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64 comments on We're In Deep Water

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step back on October 7, 2005 - 12:58pm Permalink | Subthread | Parent | Comments top
The bigger point is that we humans continue to invest our scarce and limited economic resources into building short term solutions that have no future. This si the madness of the Adam Smith religion. There is a short term "profit" for those who build the Mad Max machinery. The cost of this suicidal march toward the cliff is dumped on the larger herd (i.e. global warming, bypassed long term solutions).
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BalticMan on October 7, 2005 - 2:09pm Permalink | Subthread | Parent | Comments top
In reply to step back's comment...

Morgan Stanley's Global Economic Forum has an interesting summary of "optimists vs. pessimists" by Robert Alan Feldman in the Oct. 7 issue (http://www.morganstanley.com/GEFdata/digests/latest-digest.html) (if you view this after the next issue is posted, you'll have to click on Archive and click on Oct. 7).

This is a good example of Peak Oil reality starting to filter into the invisible-hand-challenged economist community. Only a trickle, not yet a reliable stream, but hey, it's a start.

And further down, you can find a piece by Stephen Jen on Asian central banks and gold. Peak Oil and gold mentioned on the same day? I think that's a first for Morgan Stanley...

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NC on October 7, 2005 - 2:31pm Permalink | Subthread | Parent | Comments top
Great link BalticMan.

That is a great assessment of pessimistic and optimistic viewpoints and their outcomes.  I noticed two things from the article.  1) the pessimistic view point is more likely correct for more of the concern areas.  2) there should be coordinated investment into alternatives because the only downside (if the peak doesn't arrive soon) is some loss of efficiency that could be absorbed in a growing economy.  The article tends to summarize the many discussions here on TOD, with a conclusion that we should be encouraging heavily investment into alternatives (not just fossil fuels) at a national level.

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step back on October 7, 2005 - 2:42pm Permalink | Subthread | Parent | Comments top
Wasn't Morgan Stanley the one who predicted $105/bbl?

For readers who link into the above article, the Feldman story is about halfway down, below the long taled story about how Greenspan swept his dung under the carpet. Feldman states at one of his headings that "Energy is energy is energy".

I'm sure I won't be the first to point our how wrong-headed that econo-babble is. Trouble is that too many economists never studied chemistry and physics and other hard sciences. Economics is mostly a fantasy math game that selectively ignores real world observations.

http://www.amosweb.com/pdg/

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Glenn on October 7, 2005 - 3:21pm Permalink | Subthread | Parent | Comments top
Goldman Sachs actually.
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BalticMan on October 7, 2005 - 4:41pm Permalink | Subthread | Parent | Comments top
I agree, step back, much of what passes as academic economics sounds like babble to me. But the Morgan Stanley piece (and other pieces like it that have only recently begun to appear) suggest to me that maybe, just maybe, the "mainstream" financial community is starting to acknowledge just how difficult our energy position is. As Dave's original post shows (yes, I wanted to tie back into the thread somehow!), deepwater is going to be less productive than many now expect. If the "mainstream" financial community is now taking a baby step toward investing in the energy complex (and not just speculating on an oil price spike), that might become important.

55 more baby steps, and maybe we'll be on our way to some of the solutions that are being discussed on this thread and others. Waking up Joe Sixpack to peak oil is important, but getting the finance people to see the oil industry as something other than just another severely-cyclical commodity industry is also a big part of the solution, too.

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step back on October 7, 2005 - 5:30pm Permalink | Subthread | Parent | Comments top
Econo-talk is not just "babble" (refering to Biblical origin of word from the Towers of Babble), it is psycho-babble; meaning that the words used by the high priests of economics are mesmerizing and pull one into a hypnotic state where one loses all sense of what might be fair or out of balance.

Take the word "commodity" (please).

Oil is considered a "commodity".

What does that mean?

from Webster online: http://www.m-w.com/cgi-bin/dictionary?book=Dictionary&va=commodity
Definition number "c": a mass-produced unspecialized product <commodity chemicals> <commodity memory chips>

That does not give the full picture though. Pork bellies are commodities. There is an unlimited amount of "pork" that can be created in this country. To equate "oil" with "pork" and with "commodities" in general creates a false hypnotic perception.

Readers of TOD know that "pork" does not make the world go round in the same way that "oil" makes it spin. Airplanes do not fly on pork power. A generic commodity trader would not know that. One commodity is basically like the next. That is what "commodity" means. It's fungible. It's interchangeable. One is like the next. Makes no difference which slice of the lot the buyer gets. It's all indistinguishable.

That's how the financial community "thinks".

So, for us to convince "them" that crude oil is a special case, would take a lot of hard hard work.

