global warming are things I have brought up again and again in these forums. quote: If burning more coal caused global warming to be worse than the consensus IPCC position (and contrary to what Margaret Wente seems to believe, the consensus is probably breaking down at the other end of the range) the possibility that society will collapse certainly exists. And the solutions to global warming are essentially the same as those needed to address Peak Oil.
Then why not argue about global warming, which really exists, rather than peak oil, which doesn't? Perhaps because global warming is a gradual process which is already underway, rather than a sudden crisis somewhere in the future? You think, perhaps, the peak oil is easier to sell to the public? It's stupid to pursue bitterly opposed social changes, which are good and necessary, with bad science and ludicrious ignorance of economics. You will damage the case for good and necessary enviromental measures when your doomsday fantasy collapses under scientific scrutiny like a house of cards.
From: Portland, Oregon | Registered: Dec 2004
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Nopiming
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posted 04 September 2005 10:37 AM
Peak oil or not, what might be the effect of belching out every bit of geologically sequestered carbon on long-term climatological equilibria? Might a rapid shift in climate due to the CO2/NOx emissions of petroleum combustion make this whole argument moot? (Sorry about the thread drift, but I noticed one of you is a meterologist) I guess my point is that our dependence on petroleum is leading us to several potential "apocalypses", some of which may already be beyond our control. Peak oil is a given, whether it happens now, 100 years from now or last year. What is more at issue is what we do with the oil that is left, however much that is, and if we dare consume it at all. Do we move forward as we have, hoping blindly that things will go well, or do we use some of the wealth that this cheap (even at $200/barrel) energy supply provides us to invest in the infrastructure, minds, and policy to insure ourselves against calamity? [ 04 September 2005: Message edited by: Nopiming ] [ 04 September 2005: Message edited by: Nopiming ]
From: Courtenay, BC | Registered: Dec 2002
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Sirrhosis
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Babbler # 10326
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posted 04 September 2005 11:42 AM
This is an interesting article on new developments in shale oil extraction developed by Shell Oil Rocky Mountain News. Apparently the reserves are larger than all those to be found in the middle east- according to this link Seattle Times. Interesting stuff.[ 04 September 2005: Message edited by: Sirrhosis ] [ 04 September 2005: Message edited by: Sirrhosis ]
From: Toronto | Registered: Sep 2005
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rsfarrell
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posted 04 September 2005 01:22 PM
quote: Peak oil is a given, whether it happens now, 100 years from now or last year.
The fact that, barring measurements of entropy, all numbers which go up are eventually going to come down, is indeed a given. What has not been established -- but is nevertheless an assumption of the "peak oil" thesis, is that this will be drastic enough, and soon enough, to have a major impact on society.
From: Portland, Oregon | Registered: Dec 2004
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rsfarrell
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posted 04 September 2005 01:33 PM
quote: Originally posted by Policywonk: I don't see that you have made any relevant arguments either.
That's because you are looking for the wrong things, as you reveal below: quote: In particular you have not provided any evidence against Peak Oil or that you understand economics and resource depletion yourself.
I have provided plenty of evidence that the speculative reasoning of "peak oil" advocates is full of holes. It is rather problematic articulating counterarguments to your evidence, since you don't have any in the first place. Fortunately, the burden of proof in on you, to prove you theory, and not on me, to disprove it. The idea that something that has not been disproven is thereby credible is the fallacy of an appeal to ignorance. Equally specious is the "proof" you would have that I understand resource depletion and economics. First, there's a logical problem: you're stone ignorant of both, so how would you judge? Secondly, it's irrelevant; what matters is not my credibility but the credibility of my arguments, which throughout you have studiously ignored. quote: Whatever.
Indeed.
