DrumBeat: July 23, 2006
Posted by threadbot on July 23, 2006 - 9:50am
Topic: Miscellaneous
"Peak Oil" and should gas prices be higher?
A roundup of peak oil in the media. Features a video interview with Dr. David Goodstein, Professor of Physics and Vice-Provost at CalTech, and author of Out of Gas: The End of the Age of Oil. Also links to TOD and mentions Prof. Goose and Robert Rapier by name.
(You may need to use Internet Explorer to see the video.)
Power problems continue in California and New York.
Senate Bill Would Open Gas and Oil Fields in Gulf
Senate Republicans have agreed on legislation that would open four times as much of the Gulf of Mexico to oil and gas drilling as the Bush administration was seeking, and a vote on the bill is expected next week.
Refineries: The Achilles' heel of US oil industry
Iranian army chief: Arab states should cut oil supply to Israel
Oil wealth causes angst for Norway
The Saudi Arabia of the north is struggling to work out what to do with the $1billion it earns each week. Should new reserves be left untapped or its citizens made even richer?
Oil spawns new wave of newly rich in Venezuela
Amazon rainforest 'could become a desert'
The vast Amazon rainforest is on the brink of being turned into desert, with catastrophic consequences for the world's climate, alarming research suggests. And the process, which would be irreversible, could begin as early as next year.Studies by the blue-chip Woods Hole Research Centre, carried out in Amazonia, have concluded that the forest cannot withstand more than two consecutive years of drought without breaking down.
Shanghai company starts small with hydrogen-powered car
Technology aims to convert solar energy on large scale
Promising approach may make sun-fed power competitive with fossil fuels for the first time, experts say
Indianopolis gives up on Light Rail, will use only buses.
Some excerpts:
$3.5 billion in federal money for mass transit is still up for grabs over the next two years, but competition for it will be fierce.
[That is $1.75 billion/year available for a 50% Federal match; down from 80%. A trivial amount in the larger Federal Budget ! By comparison, a recent topic here, US Aid to Isreal was $2.63 billion in 2005. Many other examples exist as well.]
The process has been under way for several years, but got sent back to "Go" about a year and a half ago when the federal government stiffened its ridership projection criteria. According to IMPO assistant manager Philip Roth, the organization hopes to complete those projections by the
end of the year and choose an optimum route and mode -- or check "None of these" -- by spring. Then, it must find funding.
[Note that "stiffened federal requirements" was the key to birth control in Indianapolis]
http://www.wishtv.com/Global/story.asp?S=5158565&nav=0Ra7
http://www.wishtv.com/Global/story.asp?S=5130717&nav=0Ra7
http://www.indystar.com/apps/pbcs.dll/article?AID=/20060713/OPINION/607130394/10\
He thinks that we are wasting a lot of fuel because of the number of vehicles stuck in traffic. His solution--drumroll please--more roads. If we vastly expand the number of roads, cars will travel faster, thus saving fuel.
He knows Peak Oil is decades away, because ExxonMobil tells him so.
This is the predominate message that Americans are getting--buy and finance the large home and mortgage and continue with the long commute.
The New York Times has a story this morning about mortgage debtors refinancing their adjustable rate debts, often taking money out to live on, so that they can get a new lower payment. Basically, they are just postponing the day of reckoning. One mortage banker said that it had been 15 years since a prospective debtor asked how fast they could pay off their mortgage debt.
If this is true, then paying on a mortgage is really the same as rent -- you can be evicted at any time -- then it would make sense to treat a mortgage that way and postpone the day of reckoning -- either mortgage payoff or eviction, depending on the twists of fate, not excellent financial planning.
Dealing with the present economic situation (from the individual's point of view) would seem to be like cancer chemotherapy -- the best you can hope for is to prolong life a little and to hope for quality remaining time. In any case, what would it mean to "pay off your mortgage" if the government causes hyperinflation and then raises property taxes to unsustainable levels? You lose your property anyway.
Most people don't understand that a bank or mortgage lender can forclose on you at anytime, even if all your payments are on time. If the lender feels that the risks are rising, such as a substantial rise in unemployment in your area, they might just forclose your home. This is because the fear that home prices in your area may become depressed and they don't want to be stuck with the home if you lose your job in the future.
>If this is true, then paying on a mortgage is really the same as rent -- you can be evicted at any time -- then it would make sense to treat a mortgage that way and postpone the day of reckoning
Absolutely. When you have a mortgage, the lender owns the home until you pay off the mortgage. I find it ironic that most people consider their home, their biggest asset that they don't really own.
> In any case, what would it mean to "pay off your mortgage" if the government causes hyperinflation and then raises property taxes to unsustainable levels? You lose your property anyway.
In hyperinflation, wages rise on a daily basis to adjust for it. If property taxes or other taxes are impossed to the extent that people can't afford it, then it would trigger deflation. Imagine what happens when millions of home owners turn in their keys to the lender. It would cause massive unemployment and cripple the economy.
However I don't subscribed that hyperinflation will happen. If the gov't was to start printing money, every lender would immediate impose draconan interest rates. Japan for instance has tried a similar tactic and they still remained in a state of deflation for about 20 years.
