Friday, July 18, 2008

Peak Oil And Generic Economic Doom

Having grown up in the 70s, I have vague memories of hearing words like “inflation” and “energy crisis” whenever my parents watched boring grown-up shows like The News. That’s why I refuse to gripe about gas prices: because I don’t want to turn into my mother.

I will, however, gripe about peak oil, since they never said anything about it. Jackson over at the Art of the Possible wonders how high we can expect gas prices to rise, and was surprised to learn that his worst-case scenario is my best-case one:

I have suffered something of a failure of imagination. Now that I think about, a truly catastrophic increase in the price of oil is the only reasonable scenario to consider when one is trying to imagine a worst case scenario. I personally don’t regard that as the likely scenario, but it is a reasonable scenario, and certainly one that policy makers should consider. During the chat, when I offered what I felt was a fairly bad scenario, Jennifer saw it as a “best case scenario”:

(07/16 08:14 PM) Jennifer: My main concern regarding peak oil involves personal transportation. The majority of Americans live in situations where daily life is impossible without a form of cheap, fast individual transport enabling folks to travel dozens or even hundreds of miles in a day. And where personal transport is concerned, there’s no viable replacement on the horizon for the internal combustion ngine. Mass transit only works if a large number of people live and work in the same general area.

(07/16 08:15 PM) jackson: Jennifer, suppose for a moment gas goes up to something like $6 a gallon and stays there for 10 years. What changes do you think people will make?

(07/16 08:18 PM) Jennifer: If gas goes up to $6 a gallon there’d be a shift to more fuel-efficient cars (as we’re seeing already), and far-distant suburbs would become less desirable places to live (ditto), but frankly I think “gas reaching $6 and staying there” is a scenario so best-case as to be implausible. I suspect gas will continue getting more and more expensive. And government will continue making things worse; despite everything, there’s still plenty of snob-zoning laws forbidding high-density housing and so forth.

Supply declines aren’t the only way oil can hurt America’s economy. It’s only been a couple of years since I learned about the oil bourse: for nearly four decades, the US dollar’s been artificially propped up by being the only currency used to buy oil. If you’re Japan buying oil from Saudi Arabia, you don’t use yen or rials; you have to buy dollars first.

If you stand on a street corner and ask everyone who passes “Do you think it’s a good idea to have our currency’s stability dependent on a substance whose supply is largely controlled by religious fanatics who tend to hate our guts?” every last one of them will say “no.” Unless they work for the government.

26 Comments:

Blogger Caveman Lawyer said...

The thing most peak oil types ignore is the hidden cost of environmentalism. They figure the high sulphur coal veins will never be mined, they figure that nuke power will never be used, they figure that old wells will never be reopened.

The truth is as oil prices rise lots of fields that weren't profitable at $28 a barrel are opening back up as oil goes over $100 because those fields ARE profitable at that level. Other technologies such as tar sand and oil shale processing which were not profitable when a barrel was under $50 are now good money at current prices.

As soon as some old folks kick the bucket in the north east because they couldn't afford to heat their homes we'll be digging the high sulphur coal up and burning it to keep things going until we can build a few hundred nuke plants to take their place.

Environmentalism is simply a luxury we wont tolerate when things get tight. We wont go back to the stone age to satisfy the tree huggers and if they try to stop us they will start adorning lamp poles.

Sure all them high tech toys that are coming down the pipe will help reduce usage but unless the gubiment is going to start a Pinto buyback program you wont see them as a major part of the rolling fleet of the US any time soon. Normal folks just can't afford a new hybrid when the price of everything else is climbing faster than their salaries.

6:05 AM  
Anonymous smartass sob said...

...but frankly I think “gas reaching $6 and staying there” is a scenario so best-case as to be implausible. I suspect gas will continue getting more and more expensive.