From: Portland, Oregon | Registered: Dec 2004
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maestro
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Babbler # 7842
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posted 04 September 2005 07:36 PM
One of the chief indicators of so-called peak oil is that it has already happened.Most obvious example is the US, but they are by no means the only example. North sea oil is another. In fact, most producers of oil outside of the Gulf have already peaked. One of the reasons the reserves figures look somewhat optimistic is specifically from the 80's, when OPEC assigned production quotas based on reserves. Overnight, most countries in OPEC increased their reserves by double, and some even triple. Usually one doesn't hear of this episode of wild reserve inflation during discussions of oil production. One other thing. As Matthew Simmons has pointed out, Saudi Arabia has been pumping billions gallons of water into their largest fields in order to maintain production levels. One of the consequences of that technology is that when the field is exhausted, it will be exhausted almost overnight. Problem is, no one knows exactly when that will be. However, take one large Saudi field off-line very quickly, and the situation will be approximately the same as we see now, with Gulf of Mexico production taken off-line. Essentially there is zero spare capacity in the world today. Everyone is sucking it up out of the ground as fast as they can, and every barrel they get is already spoken for. The lack of spare capacity in the system is totally different now than say in the 80's, when spare capacity equalled roughly 30% of possible production. Which explains why the US is spending hundreds of billions to secure access to Iraqi oil. If they didn't see peak oil coming, and if they thought there would be no problem when it arrived, their attitude towards Iraq would be similar to their attitude towards Rwanda, or Korea. When the people who know the most about current and future oil supply are willing to destabilize countries - and whole regions - to satisfy their need to control oil supply, you have to accept that they think there is a problem.
From: Vancouver | Registered: Jan 2005
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Policywonk
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posted 04 September 2005 08:17 PM
quote: Fortunately, the burden of proof in on you, to prove you theory, and not on me, to disprove it.
There are essentially two competing theories. I have already outlined the evidence for Peak Oil, as have others, here and elsewhere. You can accept or reject it, or claim that it is not evidence at all as you choose. This is yours, from earlier in the thread (so that I am not accused of putting words in your mouth): quote: To the first, obviously resources are not literally infinite, but I have been told by physicists that hydro-carbons in a more general sense than simply "oil" are practically infinite, that even radically increased world consumption could not possibly deplete them except in geologic time. Which is a bit beyond the normal planning cycle. The catch, as always, is price.
Aside from the fact that I think this is a totally preposterous statement, an opinion I am entitled to regardless of it's truth or falsehood, price is only one catch. The other and probably more important one is the amount of energy required to extract these hydrocarbons, if they exist. If it takes more energy to extract them than the energy that is retreived (Energy Return on Energy Invested), then they will not simply not be able to meet a society's basic energy needs. In any case, I'd rather ask geologists than physicists about hydrocarbon sources, at least those on Earth. It is geologists that came up with the Peak Oil theory (observation in the case of the continental US peak production and global oil discoveries). There are extra-terrestrial sources of course, which you might ask astronomers and other planetary/space scientists about, but exploiting them is a problem. My opinion, which I believe is backed by common sense as well as credible evidence, is that your theory is nothing more than blind faith. You are entitled to your opinion, however delusional I think it to be, just as I am entitled to mine.
From: Edmonton | Registered: Feb 2005
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Policywonk
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posted 05 September 2005 03:50 AM
My apologies. That was indeed not your quote. Still if you do not believe in Peak Oil, then presumably you believe that either demand will fall significantly (in which case there may be a peak in production but it will be irrelevant) because we will have found suitable alternatives to meet our energy needs (or suffered some catastrophic decline in population), or that easily exploited new oil fields will keep pace with demand indefinitely. These are essentially competing theories. You keep dismissing Peak Oil without actually seeming to say why (at least not recently in the thread), besides the contention that because non-renewable resources haven't run out yet that they won't in the future, or won't become too expensive energy wise to exploit (which I regard as wishful thinking, except in the obvious case of certain metals that we have found substitutes for, like copper, which we can also recycle), in addition to an aversion to those you think have apocalyptic visions they want to have proven right.
From: Edmonton | Registered: Feb 2005
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drgoodword
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Babbler # 3214
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posted 05 September 2005 02:45 PM
quote: Originally posted by rsfarrell:If you look at the reported oil reserves from 1950, 1960, and 1970, I think you'll find that under the peak oil model we should have been out of oil long ago.
