Also, IMO, we are looking at a smaller group of consumers paying a higher unit price for a smaller volume of oil--as forced energy conservation moves up the food chain.

Good article BTW. I don't have much time today. I'm on the second leg of New York and Chicago speaking gigs this week. I presented our export work to a large investment firm in NYC on Tuesday, and I just sent them the link to this article.

I have suggested Phase One & Phase Two export declines. In Phase One, the cash flow from export sales increases--even as export volumes fall--because oil prices are going up faster than volume declines. In Phase Two, rising oil prices can't fully offset the decline in export volumes.

BTW, would NIgeria be a good example of what happens when an exporter tries to maximize exports, without meeting domestic demand?

I think that Nigeria is a great example of two complementary feedback loops at work. Right now, due to graft and ethnic conflict, Nigerian leaders are essentially stripping the country of their oil wealth to enrich themselves, while their people stay miserably poor. This is driving the militant attacks on oil infrastructure, which is keeping a significant quantity of oil of the global export market. ELM isn't a huge factor in Nigeria compared to other like situated exporters. However, IF the country got its at together, distributed the oil wealth to the people in an appropriate manner, resolved the ethnic disputes, etc., then that geopolitical disruption *could* be largely solved. The problem here is that it would essentially be replaced by a new set of geopolitical feedback loops--first ELM as rising median wealth leads to rising domestic consumption, and probably also by a far-sighted desire to conserve resources for when they will be more valuable. The net effect will be that the oil freed up from militia attacks still won't make it to the world export market, at least not over the long haul. More on this notion of complementary feedback loops in a later post...

Exactly the interaction of the feedback loops shows that they almost always work to prevent things from getting better.

A simple example a person drives a Hummer but makes the decision that if Gasoline costs more than five dollars a gallon they will switch to a more economical car. Several people decide that as gasoline goes over four dollars a gallon the will switch to a more economical car. Since the second group acts first it delays the time when the first person driving a Hummer engages in conservation simply because he had a higher pain threshold.

Somehow these sorts of contradictions seem to be related to a sort of maximum power principal in the sense that the underlying problem is that all parties wish to maximize their lifestyles almost always by increasing consumption or delaying a decrease. No one wants to be the first to change and everyone is willing to take advantage of the first people to change. A re-balancing or shift in the consumption invariably does not change the overall consumption since the entire system remains at maximum power. The export land vs king model is a perfect example.

As long as we fail to recognize that without serious intervention the natural result is that the collective system operates at maximum power we will be unable to really make changes.

http://en.wikipedia.org/wiki/Energetics

In my opinion what we call wealth and lifestyles or a good life almost always is directly related to a energy quality measure of some form. As long as we desire energy quality transformations we are stuck
in a maximum power rut if you will.

Its interesting that some of our greatest works music, books and computers are objects that break this direct relationship between energy and desirability. Art in all its forms seems to be the only way out.
However we often debase arts such as a beautiful dress design by coupling it with mass production which links the beauty of art with the material needs of a mass produced quality transformation.

This shows that mass production itself is far more dangerous then we realize since it devalues a work of art and causes it to be translated into a replicative maximum power problem.

Certainly at some levels it makes sense to mass produce common objects but our society has no concept of the need to balance the ability of art to satiate our desire for a good life with its ability if kept within reason to limit and treasure the material manifestations of art by not mass producing it.

A great example is fine china tableware which has lost all value via mass production. It used to be hand painted and crafted art. Not anymore.

A great example is fine china tableware which has lost all value via mass production. It used to be hand painted and crafted art.

No it hasn't "lost all value". It may have become a lot lower in price but it remains the same fine china tableware with the same (non-monetary) value. As in knowing the price of everything and the value of nothing!

Very much the same fallacy as Simmons points out about oil - that because its price is only £1xx it fails to be properly valued as more like the $2xxx + that it is really worth, too valuable for mere burning and transport.

I disagree in the past people handed their fine china down from one generation to the next not only did it have monetary value but it picked up tremendous sentimental value. Or it was presented as a wedding gift and this invoked feelings every time it was used etc.

It was not a price issue although price/cost and limited availability ensured that china could be used as this sort of gift.

