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Calling Out Our Leaders on Oil & Gas

By Brian | August 11, 2008 | Share on Facebook

Oh, for a politician who understands the financial markets…

Back in mid-July, President Bush lifted an executive ban on offshore drilling that was originally signed by his father in 1990. The move did nothing to change the supply or demand for oil, since there is a second ban – a Congressional ban – on offshore drilling that remained (and still remains) in effect. Basically, Bush was playing politics. By lifting the executive ban, he made the congressional ban (which could be lifted by Congressional Democrats) the only thing standing in the way of offshore drilling.

At the time, House Speaker Nancy Pelosi said this:

Once again, the oilman in the White House is echoing the demands of Big Oil. The Bush plan is a hoax. It will neither reduce gas prices nor increase energy independence. It just gives millions more acres to the same companies that are sitting on nearly 68 million acres of public lands and coastal areas.

Barbara Boxer (D-CA), chairwoman of the Senate Environment Committee said this:

This proposal is something you’d expect from an oil company CEO, not the president of the United States. The president is taking special-interest government to a new level and threatening our thriving coastal economy.

Gene Karpinski, president of the League of Conservation Voters (an environmental group), said this:

President Bush has once again ignored the wise precedent set by his father and taken reckless action that has neither hope of reducing gas prices nor concern for long-term consequences.

And Bill Burton, a spokesman for Barack Obama, said this:

If offshore drilling would provide short-term relief at the pump or a long-term strategy for energy independence, it would be worthy of our consideration, regardless of the risks. But most experts, even within the Bush administration, concede it would do neither. It would merely prolong the failed energy policies we have seen from Washington for thirty years.

Countless others have appeared on Sunday morning talk-shows and other venues, repeating the Democratic talking point that offshore drilling wouldn’t put oil into the market for years, and therefore wouldn’t affect the price of oil (or gas) by more than a couple of pennies, if at all.

The chart in the upper-left provides a quick lesson on how markets work, and on how much politicians depend on our collective short-term memory loss.

The oil markets used to be filled primarily with oil consumers, and so the price of the commodity was driven primarily by supply and demand. Today, with a sputtering stock market and a beaten-down housing market, many investors have entered the oil markets, making the price sensitive to speculation as well as supply and demand.

When Bush lifted the executive ban, speculators saw it as a sign that the United States might be much closer to increasing oil supply than they were previously, and many of them began taking their profits and investing them elsewhere (probably the currency markets, since the dollar began strengthening at around the same time). The sell-off in the oil market and the strengthening dollar began driving prices down. Not by one or two pennies, and not in ten or twenty years. But within the same week, and (at the time of this writing) by more than 21%. Gasoline prices, which lag behind the oil market, are down almost 6% in the same time period. It stands to reason that if Congress lifted their ban on offshore drilling, we’d see an increased move in this direction, and could be looking at sub-$100 oil and $3/gallon gas again in a few weeks time, but now I’m the one that’s speculating…

Also, note that a 20% drop in the stock market (the threshold by which economists define a “correction”) is what began the incessant drumbeat of “recession” talk that has allowed the Democrats to paint President Bush as a failure on all economic matters for the last several months. That said, you don’t hear anyone talking about the “day the oil bubble burst,” do you?

To Barack Obama’s credit, he nominally remained true to his spokesman’s words – offering to consider drilling now that it’s been proven to “provide short-term relief at the pump”. I still have hope for that guy yet.

Of course, he back-pedaled as to the reason, though:

I still don’t believe that’s a particularly meaningful short-term or long-term position, [but I don't want to make] the perfect the enemy of the good.

And then John McCain, rather than pointing to market data to prove the point (as I’ve done here), simply called him a “flip-flopper” and hammered another talking point about nuclear power and other alternative fuel sources.

I’m not asking for a president that’s an expert in the world’s financial markets. I’d settle for one who has strong economic advisers and who is willing to talk to the American people about what really drives the markets, instead of painting his opponent as a shill for oil company CEO’s or the environmental lobby. But when the guy who got it wrong changes course and then tells us he still thinks he got it right, and the guy who got it right seems to be unaware of why he was right in the first place, my confidence in both men drops significantly, as does my ability to trust their next, dire predictions about the world economy.