Do you have a link or explanation for this statement? I don't think any of the peak oil theorists, including Hubbert, set a timeframe for global peak oil that indicates "we should have been out of oil long ago." quote: Originally posted by rsfarrell:Also, there is no indication from this that discovery of new fields will follow a bell curve. If we continue to find new fields, the fact that oil fields eventually peak will be irrelevant.
Looks like a bell curve to me: quote: Originally posted by rsfarrell:Many people on this thread, including you, have claimed that alternative sources of energy require "cheap oil" and our whole society is based on "cheap oil," but to respond in the most respectful terms possible, I don't see any evidence of that. Whether oil is cheap or expensive, you can build a nuclear power plant, although with expensive oil it will cost more. Food should be quite sensitive to oil shocks, since it Western food production is based heavily on fertilizers, but, again, the effect would merely be to make food more expensive, something society could cope with in any number of ways (eat less meat and grow more grains, for example.)
"Cheap oil" is something of a misnomer because it suggests a context of merely price, which, while correct and important, tends to obscure the larger issue already mentioned by a number of posters in this thread, namely EROEI (Energy Returned On Energy Invested). No one says there aren't alternative sources of energy. But the fact remains that no other source of engery, conventional or alternative, has as high an EROEI as oil. Nothing. Therefore, after the oil industry's capability for production peaks, our entire global man-made energy system will have incrementally declining energy to work with. Given current technology, it is physically impossible to make up for the energy shortage of terminal oil production decline. Here's a good overview of why the various energy "alternatives" to oil won't be sufficient. The economic consequences of even a minor, permanent reduction in oil-producing capacity would be catastrophic. The economic woes of the 1970's oil shock resulted from only a 5% reduction in oil supply, and that was a temporary and artificial condition. The problem of food production is even more severe. A decline in oil production will mean not only more expensive food, but--at some point in the decline--less of it. Modern industrial agriculture depends on oil for both raw mechanical energy and chemical inputs. Sufficiently reduce the availability of oil, and you ultimately reduce the amount of food being produced. Peak oil could lead to global starvation on an historically unprecedented scale. quote: Originally posted by rsfarrell:Come down to Portland and I'll cook you up a little abiotic oil in the lab. It's no big deal. All it takes is energy. Or did you mean something different?
Abiotic oil.
From: Toronto | Registered: Oct 2002
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rsfarrell
rabble-rouser
Babbler # 7770
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posted 05 September 2005 03:20 PM
quote: Originally posted by Policywonk: [QB]My apologies. That was indeed not your quote. Still if you do not believe in Peak Oil, then presumably you believe that either demand will fall significantly (in which case there may be a peak in production but it will be irrelevant) because we will have found suitable alternatives to meet our energy needs (or suffered some catastrophic decline in population), or that easily exploited new oil fields will keep pace with demand indefinitely. These are essentially competing theories.
I don't believe either of those things. I think we will probably a continuation of the situation today -- oil becoming more expensive here, less expensive there. Rather than innovations driving price, price is likely to drive innovations, as things like cracking coal and extraction oil from shale, or manufacturing biodiesel, become more cost-competitive (conservation too). I also expect to see -- especially if oil stays expensive -- better extraction methods such as deeper sea drilling. This has been the case in the past. What peak oil theorists are arguing is that something will happen which has never happened before with any of the hundreds of non-renewable resources our economies have been using for centuries -- that seems to me to be a new theory, which could of course be correct, but needs proof. quote: You keep dismissing Peak Oil without actually seeming to say why (at least not recently in the thread), besides the contention that because non-renewable resources haven't run out yet that they won't in the future, or won't become too expensive energy wise to exploit (which I regard as wishful thinking, except in the obvious case of certain metals that we have found substitutes for, like copper, which we can also recycle), in addition to an aversion to those you think have apocalyptic visions they want to have proven right.