Just a few days ago I was reading some comments on the blog of a microscope group to which I belong, and a woman in the UK mentioned that petrol cost the equivalent of about $9 where she was. That's almost unbelievable. I have no idea how high the price of gasoline may eventually go in this country, but I do know that the higher it goes, the more economic incentive there is to develop alternatives. Higher gas prices make other ideas more feasible and attractive.

I don't think there is any shortage of energy available to the US or even a shortage of fossil fuels. There are vast deposits of oil shale in both this country and in Canada, and there is plenty of coal that could be burned as is or converted to liquid fuel. There are gazillions of cubic feet of natural gas in the oceans, not too far off our shores (like in the Bermuda Islands area.) What there is a shortage of is cheap energy. Unfortunately, if hysterics like Al Gore have their way, we won't be allowed to use those sources - or if we are, we will be required to pay such heavy taxes that most people will be walking.

for nearly four decades, the US dollar’s been artificially propped up by being the only currency used to buy oil.

Yes. In fact, there are those who say one of main reasons we are in Iraq is because Saddam had planned to begin oil trading in some other currency such as Euros; that would have devastated the Dollar. The US has been in an enviable position for forty years or more - if we need more oil, we simply print some more money. Or rather we create it by means of fractional reserve banking and/or deficit spending. That is to say, we expand the money supply and make every pre-existing dollar worth less. But because we get to spend those new dollars first, we have always gotten full value for them when it comes to oil. The oil-producing countries get almost full value of those dollars, because they are second in line to spend them. They have always gone along with this "hot check" scam of ours in the past, but now they are beginning to wake up. They are beginning to realize that our IOUs are not much better than those of many other countries, so the price of oil keeps going up - just as the price of other commodities has increased dramatically.

Actually, if one adjusts for inflation, the price of a gallon of gasoline in the US has risen very little in forty years. I remember quite well that in the middle to late 1960's that gas was often only 25 cents a gallon where I live. And a pack of name brand cigarettes was 30 cents or so. Compare prices of both items today, and keep in mind that taxes were as large a proportion of the price of a pack smokes then as they are now roughly.

6:31 AM  
Anonymous smartass sob said...

Hm. I see Caveman Lawyer has stolen some of my thunder while I was composing. Oh well, we "old folks" are a bit slow. Besides - I'm still on my first cup of coffee this morning. ;-)

6:35 AM  
Anonymous smartass sob said...

BTW, it's off topic, but semi-regular commentator, Nostar had a birthday yesterday or today. He's getting ancient - fifty-four I believe. ;-)

8:13 AM  
Blogger Holly said...

I do agree that many of the peakers (I confess to being a peaker myself) have over looked the future devastation that lack of oil will cause.
Burn the coal or the wood or process the shale (if you still have money to) but you end up with foul air and few trees - is this the long term solution?
Think about Easter Island...

8:27 AM  
Anonymous smartass sob said...

... have over looked the future devastation that lack of oil will cause.
Burn the coal or the wood or process the shale (if you still have money to) but you end up with foul air and few trees...


Not necessarily. Coal can be liquified and cleaned before it is burned. Likewise the oil shale would also have to be cleaned before use. And trees? Well it would be nice if they could sufficiently or efficiently supply our energy needs, because they are a renewable resource. Plus they don't add any net amount of CO2 to the atmosphere. If anything, they help reduce and sequester CO2 as do all green plants. Trees, however, do not regrow quickly enough to keep pace with our energy demand. That's not to say that some sort of genetic manipulation couldn't be found to make them do so. If we end up with few trees in this world, it will be primarily because of people using the land for something else.

I think what will happen is that all forms of energy will become more expensive and especially so as demand from the developing world increases. We will find that maintaining our present living standard will become ever more expensive and difficult.

9:06 AM  
Anonymous smartass sob said...

We will find that maintaining our present living standard will become ever more expensive and difficult.

In fact, we may have to start producing and offering the rest of the world something besides funny money. Hell, it doesn't even make good toilette paper. ;-)

9:10 AM  
Blogger Caveman Lawyer said...