Topics: Money Talk, Political Rantings | 13 Comments »

13 Responses to “Calling Out Our Leaders on Oil & Gas”

  1. Stacey Derbinshire says at August 11th, 2008 at 5:31 pm :
    Nice site. There

  2. Winnie Government says at August 11th, 2008 at 10:32 pm :
    The natural gas and crude oil properties are located in the Canadian provinces of Alberta, British Columbia and Saskatchewan. Winnie Government

  3. Ilya says at August 12th, 2008 at 5:36 am :
    Well put, Brian. I think my blogging for today will be limited to pointing people to your article here…

  4. Jeff Porten says at August 12th, 2008 at 6:18 am :
    [Dude, I'd double-check those first two comments; they look like linkspam to me.]

    My knowledge of the international oil markets is such that engaging you in a debate on this wouldn’t be even like bringing a knife to a gunfight; more like bringing a sharpened sponge. That said, I’ve read a number of articles recently that argue that the price of oil is not being particularly driven by speculation (cf. Slate, IIRC). I’ll admit that I have a bit of trouble with the idea that the value of this investment has dropped 20% based purely on a governmental action that the entire market knows to be meaningless, and I rather wonder what other factors might be influencing the drop. (For example, your graph shows a sharp dip in the weeks preceding the speech, so my first question is whether the drop stems from the speech, or whether the peak you comfortably point to is an anomalous rise in a preexisting market change.)

    That said, my real argument with your post is your reduction of the entire debate to dollars and cents. Yes, some Democrats argue that we shouldn’t drill offshore because it won’t affect prices for years, but other Democrats argue that we shouldn’t drill offshore for a host of other reasons. The price of gasoline makes for a more conducive environment, so to speak, for these alternative reasons to be heard, but transmogrifying the entire argument into the current cost per gallon of liquified dead dinosaurs rather missed the point.

    It does, however, frame the argument such that it’s easy to score points for the Bush administration over a tiny drop in an overall price rise over which he’s presided (and many would argue, caused), so bonus points for rhetoric.

  5. Brian says at August 12th, 2008 at 11:09 am :
    Ilya – happy to oblige.

    Jeff:
    1) Re: comment spam – I’ve become quite the target lately (my post on fake China fireworks attracted a 9/11 conspiracy theorist who I even considered not deleting, until his YouTube links went from 9/11 video to Chinese porn). These two were on the fence, so I left them in.

    2) I don’t think the government’s action was meaningless, and the markets agree with me. Bush lifting the ban puts the U.S. a lot closer to offshore drilling than it was before, and speculators are in the business of managing risk (just like poker: if the turn gives you a draw, you’re more likely to bet on the river…).

    3) It was not my intent to “score points” for the Bush administration here. Those who would claim that Bush brought oil prices down are as wrong as the “many” you cite in your comment that would claim that he caused the price rise. Oil prices spiked due to many factors, and they are fairly well known at this point: the weak dollar, the declining stock market, the bursting of the housing bubble, and the increased demand in East Asia. These factors drew speculator money to a market that didn’t typically attract it, and so now a change on government policy can move the market (by driving speculators elsewhere).

    My point was regarding the presidential candidates, and how they and their minions made statements of certainty that have proved to be wrong within a matter of weeks (the kind of statements that you’ve often quoted back to me as “documented fact.”), and how neither candidate seems to possess the basic understanding of world markets to change his tune on the subject. Basically, I’m fine with you bringing a sharpened sponge to this arguemnt, but I’d like my president to at least know someone who owns a gun.

    4) Believe it or not, we quite likely agree on the non-financial aspect of this discussion. Totally absent from this post is the discussion on whether we should encourage decreased oil prices, since the bubble conditions seemed to have been driving inovation in that “emergency mode” I discussed here, here and here. In that regard, I tend to think that high oil prices (and, to your point, high gas prices) is generally a good thing, given society’s response. Where you and I probably differ is that I can see an argument for gaining control of the supply ourselves, rather than allowing it to rest in the Middle East, and then allowing the market to chase the cheaper, longer-term solutions.

    It’s funny, though. When you and I discussed this in the other posts I linked to above, you were dead set against these “adaptive” measures because they’d be too little, too late, while “preventative” measures could begin right away. If the graph above shows anything, it’s that “adaptive” measures certainly have a place at the table in this debate.

  6. Jeff Porten says at August 17th, 2008 at 5:49 pm :
    On the “better late than never” theory of commenting:

    I don’t think the government’s action was meaningless, and the markets agree with me.