I don't have any adversion to apocalyptic visions when they are based in fact. My assessment of the abilitity of the earth to sustain human life in the billions a century from now would probably qualify in most circles as apocalyptic. The objection I have to peak oil is that I think its appeal is mostly emotional rather than rational. I do think the the economy will deal with oil scarity, because capitialist economics is basically a system of managing resource scarcity, and for all its cruelties and inefficiencies, that is one thing capitialism does very, very well. In the case of oil, there are so many easy ways to use less, and so many possible ways to make more (see shale link, above) that I really cannot see the kind of massive disruption or long-term energy shortage peak oil theorists are anticipating. I also can't get a good explaination of why we should anticipate "peak oil" without obvious mistakes like these(from d-wood's post): quote: No one says there aren't alternative sources of energy. But the fact remains that no other source of engery, conventional or alternative, has as high an EROEI as oil. Nothing. Therefore, after the oil industry's capability for production peaks, our entire global man-made energy system will have incrementally declining energy to work with.
Clearly the first statement doesn't imply the second statement. Supposing that burning oil is the easiest way to get a lot of energy (which is all "high EROEI" means); that doesn't mean energy production will decline. As long as the net energy output is positive (as it is for coal, nuclear, gas, wind, hydro, and some forms of solar) then to get more energy we simply have to build more facilities to collect or generate the energy; If your trucks carry 75% as much cargo as your competitors, that does not mean you are dooomed to transport less cargo than him, only that you need a larger fleet to do it. I took peak oil more seriously as a theory at the start of the thread; explanations like this one reinforce my doubts.
From: Portland, Oregon | Registered: Dec 2004
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maestro
rabble-rouser
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posted 06 September 2005 05:08 PM
What happens when the energy invested must increase to maintain levels of oil production, is that total oil consumption rises to meet the needs. Which brings the peak oil production closer.At the point where a barrel of oil is required to get a barrel of oil out of the ground, you have reached the end of oil, regardless of how much oil is left in the ground. There could be trillions of barrels of oil in the ground, yet they could be inaccessible for that reason. Energy used to retrieve oil could rise dramatically by the simple factor of losing a field which has a very low cost of production. Right now we're effectively using $2.00 Saudi sweet crude to find and retrieve $20.00 tar sands oil. When those Saudi oil fields roll over - which could be any day, and will be totally unexpected - the cost of finding a retrieving new oil will rise steeply. What it all means is that as we approach 'peak oil', the speed at which oil is used will increase, which will hasten the peak. A self-reinforcing process of which there is no doubt about the end - only the speed with which it will happen. As Matthew Simmons says, "...what’s dangerous is how many of the optimists really believe we won’t ever have any oil problems." Rose coloured glasses are wonderful, bathing the world in a warm glow, and allowing the wearer to temporarily ignore reality. Unfortunately, the effect is soon lost in the harsh light of reality. The cheapest and easiest energy to find is energy that isn't used. The most obvious, and cheapest, answer to future oil supply problems is to reduce use now.
From: Vancouver | Registered: Jan 2005
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Stephen Gordon
rabble-rouser
Babbler # 4600
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posted 06 September 2005 06:49 PM
quote: Originally posted by maestro:
What it all means is that as we approach 'peak oil', the speed at which oil is used will increase, which will hasten the peak.
That's awfully hard to believe, since oil prices will be rising steadily as well.
From: . | Registered: Oct 2003
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maestro
rabble-rouser
Babbler # 7842
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posted 07 September 2005 08:40 PM
My original quote: quote: Originally posted by maestro:What it all means is that as we approach 'peak oil', the speed at which oil is used will increase, which will hasten the peak.
Response from: quote: Originally posted by Stephen Gordon:
That's awfully hard to believe, since oil prices will be rising steadily as well.
