<Oh(phelia), please not again... The Oil Drum Oil availability around the world>

34 comments on Late night open thread

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Rick on September 8, 2005 - 2:34pm Permalink | Subthread | Parent | Comments top
Halfin-
I agree entirely with your analysis of the numbers, and the uncertainty of the situation. You're basically taking a falsification approach--if you can poke holes in a theory, then it needs strengthening. But the fact that we can't confirm a problem does not mean that there isn't a problem. It just means our analysis is crude. And it won't get much better anytime soon.

We should then be taking a risk analysis approach. What are the chances of oil peaking? Over the long term, 100%. Over the short term, pick your number, but it's certainly a significant chance.

Then, what are the ramifications of oil peaking, plus continued demand, plus significant depletion rates? This could make for a few bad days.

There are only 4 possibilities: no peak/no preparation; no peak/prep; peak/prep; peak/no prep.

What happens if we prepare now, and oil then peaks? See the Hirsch report. Even under this "best case," we've got trouble.

What happens if we spend lots of money on alternative energy, and output never peaks, and we've got rivers of oil? I'd guess that the world becomes economically more efficient (fewer BTU's per dollar of GDP), new industries are developed, climate change is slowed, the world is less hostage to OPEC, trade imbalances are eased.

If we don't prepare, and didn't need to, we luck out, though the outcomes are less attractive to me than the preparation scenario. If we don't prepare, and do need to, we're toast. This is the world's current high-risk strategy: betting that we don't need to prepare.

If we prepare wisely, but didn't need to, I think we're much better off. If we prepare, and did need to, we're still in trouble. Preparing for peak oil is the only prudent course. The potential costs of inaction far outweigh the costs of unnecessary preparation.

I like your analyses, but I'm concerned about how people can take them. You are saying only (I think) that we can't prove there's an imminent peak. I'd agree, even though I believe it will peak soon. However, if people misuse such an argument, and cite it as evidence that there will not be a peak, it can lead us to the worst possible outcome.

The conservative choice is to begin preparing now.

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Dave Cohen on September 8, 2005 - 3:25pm Permalink | Subthread | Parent | Comments top
Re: "There are only 4 possibilities: no peak/no preparation; no peak/prep; peak/prep; peak/no prep"

Since the peak is inevitable but projections are uncertain, we must go with peak/X. The Hirsch report is important in this respect as you say.

Stuart Staniford and I went around a bit on this very point earlier this week. Part of his position rests on the assumption that humans are too short-sighted to do "squat" about it until the peak actually occurs and his modeling tries to show hope for us (based on depletion rates) after the peak occurs. I disagreed saying (partially) that although I agreed about the limitations of human nature (cf. New Orleans), we are screwed if the peak occurs and no preparations have been made. I stick with that position. Which is why, in my view, we need to acknowledge that this poorly dated peak production 1) will occur and 2) we need to do something about it starting now (or, better and impossibly, yesterday). Even if it's 2020 or later (CERA) -- which I doubt -- preparation now 15 years in advance would be about right.
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NC on September 8, 2005 - 7:32pm Permalink | Subthread | Parent | Comments top
Rick and Dave,

I agree with both of you completely.  Once the concept of peak oil has been brought to light and proved to be true (i.e. there is not an unlimited amount of oil) then we should start moving on weaning ourselves off of oil ASAP.

However, I am more and more convinced this will not happen because people are not approaching the problem rationally as you both highlight.  Lately I am seeing Step Back's position that there are way too many people using the economic system for there own gain to ever start changes before absolutely forced to.

People are doing immediate economic risk analysis.  How much money will I get to keep if I do A) vs if I do B).  This leads to people buying SUV's after the price of gas has gone up 50% in 6 months.  Just because the price is reduced on the SUV by $3000.  You could still buy a more fuel efficient car, that seats 5, for less money but people thought they were saving money because they didn't pay list for an Explorer.  No thought that since gas already went up by 50% it might just keep going up.  They always wanted an SUV and got one cheap.

By this rational doesn't this mean that when oil and NG get scarce that old innefficient technology will get really cheap, but lots of people will buy it because they are on sale?  They will rationalize that the money they save on purchase price will more than pay for increased fuel consumption.  In aggregate we will use more oil than ever until all the inventory of old stuff is gone.  There will be fire sales on everything inefficient, and if some manufacturers make profit on this stuff, they will keep making it.  

This violates all the economic theory that has been discussed at TOD over the last couple of weeks; Increased price always reduces demand.  I'm not convinced it can work fast enough to make any difference in consumption on a global scale.  Individual scale yes, global scale no, and that is the only thing important for peak oil.

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Rick on September 9, 2005 - 2:43pm Permalink | Subthread | Parent | Comments top
NC--
"People are doing immediate economic risk analysis." I agree. Saw a clear case in new housing estates outside of Tampa. The developers did careful research on pricing, and found out that a 15 minute longer commute required a price drop of $12-15,000 from memory. When I calculated it out, it seemed that the mortgage interest savings were almost exactly equal to the increased gasoline costs alone. People were not calculating in the true total cost of running a vehicle, or the addition of at least 125 annual hours (3 work-weeks) in the car.

Will old inefficient technology get really cheap? Absolutely. Used SUV's are moving into lower income brackets because they are appealing, and because they depreciate faster than cars.

As for violating economic theory, maybe not. Economist have a great concept called "stickiness." A sticky price is one that stays high, when rationale says it should drop faster. A lot of our infrastructure-related problems are sticky, and will not adapt quickly. Once an SUV is built, someone will probably drive it until the wheels fall off. And an old cheap SUV probably has lower costs of ownership and running than a new Prius, so they'll persist.

I too am very pessimistic about the ability to adapt quickly based on price increase alone.

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34 comments on Late night open thread

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