Thursday, January 29, 2009

"Deader Than Hell"

Texas Monthly (via Rod Dreher):

What has taken most of the steam out of the Pickens Plan, of course, is the simple fact that a lot of people have stopped caring. When Boone launched the Pickens Plan in July, crude oil was at $136 a barrel and rising. Now, with crude at or below $40 a barrel, the last thing the public is concerned about is alternative energy.

This is one of the reasons why wayward monetary policy is so destructive. Because it distorts natural market forces, it makes private sector planning and investment either difficult or dangerous. This is playing out like the 1970's when peak oil was a hot topic. Then the price of oil collapsed, and conservation and alternative energy were discredited. Lather, rinse, repeat.

Regular readers know that during the past few years I've taken a dim view of peak oil hysteria and the revolving media explanations for rising prices at the pump (North Sea weather, Nigeria unrest, fog at U.S. ports, etc). As oil has collapsed, the shrill -- rhymes with drill -- have gone silent. They'll be back when the terrible consequences of Bailout Nation and current monetary policy become obvious.

10 Comments:

Blogger Dave S. said...

North Sea weather, Nigeria unrest, fog at U.S. ports, etc

You forgot pirates! Arrrrr!

1/29/2009 1:47 PM  
Anonymous Goldhorder said...

Good post. I agree. There is always an explanation from the pundits for day to day stock market trends. Once in a blue moon they talk about trends. Nobody but "quacks" ever bring up fundamentals such as peter schiff. We became a short time preference society and now we are going to pay for it

1/29/2009 6:03 PM  
Anonymous Thomas Daulton said...

Excellent, excellent point about monetary policy -- but unfortunately we can't blame it _all_ on the government. Wasteful cars are a status symbol. Cars are like an addictive drug: the moment gas prices drop a few pennies, most of the sheeple instantly want to trade in their rice burners for the bulkiest, least-efficient rolling strip malls that they can find, in the name of "comfort", "roominess", "style".

http://www.credoaction.com/comics/2008/06/a_brief_history_of_gasoline_co.html

Something in the national ethic causes this behavior, and its source is not merely monetary policy. Something about "keeping up with the Joneses", something about the ancient cowboy riding the range, somehow makes us imagine that one's distant suburbian box home is some kind of castle and feudal domain, making otherwise smart people view the 40+ mile commute to your job as a "minor inconvenience". The same ethic shows up in our attitudes about energy conservation -- profligacy is a status symbol, efficiency means you're poor and destitute -- although again, you could easily show monetary policy playing a big part there too.

Another part of the blame goes to the American automakers, of course, for their fierce insistence on cleaving to the most wasteful and counterproductive strategies possible in exchange for limited short-term profit:

http://www.itulip.com/forums/showthread.php?p=65210

1/29/2009 7:49 PM  
Anonymous Thomas Daulton said...

P.S. Peak oil is gonna happen. It may not look like Kunstler's "Long Emergency", it may not happen in our time or our children's time, but it will happen. Does that make me shrill?

Lemme put it this way. A lot of Peak-Niks are actually saying the same thing that you are, TCR! With the Federal government manipulating monetary policy, plus the petroleum companies blatantly manipulating energy policy and foreign policy as well as the alleged 'Free Market' itself, we are simply not gonna see the price signals which theoretically would wean us off of fossil fuels and drive us into renewables. Not until it's too late to avoid massive problems.

Can anyone dispute my position without relying on pie-in-the-sky "soon we'll synthesize oil from turkey guts" techno daydreams? Does anyone here think that today's $40/barrel price is somehow more truthful, more representative of "market fundamentals", than the $140 price was a few months ago? Your average American driver certainly does, but I suspect the readers of this blog are of a higher mental caliber.

Many Peak-Oil-ers take a moderate position, which says, we don't know for sure that oil is running out, but all our information is completely ¡%°!¿!&¿*#-ed, the gages are all broken off, and the consequences of a big sharp shortfall in the near-to-medium-term future are much too grave for us to just blindly stumble into it. Therefore we have to lay the groundwork for a switch away from fossil fuels long before the crisis hits us in the head with an anvil.

Free-market theory only works with free and accurate consumer information, and the information is clearly and obviously being manipulated. As TCR shows in this post. This is a case where the alleged 'Free Market' is simply not going to do our advance planning for us and it'd be irresponsible to think otherwise.

1/29/2009 8:20 PM  
Blogger EDC said...

peak oil won't happen - peak credit beat it to the punch. Odds of peak oil is odds of inflation in the next 12 months.... NOT GOINGN TO HAPPEN.

innovation will lead us another way before peak oil ever gets footing..

boone lost credibility when he went all in the the OSU donations and lost it all...

he is nothing more than a salesman for his company's stock.

pickens plan with no financial bet behind it, would of been a believable plan. lies, nothing more...

1/30/2009 12:32 AM  
Anonymous Thomas Daulton said...

peak oil beat [peak credit] to the punch -- very true, and this will make the energy situation _seem_ easier. For a time. As TCR implies when discussing monetary policy. (small comfort when you're sitting in your freezing, over-mortgaged home.)

This is my exact point. Energy price signals have been blunted by non-energy factors, the economics has been convoluted and is opaque to the consumer, therefore the technology won't come on-line in time.

We could invent our way out of this dilemma with new technology, if it was a national priority. But it's not. Many Peak-Oilers are simply trying to shout and scream that the innovation you are taking for granted should be a national priority. Right now it isn't.

In a sense we're simply agreeing with you. But where is this awesome-yet-unspecified innovation going to actually come from, if it's not profitable due to warped economics?