Only if you believe there is some relationship between the price of oil and the availability. Fact is, over the last thirty years, the supply has remained more or less unchanged, while demand has skyrocketed, yet the price now is less than it was in the 80's. How is that possible in a supply and demand scenario? In any case, in the case of Saudi Arabia, the net benefit of retrieving a barrel of oil is pretty close to the whole barrel. Energy used to get that barrel is only a small fraction of the energy gained. In the oil sands, energy used is considerably higher, so the net benefit of retrieving one barrel of oil is less. As the energy used to retrieve the oil gets higher and higher, the net benefit of each barrel will decline. In order to maintain current supply levels, it will be necessary to use ever greater amounts of oil to get what's left. I believe you're saying that demand will drop off as the price rises, and that will take care of the problem. But for industrial economies, oil is as air is to humans. How much would you be willing to pay for the air you breathe? Of course it's a silly question, you would pay whatever was required or you'd die. For much of the industrial world, using less oil is not an option. The whole infrastructure is based on oil. It's not possible to reduce oil consumption without shutting down significant portions of the economy. Air travel is one. Somewhere around 9% of the fuel expended in the US is used by the airline industry. That industry seems almost impervious to oil prices. (It's also an interesting example of a uttlerly insane business model, but that's another story). Of course, the amount of fuel used for a specific flight doesn't change much when there are fewer passengers. So even if there is a certain amount of cutback in people's travel plans, that doesn't translate into a big drop in fuel consumption. In addition to which, some of those travel plans just change from flying to driving. In that case, there could even be a net increase of fuel use. There is a certain amount of discretionary oil consumption that could be reduced without serious affect on the economy, but the bulk of fuel consumption is required or the economy goes into recession. Every US president since Nixon has declared their intention of cutting back oil consumption in the US to basically what they can themselves produce. At the same time, their consumption of oil has increased dramatically, while domestic production peaked, and then started to decline. Obviously there is something else at work than the 'free-market', which operates on the fiction that all consumption is an option. What air is to you, oil is to capitalism. Without it, it dies. There can be no constraints, and no vountary reduction in consumption.
From: Vancouver | Registered: Jan 2005
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maestro
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posted 08 September 2005 03:56 AM
From Inflationdata.com. The chart is not necesary for the point: quote: The above chart shows why oil prices have not yet put as big a crimp in our budgets as it did back in 1980. Back then the monthly average price peaked at $38 per barrel (although the intraday prices spiked much higher). The common price quoted is for the all time high of Oil prices is the price that the highest barrel ever sold for. That price doesn't really have any effect on the price consumers paid. What really matters is the average price the refineries had to pay for the whole month. Adjusted for inflation in July 2005 dollars this $38 peak is the equivalent of paying $96.81 today. This number is constantly changing as we adjust for inflation at the current moment.
Since 1950, oil consumption is the US has increased from roughly 2.5B bbls/year to roughly 7.5B bbls/year. There was a brief levelling off of consumption at the beginning of the 70's, and a drop in consumption during the period of very high relative prices in the 80's. However, the drop in consumption was only from about 6.2B bbls/year in 1985 to 5.8 B bbls/year in 1990. So consumption relative to price seems to be only marginal at best. It takes a very sharp price spike to cause a small reduction in consumption. However, the main point is still that there will be diminishing returns in the oil patch. As those returns diminish, it will take ever greater amounts of energy to get even reduced amounts of oil. When it takes a barrel to get a barrel, peak oil is meaningless, oil is over. By 1995 consumption had returned to the earlier high, and has continued upward since.
From: Vancouver | Registered: Jan 2005
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CMOT Dibbler
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Babbler # 4117
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posted 08 September 2005 07:55 PM
quote: Originally posted by maestro:
No.
No? No what? No, I completely misinterpreted what you said, or No, smartcars and bicycles woin't help? Which is it? [ 08 September 2005: Message edited by: CMOT Dibbler ]
From: Just outside Fernie, British Columbia | Registered: May 2003
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Stephen Gordon
rabble-rouser
Babbler # 4600
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posted 08 September 2005 10:24 PM
quote: Originally posted by maestro:Fact is, over the last thirty years, the supply has remained more or less unchanged, while demand has skyrocketed, yet the price now is less than it was in the 80's. How is that possible in a supply and demand scenario?
Supply did change. Over the past 20 years or so, world oil production increased by about a third (source). Also during this time, proven reserves roughly doubled (source - the two big jumps in that graph are due to a major revision in Iraqi and Iranian reserves in 1987, and the most recent one reflected the decision to count the tar sands). quote:
In any case, in the case of Saudi Arabia, the net benefit of retrieving a barrel of oil is pretty close to the whole barrel. Energy used to get that barrel is only a small fraction of the energy gained. In the oil sands, energy used is considerably higher, so the net benefit of retrieving one barrel of oil is less.