Mass production destroys these concepts. Look at the McMansion craze in housing. Large homes used to be custom homes built for people with real wealth and generally speaking they where works of art ( Often ugly but )

The McMansion destroyed this concept and created the middle class mansion instead that probably will decay rapidly because of its cheap construction.

So all value has been lost.

Another thing one reason that ELP (Economize Localize Produce) is so attractive is that local production naturally ensures that what is produced is resource constrained at some level. This constraint is really about getting back to making works of art not mass produced garbage. And I'm not talking about the physical serviceability of mass produced work such such a china vs hand made china. I'm talking about this concept of treasuring and in a sense respecting the giving a long life to something every time we change the value of the raw materials by applying energy and creative thinking.

Every time a object no matter how mundane is made by hand you have the chance for human inspiration to create something new and different. Mass production destroys this. What we treasure is this embodiment of human thought and skill in a object and with that its treasured art and more often a unique capturing of a thought whim or even more important concept or breakthrough.

Localization and by default constrained and limited production brings this back.

I agree there is some validity in your reply. But it is a largely subjective thing and depends on the person. And meanwhile the teacups are still teacups that hold the same amount of tea just as solidly.

A person such as myself recognises a thing for its beauty and usefulness. I don't care how cheap it was or how mass-produced.

I'd like to cite an example. I have 2 Bechstein model 5 (= model 10) pianos. The market price of these is relatively low because ignorant people (= the vast majority) assume that non-overstrung pianos are inferior. But I myself just recognised outstanding, brilliantly-designed pianos for what they were - it is so rare to find pianos that have good uniform tone etc., let alone with a smaller size too. Only later via the internet did I learn that expert others with the required discernment of quality recognise these as some of the best pianos ever made (and in my experience there are far more Bechstein 5s/10s than any other model of any make, a reflection of that fact). Personally I don't give a fig that the ignorant assume these to be less valuable, more fool them. By the way, quality pianos have been in great part mass-produced for the past 150 years, big deal. The higher the quality the masser the production (because huge research and expertise is involved)!

Good observations. I've thought about a related concept in regards to digital reproduction of art.

In the recent past the (audio) quality of recorded music would decline over time, and there was little that could be done about it. Now with digital storage, it can be copied and what's more, distributed around the world in an identical state. Does it lose value through this, or gain it?

As a musician, I'm socially dissuaded from investing all my time in songwriting/performing, because so much music is available due to modern distribution channels (internet/tv music channels/radio). I think my inclination to write/perform comes - to a degree - from the wish to acquire social capital. But since there's now a global market to compete with, I'm forced more into the (more detrimental) aquisition of financial capital instead.

I have often thought how much difference it would make to social outcomes of musicians if music could not be recorded or amplified. Performance would be limited to small groups. The same applies to many art forms.

To some extent this issue is not a matter of recording but access to distribution channels. If you think about it the real problem is a performing art needs an audience. The reason I bring this up is obviously there is a imbalance in access to customers between the small time musician that the industry. Internet radio is beginning to close this gap. But the key point is that every time you don't perform we lose the chance for a famous song to be created. So the main point of loosing the chance for human inspiration stands. Only when people are actively involved in a process esp the arts can new art be created. The recording industry destroys a lot of this. Look at Rap and indeed most of our new musical forms they where all developed by street musicians or bar bands.

I've noticed in bars the tendency to have DJ's instead of live music for example.

Back to the interesting problem of high fidelity recording. All I can do is compare it to a computer program programs can be perfectly copied but we have a vibrant open source community so perfect copying works to our advantage. The big difference I see is the with programs we can choose to send the source which allows people to apply their own inspiration to a original work. I'd say that the problem with music in a world where it can be perfectly copied is that you lack a real format for sending music out in a form that allows it to be edited and modified by others.

So what probably needs to happen is that music should actually be send in the form of a electronic notes. Voice removed editable tracks etc. The voice format itself probably needs some sort of word recognition boundary so that its also editable. You can see that I'm suggesting that the problem is music is not being distributed in a form that allows others to perform the work and add their own inspiration. Karaoke is a small example of this and it keeps older songs alive and well.