Holly, not everyone can afford to green up their lives. Hybrids are pricey, many of us rent and our landlords wont buy more expensive energy efficient appliances and windows. If you want to save the planet stop trying to buy politicians and start buying your poor neighbors all the green tech you can afford.

10:57 AM  
Blogger NoStar said...

The high price of oil is not a problem; it is the solution to the problem of over-using a scarce commodity that pollutes.

Call me a "glass is half full" kind of guy.

NS

11:28 AM  
Anonymous A Moose said...

The high price of oil is not a problem; it is the solution to the problem of over-using a scarce commodity that pollutes.

And under use of a not so scarce commodity that pollutes less, such as nuclear.

11:53 AM  
Blogger Jennifer Abel said...

You can't run cars on nuclear power. And transportation is going to be the worst aspect of peak oil, where America's concerned.

11:56 AM  
Anonymous A Moose said...

You can't run cars on nuclear power.

Obviously you haven't seen "Back to the Future" enough ;)

At this point you cannot, that is true, and it is impractical with our current knowledge of nuclear power. However, you can run cars partially or wholly on electricity, which can be made much more cheaply and cleaner by using nuke power.

I'm just sayin.

1:16 PM  
Anonymous smartass sob said...

...commodity that pollutes less, such as nuclear.

True, it does not pollute the air, but it does produce some nasty by-products that have to be stored indefinitely. If they are stored in a central location, they could be subject to terrorist attack or hijacking while in transit. Some especially devastating "dirty" explosions or bombs could be the result.


... electricity, which can be made much more cheaply and cleaner by using nuke power.

I question the actual cheapness of electricity poduced with nuclear power. If the companies which produce it are held fully liable for damages resulting from various "accidents" and are required to buy expensive liability insurance, how in-expensive would this electricity be then? Of course, it is more than likely that our lovely government would not hold such companies fully liable - they don't now, you know. But the risk is still there and represents a cost whether it's in the form of insurance premiums passed along to the consumer or un-insured risk born by those who might be damaged by "accidents."

1:46 PM  
Anonymous A Moose said...

True, it does not pollute the air, but it does produce some nasty by-products that have to be stored indefinitely.

Half life of mercury? How about lead? They're around forever too, just not radioactively. Much more is produced, tonnage wise, than nuclear waste.

If the companies which produce it are held fully liable for damages resulting from various "accidents" and are required to buy expensive liability insurance, how in-expensive would this electricity be then?

What if the WVA strip miner types had to chase down the entire river and clean it up, how much does coal cost? Same argument. In terms of volume nuke produces much less than other forms

3:50 PM  
Blogger NoStar said...

Just remember, before Henry Ford came along, people were complaining about how expensive horses were and how unsanitary it was having roads ankle deep in manure.

Would any body like to go back to that pollution problem. I like CO2 better than horse-shit.

4:11 PM  
Blogger Jennifer Abel said...

Tough call. CO2 is a greenhouse gas resulting in global warming, melting ice caps and unpleasant climate changes, whereas horseshit gets a job working for the government.

5:16 PM  
Blogger Caveman Lawyer said...

CO2 is a gas produced by every human action. Calling it a problem is a great excuse to regulate every aspect of human existence. When you are dealing with granting government power that Pol Pot or Stalin would have given their left testicles for I tend to get skeptical of the science that the proponents are quoting.

6:16 PM  
Anonymous smartass sob said...

whereas horseshit gets a job working for the government.

Damn it, Jen. You're so fast with a quip a guy doesn't stand a chance anymore of getting in a smartass remark. :-) Good one though!


I like CO2 better than horse-shit.

I was going to say that we seem to have plenty of both lately, particularly coming out of DC.

6:35 PM  
Anonymous smartass sob said...

When you are dealing with granting government power that Pol Pot or Stalin would have given their left testicles for I tend to get skeptical of the science that the proponents are quoting.

I'm right there with you on that one, CL.

6:37 PM  
Anonymous smartass sob said...