    I really don’t follow you here. Bush made an executive action, which requires further action from Congress prior to the installation of a new president whose own executive actions can completely repudiate this one. (Likewise, if we get a new Congress with stronger Democratic majorities, the window on legislative action could also be substantially narrowed, depending upon how their platform evolves.) The action in question requires a ten-year lead time for a result that should affect the market, so it seems to me that only 10-year futures and greater would be affected. (Do such exist in the oil market? Man, talk about a long bet.)

    Assuming a rational market, I just don’t see how your supposed cause can lead to this effect. Seems to me that there are two more plausible alternatives: 1) an irrational market, or 2) there are other causes afoot that are having a hell of a lot more impact than Bush is. (I.e., McCain and Obama’s statements, since they’ll collectively be a hell of a lot more important, or demonstrations that the price of gas is finally impacting consumer demand.) Personally, I’m always suspicious that the markets are pretty damned irrational (because humans collectively are), but in any case, I think I have a stack of better explanations for a short-term drop in oil than “Bush did it.”

    just like poker: if the turn gives you a draw, you’re more likely to bet on the river…

    Dude, if the turn gives you a draw, bet the turn. By the river, the fat lady has sung. :-)

    Oil prices spiked due to many factors, and they are fairly well known at this point….

    I am absolutely frickin’ amazed that you exclude from your list of factors the various wars we have engaged in, either on territory with oil, or territory with oil pipelines. These were what I had in mind when I wrote that.

    My point was regarding the presidential candidates, and how they and their minions made statements of certainty that have proved to be wrong within a matter of weeks (the kind of statements that you’ve often quoted back to me as “documented fact.”), and how neither candidate seems to possess the basic understanding of world markets to change his tune on the subject.

    I don’t mean to get snotty about this (probably too late), but it seems to me that if your discussion about oil revolves around the markets therefrom, you are already incapable of a basic understanding of oil, even if your grasp of the markets is Einsteinian. All of the “documented facts” which I have referred to are about the nature of oil, not the economics of oil.

    First, oil is finite, to the best of our knowledge. There is endless debate as to how finite it is, but estimates of “within our lifetime” have some credibility. Naturally, the markets will react accordingly when the day is imminent, but I think any economist will gladly point out that, since we’ve relied on burning carbon for the last 250,000 years, we will have a natural tendency to discount the tremendous social pain of switching to other forms of energy until the crisis occurs. If a society lives in a delusion, so will its markets.

    Clearly, $150 barrels of oil, and constant wars in oil-producing and transporting regions (to which we can add Georgia this month), is not a sufficient level of crisis to require action. I take this as evidence that we are still of the mindset to continue sucking at the gas teat until such time as we are absolutely forced to stop. At which point, nations and economies that are inadequately prepared for such a change will be left on the dustbin of history, and the poor schmucks living in those economies will likely look back to the Great Depression as the “good old days.”

    I think the true danger of the market-based perspective is that any democratically elected government has two choices in the face of this oncoming locomotive: 1) inflict increased costs on its citizens as it reduces dependence and subsidies on oil, while investing in alternative energy technologies with longer lead times; 2) reduce the immediate pain by continuing the flow of “cheap” oil, allowing us all to party on the tracks until the train gets here. Personally, I’d rather see a transitional change, rather than a crisis when the train arrives, but it seems to me that our present method of propping up markets nearly ensures that the switch is likely to be catastrophic.

    I’m impelled to note here that the cost of changing to alternative energy is generally exaggerated compared to existing expenditures, and in any case is far lower than our demonstrated will to spend on other threats. If we viewed the threat of oil dependence similarly to the “threat” of Saddam Hussein, a fraction of our Iraq investment could switch us to solar by paving Nevada and Arizona with collectors and dumping it into the grid. Solar and wind would work immediately if the investment numbers were high enough (and would make middle America from the Dakotas downward a boom economy); I’m reasonably confident that in that economy, the car batteries would shortly follow. Markets are great at following the money.

    Second, the obvious counterargument is that we’ve gotten very good at oil extraction, raising the quantity included in the word “finite”. That said, finite is finite, and pushing back the day of reckoning only really makes sense if our collective theory is “fuck our grandkids, so long as I get by okay.” Personally, I think the United States has generally been a force for good since we assumed world leadership status in the late 19th century, so I’d prefer to see us stick around in such a role for an indefinite period, rather than one that is predictably time-limited to the next 100 years or so.