It's a very simple equation: population increases exponentially, demand doesn't quite do the same because of efficiency advances but it follows fairly closely... but petroleum, and more importantly our infrastructure which pulls it out of the ground, is finite, and the infrastructure is deteriorating. Obama wants to spend $150 Billion on highway and utility infrastructure, (ASCE says we need $2 Trillion) but some experts estimate it will take US$6 Trillion, that's Trillion with a "T", to repair the world's oil infrastructure, most of which dates back to the 1970s. That is just to bring it back to design functionality, saying nothing about expanding it to keep up with the population.

Do you really think that's going to happen at the same time as we implement massive new technologies, what, with liquid hydrogen gas stations on every street corner in Anytown, USA? Implementing any new technology at the same ubiquity as the petroleum infrastructure -- gas stations everywhere, gas pipes leading to every house -- will certainly take an amount of time similar to what it took for petroleum. Very charitably more than a decade, more likely two+. And we've already discussed that the price signals are warped, so we won't be able to see a shortfall coming. We've already seen from various oil shocks and energy crises that productivity is near its limit, stored reserves evaporate quickly, and a shortfall of a few percent can double, triple, or septuple the price of energy. Ya wanna sit on your hands for 10-20 years after the first real price shock wakes us up and we begin inventing and implementing new technology?

Your argument, EDC, it DOES _N_O_T_ in fact, rest on the advancement of new technologies. What you are saying is, that now and forever, those technologies will be smoothly implemented in time to avoid massive societal dislocation. That's not a technological question, it's not a geological question, that's an economics and "Free Market" question, and we have shown that the economics are warped.

...aaaand incidentally, plenty of experts and knowledgeable people, including TCR I believe, expect gigantic inflation. Most likely this year, perhaps not, but massive inflation is the inevitable outcome of the Fed dumping 20 TIMES more liquidity (inflation-adjusted) into the markets than has ever been dumped before in the entire history of the country. It's another very simple equation.

1/30/2009 12:11 PM  
Anonymous Anonymous said...

Thomas Daulton, you're exactly right. The issue is, I think, how do we get Americans to reject the Ronald Reagan view of the world?

Imagine for a moment that Jimmy Carter was taken seriously -- and that Reagan didn't take the solar panels off the White House to demonstrate that Carter/Democrats were just a bunch of girlie men.

I think we have a shot, even without making peak oil arguments, that we want to invest in new energy technologies as a national security measure. We don't want to be at the mercy of the Saudis and the Russians and the friggin Norwegians ;-), so we want to move to alternatives.

Will they be as cheap as oil? Not in the short run. But from a marketing perspective, I'd take the "national security" angle rather than the "peak oil" or the "global warming" angle......

- Whammer

1/30/2009 1:22 PM  
Anonymous Anonymous said...

A US friend of mine who has spent a lifetime as an engineer involved in emissions contol policy commented during the recent price rise of oil. In effect the core of the comment was that one of the potential dangers of a big shift away from oil would be that a redcution of demand would drive the price of oil down (see the fall in price in the latter half of 2008) and that the US and industry in the US would then be effectively subsidizing the cost of oil to other economies around the world.

It was and is an interesting point. I agree that energy security is a reason to pursue strategies which can foster that outcome, just as various tax and emission control regulations can shift the demand towards more effecient vehicles.

It will take great political will, and a lot of staying on message to convince the average American of the need to pursue alternate energy strategies on the scale necessary to significantly alter the demand for oil. Unfortunately many of the alternate strategies have their own set of "issues" and the solutions are not as simple as many of the proponents would have us believe.

None of this is going to be easy, and formation of a comprehensive energy policy is going to be very contentious when Oil is relatively cheap, as it is at this moment. Even those who support a move away from Oil will be glad to fill their older car with cheap gas than trade it in on a $40,000 electric car that needs to be tethered to the grid, even though they support the need to consider a move in that direction.

There aren't a lot of easy answers.

Toban

1/30/2009 1:51 PM  
Anonymous Anonymous said...

Toban, you're definitely right that there aren't a lot of easy answers. To echo what Thomas Daulton said above, that is precisely why we need govt. involvement. Leaving it to "the market" to figure it out exposes us all to the risk of extreme disruption.

Will the govt. always be "wise" in this case? No. Will the govt. always be "efficient" in the way our tax money gets spent? No.

That's OK.

- Whammer

1/30/2009 4:29 PM  
Anonymous Thomas Daulton said...

Toban and Whammer, we read each other perfectly, thanks for the comments. There aren't any easy answers, which is why we need leadership, and also why that leadership will necessarily be imperfect. But
"following the market" is not the leadership we need.

Unfortunately, I remember the last time we Americans talked about energy as a national security issue. It was around February of 2002. The response from 60% of the country was, "Yeah, so that's another reason why the invasion of Iraq is such a clever idea!" Feh. Sometimes my countrymen make me throw up my hands. Or just plain throw up.

A few months ago, TCR posted an uncharacteristic but fascinating meditation on whether consumerism erodes moral values. I think here is a prime example. There's something to be said for self-sufficiency, but consumerism as a philosophy says the opposite. If we just blithely assume we can buy all our energy on the world market, smoothly without any problems right up until the day we don't like the price, then it saps the innovation that everyone says we need in order to change the situation: why bother to change our habits? Hence, we need leadership. In advance of the problems.

But just try saying that to a globalized Free Marketeer. They'll call you a communist protectionist holdout from the 1920s.

(Having said that, of course, now some Palin dittohead will log on and tell us "Yeah, self-sufficiency!! That's why we need to drill Alaska until it resembles Swiss cheese!" I trust most readers of this blog are smart enough to know that's not where I'm going with this discussion. That's another blind strategy, a dead-end for different reasons, but still a dead-end.)

1/31/2009 1:50 AM  

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