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Rajiv on October 7, 2005 - 11:10pm Permalink | Subthread | Parent | Comments top
The main problem with economics is the time value of money. It emphasizes current consumption over long term survival. Long term survival of the human species and in fact, the survival of the planet gets discounted away. the higher the interest rate, the more short term the planning horizon. Thus no thought is given as to what results current actions will have in the long term. The assumption, no, I should say the core of economic modeling is that status quo will continue for the term of the planning horizon) thus for the long term, we are always doing "too little, a little bit too late."
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step back on October 8, 2005 - 2:08pm Permalink | Subthread | Parent | Comments top
A fundamental principle of the Adam Smith religion is that each person behaves according to his/her own selfish interests. For simplicity, let us assume each person starts working at age 25 (post college) and lives to age 75.

Death is, of course, the personal event horizon. So as the individual makes financial decisions throughout his/her work life, the time left for selfishly reaping the rewards (profits) of investment is 50 years minus years_worked-already.

Therfore, as one gets older, and presumably wiser and more productive, and also more senior in society's decison making hierarchy; the "vision" of future time gets shorter and shorter.

Is it any wonder that Alan Greenspan does not give too many wise owl hoots about what will happen to America because of the huge debt acquired. It's not going to be "his" problem.

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RayJ on October 8, 2005 - 3:42pm Permalink | Subthread | Parent | Comments top
Rajiv,
The problem (if indeed it is a problem) is not with economics but with how people behave and how easy it is to model.  As you say, the higher the interest rate, the shorter the planning horizon. The fact that people living in an economy with hyper-inflation find it difficult to plan for their retirement is not because they are short-sighted but because it's hard figure out what is going to happen in the next year, let alone 20 years out.

I agree that economic models do not do a good job of modeling the non-linearities and discontinuities that can happen over the long term.  But that is because it is hard to do.  It's like blaming physics and engineering for us not having fusion power; it's just hard.

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Gloomy on October 8, 2005 - 4:38pm Permalink | Subthread | Parent | Comments top
I both agree and disagree. Modeling human behavior can be hard yes. It requires making huge set of assumptions which may or may not be valid for a certain economic structure.

But I strongly disagree with the approach taken by economists. The mainstream of this pseudoscience is making their assumptions, building their models and is trying to fit the reality to their models. Worse of all - if their models fit some particular situation or event they take this as a proof that the model works. But if it does not fit - then they do not challenge their assumptions but attribute it to the profoundly meaningless word "externalities". When everything goes OK those externalities can easily be ignored... but if something really begins to mess up the real world slowly begins to abandon the economist fantasy world. Eventually if we experience an economic implosion, everything will become an externality.

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tom deplume on October 8, 2005 - 9:11am Permalink | Subthread | Parent | Comments top
Fisher-Tropsch and thermal depolymerisation processes can convert pigs and their manure into aviation fuel. It would be more efficient to convert corn stover to fuel but any carbohydrate source can be used.
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RayJ on October 7, 2005 - 5:57pm Permalink | Subthread | Parent | Comments top
Step Back,
I wouldn't be so hard on economics and economists.  Most economists are doing the best they can and I believe they have some good models and concepts about how scarce resources get allocated.  The key thing to realise is that their models are necessarily incomplete and in many cases even wrong.  Unfortunately, we do not have anything better until the selfsame economists improve them.  Many who believe they have better models have paid the price by following disastrous policies (e.g. resulting in hyper-inflation).

BTW, Amos Web seems to be a great site.

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step back on October 7, 2005 - 7:35pm Permalink | Subthread | Parent | Comments top
Economists are too quick to jump to conclusions. Their judgments are therefore highly suspect.

Let's take the Amos-Web site as an example.
More specifically, this article:
http://www.amosweb.com/cgi-bin/pdg.pl?fcd=dsp&term=Conserving+Our+NATURAL+RESOURCES

The author writes:

To perpetuate our lives, we must (let me reiterate MUST) make use of our planet's natural resources. We MUST cut down trees, bust the sod with tractors, suck oil from the ground, bull-doze an occasional mountain, slaughter some cows, and yes, use quagliminium. Our natural environment can not remain in it's pristine, natural state as long as we're on the planet.

"Must" means there is no alternative. How does this economist justify using the word "must"? He doesn't. He assumes it to be a self-evident truth.

Economists are hypnotized by their own self-aggrandizement. They claim they have a science. Far from it.

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RayJ on October 7, 2005 - 8:04pm Permalink | Subthread | Parent | Comments top
I would agree that some economists sometimes say things or make assumptions that may not withstand scrutiny.  I must say though, that I do agree with the author you quote. The statement does not exclude the sustainable use of resources.  We MUST make use of natural resources because I do not like the alternatives; a much lower standard of living imposed by force or a die-off.   Even if one can devise an economy that can sustain 6-10 billion people using renewable resources only, I do not believe we can get there from here without continuing to consume non-renewable resources.

Yes, economics is not as hard a science as physics for example.  However, if we convince ourselves that economics is all wrong, we open the door for creationist-type faith-based theories which, I can assure you, are out there in the fringes.