In general this problem is true for all of the performing arts to overcome the problems of digital reproduction and its destruction of human inspiration they need to follow the open source model and release the ability to perform and edit the work to create new works. Thus the underlying problem is not high fidelity reproduction but having closed the doors to allow works to be adapted.

I see what you're getting at, but don't really equate the creation/performance of music with software development (I do both). Maybe it's a personal thing, and although both are creative, I consider software development a logical, rationalised and designed process where there is little room for emotion, whereas music (for me anyway) is an emotional outpouring during which if the rational mind intervenes too much, the music suffers.

I have thought about open source music before though, and it seems like a good idea, although most musicians I've met are quite precious about ownership issues - perhaps that's because they tend to earn less than software developers?

I still think I'd prefer a less globalised music market, on the other hand I'm certainly glad to have had access to such an array of choice and influence... so maybe it's just jealousy!

I suppose employing DJs for entertainment rather than instrumentalists is analogous to employing a man and a plough rather than and army of people with spades. In both cases cheap energy/technology is leveraged, and forms a replacement for people.

Its a interesting problem and exposes the flaws of generalizations perfectly. But by using the basic concept of what your trying to achieve which is to inject and distribute your own musical inspirations I think you can frame the problem correctly. As is often the case the biggest problem is identifying the problem once its identified then solutions can be tried. Personally I think the entire music industry is seriously sick sort of like the Software industry which is controlled by a few major players. The open source movement was lucky to succeed. I think the music industry needs the same sort of lucky/stealth change that breaks the strangle hold of the recording studios. Considering the immense wealth offered to successful musicians it not surprising that they are part of the problem. The film/acting industry suffers from similar dynamics.

As we run out of Natural Gas to fire our air conditioners maybe people will return to live music and this will break up the recording cartel.

I dunno all I do know is that on average the poorer communities are far more musical then the wealthy ones.

I do know from my own life that cool music was far more prevalent when I was younger then it is today. Although I don't like rap in general some really good songs where created early on now its been commercialized.

Its interesting that the state of music at any point in time seems to be very reflective of the social and economic conditions. I'm not sure how to interpret this but music somehow acts as sort of a indicator of our social state. Not just rich and poor but also it embodies our happy/sad concepts in a collective way.
Country music for example..

I think we have made a mistake by not really listening to our own music to understand our societies.

I think you're right about music reflecting society, but also think music (and art generally) has some emotional power to help change societies to some degree too. At the moment I'll admit there's little evidence of this.

Appealing to peoples emotions has often been useful for leaders in difficult times - sometimes notoriously. If we can harness these powers positively on a more local level - as global/national institutions reduce in significance, it might help provide at least a little help in getting our societies through what is coming.

it remains the same fine china tableware with the same (non-monetary) value. As in knowing the price of everything and the value of nothing!

In a perfect world, I agree with you. As the main character in "The Forgotten Door" says, "How can a thing have two values?" But in a market economy, you are dreaming dreamy dreams.

Cheers

The market economy is only relevant to the price, not to the differing values it has to different people. The market makes not the slightest difference to the sound etc of my piano. Or the elegance of a fine design. The high prices of Rolex watches do not make them any less ugly, let alone more attractive than my £20 highly-accurate and reliable Lorus which is actually elegant unlike any Rolex I've seen.

I am reminded of the bidders one encounters on ebay, whom I call loonies. They have no concept of how much it is worth to themselves. For instance I happen to want a second widget w to go with my present widget w, which works well with my already-installed system. So a w is worth twice for me what it is for others. But when the looney sees that I bid 80 for it he then "reasons" that it must be worth at least 85 for him. And so on ad idioticum to his """winning""" the auction at whatever idiotic cost it takes. There's a way of beating these loonies but that's a trade secret not to be given away here.

Unfortunately most of the loonies bidding on oil futures are working to a presumption that the price is "high" at present and will come down even in the longterm.

Marketing junk aside i.e Rolex etc. What one pays for if you choose a different economic model is to purchase products that are built using continuous input of human inspiration or purchase copies of a single design session. If you choose products that have continuous input then you probably will pay a slightly higher price then those that don't. Hand made really means a unified design and manufacturing process i.e the designers are the builders and also directly responsible to the customers.