Which is why tar sands oil is only produced when the price is high enough to cover the costs of production. An increase in price generates more supply - that sounds like conventional economics to me.
quote:
As the energy used to retrieve the oil gets higher and higher, the net benefit of each barrel will decline.
If the price stays the same and no new reserves are found, yes. If new (and profitable) reserves are found, then production can go on at the old prices. If not, prices will rise. No-one will produce oil indefinitely at a loss. quote:
In order to maintain current supply levels, it will be necessary to use ever greater amounts of oil to get what's left.
If you replace the word 'oil' by 'energy', then I'd agree.
quote:
I believe you're saying that demand will drop off as the price rises, and that will take care of the problem.
Not quite. The gradual increase in prices should generate a gradual transition out of oil to something else. But there's certainly no guarantee that that something else will be not be worse than what we have now. OTOH, I can't think of any better solution than to use the promise of becoming richer than God as an incentive to get engineers to do all they can to find an alternative before the oil runs out. quote:
But for industrial economies, oil is as air is to humans. How much would you be willing to pay for the air you breathe? Of course it's a silly question, you would pay whatever was required or you'd die. For much of the industrial world, using less oil is not an option. The whole infrastructure is based on oil. It's not possible to reduce oil consumption without shutting down significant portions of the economy. (snip) What air is to you, oil is to capitalism. Without it, it dies. There can be no constraints, and no vountary reduction in consumption.
Well, it's been possible to make some adjustments already. Over the 30 years after the 1973 oil shock, real oil prices roughly doubled (with a lot of sudden price swings, of course). During that time, the amount of oil used to produce a dollar of real GDP in the US fell by about half (source, source). [ 08 September 2005: Message edited by: Stephen Gordon ]
From: . | Registered: Oct 2003
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maestro
rabble-rouser
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posted 10 September 2005 05:04 AM
Actually your source for oil produced shows only about a 19% increase in production since 1980. (133.22 quadrillion BTU in 1980 to 159.16 quadrillion BTU 2003). As far as oil reserves doubling, bear in mind that when OPEC handed out supply quotas in the 80's, most OPEC countries doubles, and in some cases tripled their reserve estimates overnight. It is also very much in the interest of private oil companies to inflate their reserves. Witness the collapse of a good portion of Shell Oil reserves last year. Oil reserve figures are very suspect for that reason. And then there's the fact that the world is burning 4 barrels of oil for every new barrel found. New discoveries peaked in the 60's, and have fallen ever since. As far as some technology replacing oil, that may be possible. It hasn't happened yet, and we have no idea when - or if- it may happen in the future. We certainly can't plan on it. All the improvements to technology to date have been a result of cheap oil, and the industry which lives off it. In any case, unknown technology is not an argument, it is a statement of faith. AS far as the GDP figures for the US, they are essentially meaningless. Of course their economy has become more 'efficient', They don't make stuff anymore. That's why Detroit has only half the population it had in the 50's. That's why two of the big three automakers bonds are rated as junk. GDP figures by themselves don't mean much, but even less in the case of the US, because so much of their GDP is consumption. Major league baseball contributes to the GDP, but is solely consumption, it produces nothing. There are many such examples in the US economy. Roughly 2/3's of their economy is consumption. The only thing sustaining them now is the huge amount of money they owe, and have no ability - nor intention - of paying off. Because the US dollar is the world's reserve currency (a leftover from better times), a collapse would have catastrophic consequences around the world. The only real, big, industries left in the US are food production and military, both of which are heavily subsidized by the state. Which brings up a point which I've mentioned before, but bears repeating. The real dimension of the importance of oil to the US is defined by how much money they are spending to secure oil supply in the Middle East. If the leaders of that nation - almost all of whom are very familiar with worldwide oil production and consumption - felt for one minute that there was some alternative on the horizon, they wouldn't be spending the billions they are to secure that supply. They are putting their dollars (well, the taxpayers dollars) on oil as the number one source of energy for the future. They're willing to create world instability, and kill hundreds of thousands of people because they believe, number one, that peak oil is around the corner, and number two, there won't be an alternative anytime soon.