Half life of mercury? How about lead? They're around forever too, just not radioactively. Much more is produced, tonnage wise, than nuclear waste.

Yes, they're around forever - and they have been around forever, too, in the form of various ores. Burning coal releases them into the air, if measures aren't taken to prevent it. But nuclear power doesn't just change the form of pre-existing radioactive substances - it creates more of them. Besides, which would you rather have sitting on your kitchen table - a cup full of mercury or lead? - or a cup full of plutonium? Which would you rather have spread out over your front yard?

What if the WVA strip miner types had to chase down the entire river and clean it up, how much does coal cost?

Probably not as much as the damage done by a Chernobyl - or the insurance premiums for liability coverage.

7:26 PM  
Blogger Caveman Lawyer said...

Given a choice between mercury oxide (the state you find it in the waste products from coal) in my home or spent uranium I have to ask, in a sealed container or open? In a sealed container both would be about the same level of concern. In an open container I'd be equally worried. Both will kill you in nasty painful ways.

Lead oxide (the form you get from coal waste) isn't the best stuff in the world for you either but it is safer than the other two.

The thing about the leftovers from a nuke plant is they tend to be pretty much spent, radioactively speaking. If they were good and radioactive they would still be useful to the power plant or some other level of industry.

Mind you, I wouldn't want a couple pounds of it under my bed, but I wouldn't want your normal types of household waste below my bed either.

10:57 AM  
Blogger Jennifer Abel said...

I think the dangerousness scale is Lead < mercury < anything radioactive. Lead is only a danger if you ingest it. The same holds true for mercury, but you can ingest it via mere skin contact. And radioactive stuff needs only be upwind of you.

11:35 AM  
Blogger Caveman Lawyer said...

Its such a shame that the first big use of nuclear power was in a devastating weapon. I think that's the reason people have such a knee jerk reaction to all things nuclear. Did you know the technical term for MRI is nuclear magnetic resonance imaging? Yes, they dropped the nuclear because it made people squeamish about undergoing the procedure.

Think of it this way. The intensity of the radioactivity of a given substance is inversely proportional to the duration of the radioactivity. In short, if it's a powerful source, it doesnt last long. If it will last a long time it's no more dangerous than your cell phone. Most of the waste coming out of a nuclear plant is the long term slow emitting type while a small amount is the fast emitting short decay type. Most of that fast emitting type are recycled into various medical and industry materials.

As for your danger scale, if the lead and mercury were found in pure forms then yeah, they are pretty safe. But in oxide forms they are dangerous toxins that can be ingested in water or food and inhaled. They can cause all manner of horrible illness.

Again, it's a trade off. Tons of toxic mercury oxide, lead oxide and a dozen other dangerous things not to mention that CO2 that you think is screwing up the planet or a few hundred pounds of low intensity radioactive material that isn't much worse than standing in front of an old microwave.

3:15 PM  
Blogger Kevin Carson said...

The problem with nuclear is that private industry isn't willing to spend their own money on it. They'll be more than happy to build all the nuclear plants you want, of course, if the government assumes all the cost and risk for them and they can just reap the profits.

11:01 PM  
Blogger Caveman Lawyer said...

Of course that's how it will work out Kevin. These days industry privatizes profits and socializes risks and failures. That's the wonder of having a Congress for sale.

7:49 AM  
Blogger Windham_County said...

Horse manure is not that smelly! It's partially digested grass or hay. Even right out of the horses butt it's not greasy or smeary like the manure of carnivores and omnivores.

It would also provide jobs for people cleaning up the horse manure and delivering it to farms.

Returning to horses would be wonderful, because it would FORCE lower population density, because you'd need a lot of the land in hay, not welfare sucking "residents," whose mere metabolizing presence is supposedly "enriching" the productive people around them.

I'm definitely in favor of returning to the "bad old days" (LOL) and all that entails.

8:47 AM  

Post a Comment

Links to this post:

Create a Link

<< Home

FREE hit counter and Internet traffic statistics from freestats.com