This is incorrect. A Mortgage lender can forclose at anytime. They are lending you money just like a bond investor, If they no longer wish to loan money to you they can withdrawl from the loan at anytime. A borrowers option would be to find another lender.
In the special case of convertiable bonds, the bond holder can convert their bond to stock in the company at the holders option. Again with clearly spelled out dates and conversion ratios.
Alan, you are on your game here, your right, despite the hysteria loose in these part of the woods, the power of contract still stands for something....on someone being a few payments shy of being payed off and being foreclosed upon, where did thier equity go? One assumes that that they could take a loan for some portion of the property and shake off the first lender....
Of course, if they have already refinanced multiple times they could not, given that they may be within a few payments of having the first mortgage paid, but still owe a considerable amount on the property, perhaps even more than it is worth....
Roger Conner known to you as ThatsItImout
Actually, the solution is less lanes for cars and bus only/carpool lanes as a substitute. Let's start by dismantling or at least changing the use of mega freeways like they have in L.A., Atlanta , and many other cities.
You don't get people to use the bus or other mass transit by building more roads and temporarily lessening the pain, what we need is more pain for the driver, so that the advantages of rapid transit become more obvious.
In any event, by the time all those additional lanes are laid down or new freeways constructed, we will already be well on our way down the oil reduction slope.
Combine this with the almost daily news of accelerating global warming, and it is outrageous that anyone would suggest that we do anything to make it easier to drive. We need a moratorium right now on new road construction. While we're at it, let a lot of those secondary and tertiary asphalt roads devolve back into gravel. I would nominate the highway that goes by my town as the first candidate. My grandparents could handle it and so can I.
http://arctic.atmos.uiuc.edu/cryosphere/archive.html
The July 22 image shows fractures that haven't appeared in previous years. It appears that the central polar sea ice shelf could breakup this year.
It must be that the pictures are not updated daily - any ideas?
Surely it must be an artefact - neither nature nor a ship can do that in just 24 hours can it?
I would love to have some more insight on this from anyone knowledgable - it sure as hell looks frightening.
No, this could not be. The trail of an icebreaker would not be visible from outer space. The thin line running toward the North Pole must be at least several miles wide, many times wider than the trail of icebreaker.
Note: The astronauts regard it as a joke that the Great Wall of China is the only man made structure that can be seen from outer space. It cannot be seen from outer space. In fact the widest freeways, many times wider than the Great Wall cannot be seen from outer space.
What can be seen with a telescopic camera is of course a different matter. But even their ability is often greatly exaggerated by people who do not know the facts. Atmospheric diffusion and distortion makes it impossible to see anything really small. They can make out a truck but they cannot read anything written on the truck.
Also Note: This photograph is of the whole earth and is not magnified.
I could not find another picture that showed a similar channel developing though...
http://arctic.atmos.uiuc.edu/cryosphere/IMAGES/ARCHIVE/20060723.jpg
Not something that happens too frequently in the earlier images.
I had never heard of that site, but it must be pretty popular because I started getting a lot of traffic last night as a result of the story.
I actually learned something from that story about Professor Goose that I didn't know: He is a strong advocate of higher gasoline taxes. That is not surprising, as I bet most here would take that position. I just didn't know he had advocated it in strong terms before. For the record, I am 100% on board with that idea. In fact, I think that is the single most important thing we could do to give us more time before we have to deal with the worst of Peak Oil.
Cheers,
RR
Sadly, it seems that the only message the Proles understand is spendable income.
Reduce the spendable income drastically and the Proles might take notice.
One wonders though, what kind of overreaction might occur when the Proles finally march on Washington?
One can only ponder the poorly written legislation that might result and unintended consequences that could ensue.
Speaking of proles and spendable income:
Yesterday my wife and I went to a surprise 80th birthday party for one of her aunts. It was held in a big rented tent in the backyard of her son's house, and there were about 70 guests. A big expensive catered affair.
The son is a 44-year-old union carpenter who works as an employee of an industrial construction firm. He makes good money for a tradesman but surely nothing special.
However, he lives in a large house that is probably worth at least $600,000 (northern New Jersey). He drives a full-size 4x4 pickup, and his wife drives a brand-new Chevy Suburban SUV. He's got a huge garage equipped with a lift so he can engage in his expensive hobby, cars. He's got a 1972 Corvette with the rare 454 engine, a full-bore Camaro dragster plus a huge covered trailer with which to tow it to the track, and finally, a top-of-the-line Harley Davidson. (Talk about family average gasoline consumption!)
How does he do it? Simple: he married well. His wife's father is a successful retired cardiologist who essential bought the house for them as a wedding present and appears to frequently help them out financially. There is no way in the world he'd be able to live like this without major injections of cash, even with a string of maxed-out credit cards.
What struck me about this whole situation is that this guy is essentially living the American dream almost solely on the wealth created by his father-in-law. This life styles appears to suit the couple just fine, and they probably genuinely believe that they are entitled to have it all.
What happens when and if daddy's investments go south, and he can no longer afford to keep them (and his other grown children) afloat?