From: Vancouver | Registered: Jan 2005
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maestro
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posted 10 September 2005 05:16 AM
As another little sidelight, Jeff Rubin, chief economist at CIBC predicted oil at $100 a barrel in the next two years. (Finacial Post - Friday, Sept. 9/2005) That's not so surprising, but he went on to say that world oil demand is less price-sensitive thaan was earlier assumed, requiring larger than originally anticipated price increases to rein in future growth in demand. In other words, demand is less elastic than assumed. At the same time, spare capacity has fallen from roughly 10% of demand in 2002, to roughly 1% today. How far are we from inflexible demand exceeding supply?
From: Vancouver | Registered: Jan 2005
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rsfarrell
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posted 10 September 2005 11:50 PM
quote: Actually your source for oil produced shows only about a 19% increase in production since 1980. (133.22 quadrillion BTU in 1980 to 159.16 quadrillion BTU 2003).
I make it a general rule to ignore maestro, but I found it very unlikely that Stephan Gordan was mistaken and maestro was correct, and indeed, he's not: quote: Supply did change. Over the past 20 years or so, world oil production increased by about a third (source).
Last time I checked, 1980 was twenty-five years ago, not twenty. It is also perhaps important that it is 2005, not 2003. With the correct years of reference, a one-third increase is spot on. According to my source the increase from 1985 to 2004 (the last year in the table) was 33.25%. If you're going to nitpick someone's post, get it right. [ 11 September 2005: Message edited by: rsfarrell ]
From: Portland, Oregon | Registered: Dec 2004
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maestro
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posted 11 September 2005 05:20 PM
quote: With the correct years of reference, a one-third increase is spot on. According to my source the increase from 1985 to 2004 (the last year in the table) was 33.25%.
Leaving aside the fact that Stephen Gordon's 'years of reference' which included an 'or so' in the original post, rsfarrel has given us a good source that shows exactly what I was pointing out. That source shows the decrease in oil production from 1979 to 1985 was almost all in the Middle East ME total production in 1979 - 21.34 M/bbls/day World production in 1979 - 62.74 M/bbls/day ME production in 1985 - 10.33 M/bbls/day World production 1985 - 53.4 M/bbls/day ME production 2004 - 22.11 M/bbls/day rsfarrell's source also points out that mideast production was fully developed by the late 70's, so the decrease in production from 1979 to 1985 was voluntary, totally unrelated to the issue of depletion. The figures show that oil production outside of the Middle East increased by only about 1.66 M/bbls/day over the period from 1979 to 1985. The source also points out that discovery and development of oil in the rest of the world was 'a continuous process' and there was 'no overhang of reserves' at the beginning. Thus during that period, oil production outside the ME was brought online as fast as possible, and still the increase was only 1 2/3 M/bbls/day over a 6year period. At the time, Reagan was president of the US, and gave huge incentives to companies to explore in the US. They achieved a slight increase for a couple of years, which quickly tailed off. Upon reading these figures one can see why the optimists love to use 1985 as the 'correct' year. With ME oil production voluntarily cut in half, later production figures look good by comparison. But absent ME oil from the figures, and you get a very different picture. Oil production increase in the rest of the world from the ideal year of 1985 to 2004 amounts to less than 14%. Edited to add Thanks to rsfarrell for posting that source. [ 11 September 2005: Message edited by: maestro ]
From: Vancouver | Registered: Jan 2005
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rsfarrell
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posted 11 September 2005 08:03 PM
quote: GDP figures by themselves don't mean much, but even less in the case of the US, because so much of their GDP is consumption.
None of gross domestic product "is consumption." Are there any cogent arguments for peak oil out there, or do they all contain these sorts of mistakes?
From: Portland, Oregon | Registered: Dec 2004
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maestro
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posted 11 September 2005 09:37 PM
From a media release of UBS, quote: UBS is one of the world's leading financial firms. We are one of the world's leading wealth management businesses a global investment banking and securities firm a leading asset manager the market leader in Swiss retail and commercial banking.
http://tinyurl.com/bxxwr quote: Private consumption is by far the largest component of gross domestic product (GDP). It accounts for 61% of GDP, making it a key measure of economic performance in Switzerland.
I'll let rsfarrell duke it out with UBS.