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isaiah on October 7, 2005 - 6:03pm Permalink | Subthread | Parent | Comments top
thanks for the interesting link, BalticMan.

some scary/dismal quotes:

"Few candidates in US elections dare to propose higher gasoline taxes. The unfortunate conclusion is that changes in energy policy will require a crisis large enough to give politicians cover. Even 9/11 in the US did not have this result. Advantage pessimists."

it seems they feel a immense crisis will be necessary to have significant energy policy changes.  similar to what most PO'ers believe.

"First, either the optimists are right or wrong. Second, either the world invests in technology/exploration, or it does not. So there are four combinations. (1) Optimists right/Few investments:  Civilization is safe, with little waste. (2) Optimists right/Big investments:  Civilization is safe, but has wasted some resources. (3) Optimists wrong/Few investments:  Civilization is NOT safe. (4) Optimists wrong/Big investments:  Civilization safe, but not as rich as if oil were unlimited. For a policymaker, it is better to spur the investments, because the worst possible outcome is a bit of waste. This waste can likely be absorbed by economic growth."

it's rather disturbing for Morgan Stanley to entertain the notion that Civilization might NOT be safe.  and what does that mean anyway?  even a depression doesn't imply civilization will self-destruct.  maybe what they mean is there will be great turmoil and destruction, as has always happened in history.  welcome to reality.

p.s. the post on gold was quite informative.  i didn't realize that gold would have to be $930/ounce to cancel inflation from 1983-present.  but that makes sense, since it didn't appreciate much during those years.  so it's more of a currency risk neutralizer than an inflation hedge.  

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LJR on October 7, 2005 - 2:22pm Permalink | Subthread | Parent | Comments top
Unfortunately the responses are systemic rather than individual.  The accountants conclude that the rig is worth the money in terms of ROI therefor the rig gets financed and built.  No committee of powerful wise men intervenes because that committee doesn't exist.  Human systems are rarely adaptive by design.

Railing against these systems is about as effective as railing against the weather, more's the pity.

There are many aspects to the current predicament.  I went to grade school in the fifties and I remember the teachers telling us that within thirty years nuclear energy would be so cheap there would be no need for meters.  I believe a whole generation was basically brainwashed into believing science and technology would produce a timely substitute for hydrocarbons.

Of course that didn't happen.  The problem is that nuclear energy and then fusion were our plans B and C.  We didn't think it necessary to have a plan D.

So, long ago we bet on the future of two energy technologies that haven't panned out.  Nuclear could still be a viable option if the pebble bed reactors are as safe as I've read.  I'm no expert on that so consider it hearsay.

At this point I think we should pour more money into nuclear vs: oil if that choice can be made.  I believe the chances of developing a long-lived, high capacity, quickly charged battery in the next few years are good.  Whether those batteries can be manufactured economically is a big unknown.  If we can win that bet then nuclear becomes immensely attractive.

A nasty energy shock will focus the country's attention on the need for a reliable supplies.  The destruction of Gulf production may be a blessing in disguise if we assume that the wells themselves are still intact.  But only if the system can respond appropriately.  That's a big if.

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step back on October 7, 2005 - 3:02pm Permalink | Subthread | Parent | Comments top
I for one, do not propose we should "rail" to the existing private sector. I totally agree with you that such tactics are like yelling at the wind. The private sector moves only in response to the promise of short-term, astronomical Returns on Investment (High-ROI in the next 5 years or less).

No. What we need is for our political institutions (aka Congress) to wake up and smell the edge of the ledge.

So far, only Republican Congressman Bartlett is "getting it". Kudos to him. The rest of the politicians (i.e. ex-Pres Clinton included) do not want to risk their behinds on a non-voting issue. The public does not yet see the energy crisis as a "voting issue". We need to make it a "voting issue".

Link to Clinton / Ted Turner discussion:
http://www.dlc.org/print.cfm?contentid=253507

Discussion of "voting issues":
http://oursland.net/archives/2005/05/john_kerry_puts.html#comments

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mikegordon on October 7, 2005 - 4:02pm Permalink | Subthread | Parent | Comments top
The real nature is this, there is an extremely viable alternative to Fossil Fuels, and it's Natural and Organic and can be produced in any needed quantity.

As for timeframe, this alternative could be implemented and actually bring product to market in less than 2 years. Even less if the existing refineries can be modified to use this new feedstock. And all the while reducing pollution by over 80% and its 100% Domestically Produced. And one more thing, with proper usage this resource could last forever, can ANY other natural energy resource besides Solar and Wind say that?

Thing is, none of this matters until the public and the greedy corporations understand the true nature of this problem and work together to implement a TRUE solution. Until then, I hope everyone enjoys breathing toxic pollution.

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step back on October 7, 2005 - 7:21pm Permalink | Subthread | Parent | Comments top
" ... and can be produced in any needed quantity."

This cannot be right. Our planet Earth is a sphere of finite volume and finite surface area (V= 4/3 * pi * R^3 ). It is not rational to assert that something can be produced in "any" quantity. On Energy Bulletin today, Saudi's are admitting oil will peak. They are saying year 2015 and 95 mbd per day globally.

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64 comments on We're In Deep Water

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