I tend to have a rather morbid imagination, but I just got the feeling that this big party at this big expensive house was an example of one of those end-of-an-era type of things before it all turns to shite. Sort of like the elaborate ball scene in Gone with the Wind when someone runs it and shouts, "We're at War!"
This won't work! You folks need to have a better understanding of economics.
- Does not curb overseas consumption.
- Does not curb diesel and kerosine use (Trucks, jets & heating oil)
- Does nothing to curb consumption of natural gas
- Consumers will adjust to the higher costs and demand higher wages to offset costs. Manufacturers adjust by rising price. The end result causes inflation but does not decrease consumption.
- Leads to increased gov't spending, as the increased revenues are funneled to entitlements and subsidies that aid encumberment re-elections.
- Does not curb consumption for the Wealthly.
- Deeply punishes the poor and retired who lack the capacity to adjust to rising costs.
The only realistic polic change to curb consumption is to rates interest rates. Raise rates forces businesses and consumers to become more froogle and spend money wisely. It also drives them to become more energy efficient, not just with driving, but with all of their energy consumption. It is also the only policy that can curb global consumption.I believe that most of the supporters of a gas tax are middle to upper middle class that have the capacity to adjust to rising energy costs and also have substantial debt. This is why the oppose interest rate hikes as the proper solution.
I would raise gas taxes by 1.5¢ to 2¢/gallon/month for 20 years (with quarterly inflation adjustements). This gives a clear warning of higher gas prices coming. World oil price increases will likely exceed my proposed tax; but that increase is less certain.
A phased in tax minimizes the direct pain but atill effects structural change (if only begging for better bus service).
Since the US uses 1/4 of the world's oil; should we be THAT concerned about the other 75% of oil used by the rest of humanity ? We are the 389 lb gluttons at the table !
I discount any concern about "them" not conserving !
How does that curb global consumption?
As I stated, the US is the 389 lb glutton at the table. Reduce our per capita consumption to that of Brazil and we can join OPEC.
And what would happen to consumption in India, China, and other developing world countries when US consumption is reduced? If US consumption declines what happens to crude oil prices?
FWIW curbing US consumption is in the best of interest primarily to the US itself, and to a smaller extent to the rest of the world. Americans will get rid of the soulless suburban pattern, probably lose some weight and maybe learn to smell the roses. Instead of collapsing, the country will adapt in advance and gain economical advantage when the oil starts getting really tight.
The rest of the world will win a smoother peak, developing countries will have the chance to use the energy more rationally, and we all will have a breath of relief that USA will choose getting rid of oil instead of going to SUV saving wars.
It is a win-win-win proposal, but unfortuantely ain't likely to happen.
No. Its pointless to use a tax to just curb consumption when someone else will just consumpt it for us.
Imagine if there is a community well that has a finite amount of water. You discover that the water is running low, and you enact a policy in your household to restrict water use. However this policy doesn't affect other households. Now your next door neighbor has just build a pool and starts draining the well to fill it. Will your consumption policy affect the outcome?
Instead of using taxes it would be far better to use interest rates which will curb consumption globally. A policy of raising US interest rates would force all Industrialized nations to raise rates, causing a decline in economic expansion and consumption.
Besides stemming consumption, a gas tax would also influence our behaviors in such a way as to better prepare us for Peak Oil. Take Europe, for example. They have very high gas taxes. By your logic, that is pointless, since that helped keep oil prices low so we could just consume it in the U.S. However, high gas prices have caused them to adopt a lifestyle that is much less dependent on fossil fuels. If gas double or triples, they will cope much better than we will. High gas prices have prevented them from wasteful use of their land. They don't have Houston or L.A. style suburbs that go on forever.
So, I don't think your argument is valid.
Cheers,
RR
It will not stem consumption globally. Nor would it prepare the nation for Peak Oil for the reasons I have already stated earlier in the thread. The only realistic solution is to raise interest rates, period.
>However, high gas prices have caused them to adopt a lifestyle that is much less dependent on fossil fuels.
It will not. Consumers will adjust to rising costs. Since 2002 prices have more than doubled and demand did not decline. As long as credit is cheap the money supply will continue to expand that people will be able to afford thier high consumption ways. The only group people that will be forced to cut back consumption is the very poor and retired who lack the ability of wage growth.
>High gas prices have prevented them from wasteful use of their land.
This has a lot to do with social development. Canada has similar housing to Europe, yet fuel prices are cheaper than the US.
>They don't have Houston or L.A. style suburbs that go on forever.
This is the result of cheap and easy credit, low not gasoline taxes. Without ridiculously low interest rates people would not able to secure financing to purchase those homes.
Basicly both things will lead to demand reduction and lower oil prices. Of course interest rates will be much more effective - as much as using a steam hummer to kill a fly could be.
The point is that from the two evils a higher gas tax is the much lesser one; taxed gasoline and strong economy will result in investment in alternatives. Higher interest rates and lower oil prices will result in investment in shelters for millions unemployed.
The tax will get us away from oil for the long term, the IR will postpone and make the problem harsher the next time the economy rebounds.