From: Vancouver | Registered: Jan 2005
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DrConway
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posted 11 September 2005 11:18 PM
quote: Originally posted by rsfarrell: None of gross domestic product "is consumption." Are there any cogent arguments for peak oil out there, or do they all contain these sorts of mistakes?
GDP = C + I + G + X - M Please to be telling me where the "consumption" is missing from this equation which you can find in an Econ 101 text.
From: You shall not side with the great against the powerless. | Registered: May 2001
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rsfarrell
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posted 12 September 2005 03:31 AM
quote: In economics, gross domestic product (GDP) is a measure of the value of economic production of a particular territory in financial capital terms during a specified period. It is one of the measures of national income and output. . . . GDP is defined as the total value of final goods and services produced within a territory during a specified period.
http://en.wikipedia.org/wiki/Gross_domestic_productThis is really just common sense, folks. Gross Domestic Product is a measure of what is produced by a country, not what is consumed. Of course, one of the ways to estimate how much an economy produces is by how much they consume -- the consumed goods come from somewhere, after all. Nevertheless, how much you consume has no necessary relationship to how much you produce, and consuming more or less does not change how much you produce, and hence does not change your GDP.
From: Portland, Oregon | Registered: Dec 2004
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DrConway
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posted 12 September 2005 10:54 AM
The way the GDP is accounted for and measured, rsfarrell, means that in effect national production equals national consumption, plus the effects of an open economy.Absent exports and imports, consumer consumption plus fixed capital investment (which is a form of deferred consumption, in the sense that one buys - that is, consumes - equipment and then gets a return back on it) and government spending (which is yet another form of consumption, since a lot of it goes to wages and salaries plus current expenses; the fact that governments have historically used the cash basis of accounting is indicative of the impermanent nature of government spending, although there is that component of government spending which builds up the asset base of the country). Now, on the other side of the ledger we have wages and salaries, interest and rent, unincorporated business income, and so on. We also have from Fisher that GDP = PQ = MV, which reflects a view of GDP from prices and how much stuff was made, or the total amount of money that moves around. But the basic point is that when you do all the math, while it is true that the bias is to look at GDP as a reflection of national production (I do this myself, incidentally), it is equally valid to view GDP in the form of who gets what (the incomes approach) or who spends what (the expenditures approach), and those two views don't see GDP as production, they see it as income or consumption. [ 12 September 2005: Message edited by: DrConway ]
From: You shall not side with the great against the powerless. | Registered: May 2001
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rsfarrell
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posted 12 September 2005 05:40 PM
quote: But the basic point is that when you do all the math, while it is true that the bias is to look at GDP as a reflection of national production (I do this myself, incidentally), it is equally valid to view GDP in the form of who gets what (the incomes approach) or who spends what (the expenditures approach), and those two views don't see GDP as production, they see it as income or consumption.
The key difference is that consumption is being used to measure production, not as a contributor to GDP in and of itself. Consumption does not contribute to production; it is merely a convinient way of estimating how much was produced. Of course you can also work backwards and call it an estimate of consumption, because from estimates of production, borrowing, import and export you call calculate a number for what was consumed. That is entirely different from the way maestro was using the concepts of consumption and GDP: quote: GDP figures by themselves don't mean much, but even less in the case of the US, because so much of their GDP is consumption.Major league baseball contributes to the GDP, but is solely consumption, it produces nothing. There are many such examples in the US economy. Roughly 2/3's of their economy is consumption.
As you can see, he is implying, not that consumption and production are equal minus trade and borrowing, but rather that consuption is a seperate and undesirable type of production which in fact "produces nothing." I could take this apart piece by piece, and perhaps I will, but I'm curious, Dr. C, to hear what you have to say, because you clearly know something about economic theory. [ 12 September 2005: Message edited by: rsfarrell ]
From: Portland, Oregon | Registered: Dec 2004
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Stephen Gordon
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posted 12 September 2005 05:53 PM
Doc's quite right, but there's not much 'theory' there; they're simple accounting identities. Sort of like what is bought = what is sold, someone's revenue = some else's expenditures, etc.But you're also right - that quote from maestro makes no sense at all.
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