No marketing depts no sales no managers etc etc just people building something beautiful because they love to built it and making a decent living. As the costs of mass production, marketing and distribution increase I think we will find that moving back to a simpler approach makes sense and then we will discover how much we lost by cutting the designers out of the manufacturing process.

Just to bring this back slightly on track :)

We have the same problems in politics the voters have been isolated from the governments.
Democracy works very well up to a certain threshold but the process is readily corruptible and turned into a marketing campaign when the voters lose personal contact with their representatives.

Or system of laws tends to work a lot better when its derived from case law not the ones congress imposes since its far less disconnected from the populace. I'd lave to see the courts really be able to rule on tax laws based on case history for example the IRS would lose more often then not.

This disconnect between the rulers and the ruled is what allows these political problems to develop.

For example take the Georgia conflict I'm sure that if all the citizens of the countries involved were allowed to hammer out a agreement then we would not have these sorts of problems. Physically thats too many people to get together but a representative approach of 1:100 or 1:1000 is readily doable and these people could reach a binding agreement probably in a few weeks at worst.

You will notice that no modern form of government allows people to take this sort of direct approach for solving major problems this is by design.

Hi Jeff - ever read 'The Work of Art in the Age of Mechanical Reproduction' by Walter Benjamin? He was onto similar ideas about the value of hand-crafted art objects vs. mass-produced.

http://en.wikipedia.org/wiki/The_Work_of_Art_in_the_Age_of_Mechanical_Re...

I haven't, but I'll add it to my (unfortunately, already too long) reading list... thanks for the recommendation

The situation in Nigeria is quite a bit more complicated than either of you seem to imply. While circuits of social and economic regress are most certainly tied to the (lack of) distribution of oil wealth, these circuits of regress can be traced back to years of colonial rule, divide and conquer techniques of social control, and years of dictatorial rule which further divided the land and its people. There is also a federal police system, the ethnic composition of which is far from representative of the Nigerian population, and over(t)ly aggressive police responses to relatively minor protests have further entrenched ethnic divisions and incited ethnic violence. But getting back to the question of oil and the distribution of oil wealth... Even IF a 'fair' distribution was to exist, there is the simple fact that oil production and all that comes with it (flaring of gases, the laying of pipelines through delicate wetlands, leaks both small and large - both unintentional and intentional) have destroyed more traditional ways of life, like fishing and agriculture. Significant populations have been displaced so that production facilities can be located in an optimal site. These are the types of disruptions that an 'equitable' dispersion of oil wealth simply cannot overcome. My simple point is that any solution in Nigeria must be more comprehensive than an enforcement of the distribution of wealth. For a solution to be viable it must break all of the circuits of regress, not simply those related to the distribution of oil revenue. I could go on and on about this topic, but fear that "the length of this document will guard it well against the risk of being read" (Winston Churchill). I encourage anyone interested in learning more about these feedback loops to email me directly at dohne[at]u.washington.edu

But the population of Nigeria is 124 million.
Its oil production is about 2.3 mbpd any way you divide that in to 124 million to come up with a reasonable oil usage level for a decent living standard leaves no oil for export.

There is no humane solution to the Nigeria's problems.

I agree, there is a danger in oversimplifying the problem set in Nigeria. I think that there are broad and relatively simple trends, but they interact with numerous much more complex issues in often unforeseeable ways. In the end, though, I think this reinforces the strength of the simpler trends (such as notions of "nationalism," "corruption," "privateering," etc.), and make me think the complexity makes the situation even less likely to be resolved. Here's an article that I wrote for The Oil Drum focusing specifically on Nigeria and many (though not all) of these complexities you mention:

Nigeria: Infrastructure Firestorm

From the big picture the best way to understand politics in oil is to realize that if you expand what I said for Nigeria and assume that the populations of the worlds exporting nations where allowed to have a lifestyle close to that of the US with oil usage say half or a third of that in the US per capita we would have seen peak exports a long time ago at a much lower level then today. We basically would have never had the decades of large oil imports into the US and Europe in a equitable world.

The last 40 years where a mirage created by oppressive regimes stripping the wealth of their countries.
This holds pretty much across the board for all commodities even food and timber in the US.

We have run the world as one big leveraged buyout and asset stripped the hell out of it with no intention of ever repaying the debt.