    Third, even if we pretend (or miraculously discover) that oil is infinite, there remains the problem that burning carbon is bad. We got away with it for the first 249,850 years because the quantities of carbon we were burning were fairly low compared to Earth’s carrying capacity, but then we kinda got carried away with it. Now, you can pick whatever numbers you like as to what the odds are that our present economy will eventually trigger global catastrophic climate change and the collapse of civilization: 50%, 1%, 0.01%. Seems to me that “the end of civilization” is a big enough cost that even if the risk is low, the benefits of the behaviors that might trigger things like ice ages and turning Ohio into oceanfront property need to be evaluated more strictly.

    Anyway, such are the documented facts that I tend to cite. What amazes me about the debate we’re having is that people like to focus entirely on the market to the exclusion of the rest of these ideas, on the presumed theory that when gasoline costs $4 a gallon and it hurts too much to drive the SUV to the Wal-Mart, science can go take a flying leap at a rolling donut until we can get our cheap cornflakes again.

    Believe it or not, we quite likely agree on the non-financial aspect of this discussion.

    Yes, but we clearly disagree on the relevance of the financial aspects of this discussion. The Earth and the global climate cycle does not give a damn about why we do what we do. There are tipping points, and if we cross them, we’re substantively fucked. Likewise, the global ecology does not give much of a damn whether humans or squid are the dominant lifeform; if we want humanity to thrive, it’s up to humans to get our own backs, because no one else is going to do it for us.

    (Completely irrelevant aside: One of the most terrifying aspects about our current political debate is how many people think that either God will save us from ourselves, or that hastening various forms of Armageddon is a good thing, as that will bring on the Rapture. We can add John McCain to this list as of last week, at least to the list of people who pander to such opinions. It seems to me that once a substantial number of voters give up on working towards collective survival, well, the odds of making it through go way down.)

    Where you and I probably differ is that I can see an argument for gaining control of the supply ourselves, rather than allowing it to rest in the Middle East, and then allowing the market to chase the cheaper, longer-term solutions.

    Woooo. Man, talk about a terrifying paragraph. Let me take that on clause by clause.

    I can see an argument for gaining control… rather than allowing it to rest in the Middle East: Rest? Wow. Are you aware how similar your language is to the last 1,000 or so years of justifications for war? Really, “we deserve that wealth” ranks second only to “dehumanizing the other” on a historical basis. So, how many nations are you proposing we conquer? And why are we putzing about in Iraq when clearly the economically correct theory is to point the nukes at Riyadh?

    If, on the other hand, you are referring to supplies that are currently deemed to be domestic, then you are making one of two arguments: either that supply is relatively small, and hence will not make much of a difference, or it is relatively large, and hence other nations should start viewing us as a military target by the exact same reasoning.

    of the supply: again, the finite supply which will run out at some point in the foreseeable future, provided you’re willing foresee far enough.

    then allowing the market: Huh? I thought the market was all-knowing, all-seeing, and infinitely wise. What is preventing the market from doing this now? Oh, probably has something to do that the market can reap the profits of oil, without paying the costs of the wars and environmental destruction the desire for, and burning of oil has been causing. Convenient, that. How about, instead, we stop externalizing all of these “irrelevant” factors, subsidizing the oil economy (to the extent that we will drive our foreign policy by it), and realize just how damned costly our current economy is?

    to chase the cheaper, longer-term solutions: in other words, “in the past 100 years, over which time we were certain that carbon-based fuels were finite, we didn’t do shit to change the basis of our economy. But now, we’re much more enlightened, so let’s just buy a few more decades at any cost, because this time for sure we’re going to make the right decisions.

    This would be known as the “I can quit any time” philosophy that is familiar to all addicts. Pardon me while I light a cigarette.

    When you and I discussed this in the other posts I linked to above, you were dead set against these “adaptive” measures because they’d be too little, too late

    I haven’t yet reviewed those discussions (and I’m about to, just to find out how many words I’m about to eat), but my argument above summarizes my feelings about “adaptive” measures. I don’t think these are “adaptive”, in that they’re not ways in which we’re planning to adapt; they’re ways in which we’re planning to delay the inevitable until it’s Someone Else’s Problem, and to hell with the cost to ourselves, our progeny, or the rest of the planet.

    Case in point: I’m generally opposed to nuclear power, on the theory that creating substances that are terminally dangerous for 10,000 years is not the sort of thing that an enlightened society engages in. (Fusion is a whole ‘nother story.) However, for the short term, are there ways of building nuclear plants that are far better in terms of carbon emission than our present ways of doing business? Absolutely. But do I suspect that this is creating a massive problem for people in the year 2508, when they find that Yucca Mountain is not exactly a miracle of 26th century engineering, and American society is as distant as the Treaty of Westphalia is to us? Also absolutely.

