Big Plans
Via a reader, a newspaper ad from the 1970's. Note the "oil is running out" claim, which strangely abated when monetary policy changed in the early 80's. If you can't read the very bottom (click on it to enlarge) it says: "Boston Edison, Eastern Utilities Associates, New England Power Company, Public Service Company of New Hampshire, New England Gas and Electric Companies." A topical example of how times change...
posted by The Cunning Realist at Tuesday, June 03, 2008
10 Comments:
It is not impossible that once again the high price is simply a matter of speculation and inflation, however I think that there are also many reasons to belive that this price does really reflects supply and demand.
Even the IEA, which until now has always taken the view that oil will last forever, has changed its opinion.
So is that to say that the weak dollar, my choice for a large part of the cost at the pump problem, is actually a good thing because it points out the truthiness of natural resources not being infinite?
Will we say the same about potable water? Unpolluted air?
Speculation is a man made issue.
Does "man" have no responsibility?
"Oil is running out" is and has always been a true statement. Changes in monetary policy only let us fool ourselves, temporarily, into thinking oil is too cheap to worry about it. It is a vast, but finite, resource -- whereas population just keeps going up infinitely. That was true in the 1970s and still true today. The only question is, when do we hit the wall. Even assuming this ad copy was literally true, the Shaw was perfectly justified in wanting to plan for a day when his oil would run out. That day may have been 8-10 or more decades away, during the Shaw's reign, but it takes many decades to really get a handle on a safe nationwide nuclear program. Plus -- oil is easily exportable and in the 1970s it was commanding extraordinarily high prices!! Everyone leaps to nefarious conclusions all the time. Howcome nobody thought the Shaw... or today thinks the Mullahs... are shrewd businessmen for trying to generate cheap electricity at home while selling expensive oil on the world market... rather than burning their prime export into smoke just to plug in their own TVs and streetlights?!?!?
Doubtless speculation plays a part in today's high energy costs -- and the weak dollar much moreso -- but if you can believe Paul Krugman, and others like him... speculation drives up prices due to artificial scarcity and hoarding, whereas today nobody is hoarding oil. Stockpiles are at their average levels, but no more.
Producers appear to be going flat-out 100% production. Demand keeps increasing and chewing up any advances made in production levels. Therefore, due to the absence of hoarding, we can probably conclude that speculation is not the real basis of the high prices.
Therefore, we are probably nearing the limits of petroleum as a resource. Not, for the umpteenth time, like we are going to run out of oil tomorrow. No. The world will continue producing 89 Million Barrels a day, plus or minus, for many decades to come, depending how much faith you place in new extraction technology. And that's right about the level that demand sits today. The problem is that even under optimistic scenarios, we're unlikely to improve that 89 MBd very much, in the long term, ever again in the future, whereas demand will keep on growing. If we're lucky we might be producing 92 MBd in five years, but demand will likely be around 95 MBd. And that gap will just keep on widening and widening with time, assuming we don't drastically reduce world population with resource wars or the like.
Thus, according to the laws of supply and demand, the price will keep trending up sharply until we can implement a world-wide, non-petroleum energy source, along with all its massive new infrastructure. Which will probably take well upwards of 20 years, no matter what your favorite fuel source. In the meantime, only the rich will afford oil and gasoline, other people will likely turn to burning more coal for electricity, and thereby destroying the environment.
Not a pretty scenario. But something like it is basically inevitable. No matter how Panglossian your faith in some new technology Saving The Day, it will take decades to perfect it and implement it on a wide scale, and we are hitting the limits of petroleum extraction TODAY. Oil prices will certainly bump up and down a lot, but they'll never get back down to the $20/barrel "oil glut" conditions. It's just not gonna happen. Demand has gone up something like 15% during the 15 years since people feared an "oil glut", and the demand just ain't gonna back down -- except by going unfulfilled.
"Times change"? In the 1970s, the public utilities who paid for that ad wanted the *billions* of taxpayer dollars in tax credits & government "allowances" they saw available to corporations large enough to override the NIMBY voters. After the Reagan Revolution, those same utilities decided there were cheaper & much faster methods for turning public dollars into private profits, such as the whole Deregulation Lollapalooza that made Ken Lay his fortune. Now that Enron has become a four-letter word, the not-quite-so-public utilities are looking for another miracle "Throw money at us, or we turn off your lights" argument. Since "Boo! Saddam bin Laden is stealing "America's" rightful oil!" isn't working as well as was hoped, and letting Dubya's puppetmasters run his Great Iraqi Adventure has effectively made a conventional war to "reclaim" Iran's oilfields for "America" impossible, quite likely some part of their solution is going to involve ginning up the pro-nuclear propaganda... again. Unfortunately, the people in charge of both the utilities (ex. Halliburton) and the Oval Office (ex. R. Cheney, "ex"-Halliburton) are their own worst arguments AGAINST trusting them with the kind of multi-billion-dollar, multi-generation planning process required to run less-unsafe nuclear power generation. It's clear that neither corporatists with an until-the-end-of-this-financial-quarter nor politicians with an unti-after-the-latest-election timeline can be trusted with nuke-level decisions.
Well, you know, there's no quick fix to the oil situation. I know it's true, because Henry Paulson told me so.
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It's a shame we haven't been investing all of this Iraqi debacle money into alternative fuels research. Perhaps the McBush administration will challenge America to be oil independent (or walking on Mars) by 2016 (end of second term, and 103 years old)!
Quite worthwhile material, thank you for the post.
Goodness, there is really much worthwhile information above!
This won't succeed in reality, that is exactly what I think.
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