    So yes, there are immediate political benefits to delaying the pain, and there are some methods available to us that delay the pain longer than the timeframes we generally consider. But are they ethical? That, I think, is something that rarely enters the current debate, whether we’re talking about saving a few decades by drilling the hell out of the caribou, or a century or two by irradiating lower Nevada.

  7. Jeff Porten says at August 17th, 2008 at 6:19 pm :
    You know, I just reread those other comment threads (including the ones where I have to go back and fix the links to my site—ugh), and I didn’t see a place where I argue against “adaptive” measures, or generally contradict what I’ve said here.

    Now, it’s well known that my opinions can vary with the season and the phases of the moon, so I’ll be happy to say that yes, you’ve pointed out a time when I had my head up my ass. I just didn’t see any such examples in your links. What were you reading when you said that?

  8. Brian says at August 18th, 2008 at 3:41 pm :
    Man…on 8/12 you’re bringing a sharpened sponge to a gunfight, and on 8/17 you’ve got more than 2,100 words on the impending demise of the oil markets. That’s chutzpah…

    The action in question requires a ten-year lead time for a result that should affect the market, so it seems to me that only 10-year futures and greater would be affected.

    Markets work on risk, not results. When you say “the action in question requires a ten-year lead time for a result that should affect the market,” it suggests that you read somewhere that “it will take ten years for new oil to reach consumers” and decided (as the two candidates and scores of pundits have implicitly decided) that the markets will only move when new oil reaches the consumers. This was the point of my original post. Bush’s action was enough to move the markets. A lifting of the Congression ban would move them again, and the approval for additional onshore drilling would move them again. Investors don’t wait for the oil to arrive to decide that supply is going to increase. They look for signals, and then adjust the risk/reward equation appropriately.

    Why did Bush’s action move the markets? Some traders may have seen it clearing a regulatory hurdle, others may have seen it as pressure on Pelosi/Reid to lift the Congressional ban, others may have simply been sitting on huge investment gains and jumped ship at the first sign of something that might lower prices, creating a self-fulfilling prophecy. Could the other factors that you mentioned move the markets too? Sure. Humans are, for the most part, irrational, but large groups of humans (i.e., markets) tend toward rationality. It’s like Wikipedia – not perfect, but trending that way.

    I am absolutely frickin’ amazed that you exclude from your list of factors the various wars we have engaged in, either on territory with oil, or territory with oil pipelines.

    Two things: first, I wasn’t aiming for a canonical list. Second, the war really didn’t move the markets all that much. Certain events in the war did: 9/11 itself brougth a jolt of uncertainty into the markets, causing major price shifts. The price of oil spiked when Saddam began burning the oil fields, but then levelled off when we found he wasn’t as successful as he (or we) assumed he’d be. The recent invasion of Georgia made the markets spike for literally two days, but then the price stabilized again when it appeared the conflict was short-lived (before you jump down my throat about Russian imperialism, I realize that could change again in short order. Keep watching the news and the price of oil…)

    All of the “documented facts” which I have referred to are about the nature of oil, not the economics of oil.

    I’m not sure I see the distinction you’re drawing. I will say that I’ve never seen anyone suggest that we’ll run out of oil in our lifetime and be taken seriously, but I don’t pretend to be an expert on that subject. Send me a link – I’m happy to learn more.

    As for alternative energy, you’re still arguing that nothing will happen until Ohio is oceanfront property, even though a mere six months of $4/gallon gas in the United States has dramatically reduced the number of miles we drive, increased investment and promotion of hybrid technologies, and put energy policy front-and-center in a presidential election that was supposed to be all about the ongoing war. As someone who lives east of Ohio, I’m wondering what has to happen before you realize that a significant economic incentive (both in terms of painfully higher expenses and available profit opportunities) are enough to bring about change. Like JFK Jr.’s environmental stump speech, the “end of civilization” argument does nothing but weaken the more practical, market-driven reasons to move forward. And like Al Gore, when the market does get us there, the people who spend their time screaming about ice ages and floods today will be (wrongly) looked upon as kooks.

    (Completely irrelevant aside: [God, blah, blah, blah, Armageddon, blah, blah, blah]

    Please…McCain didn’t turn into a bible-thumper overnight because some Democrat decided to news-catalog him in the “Bush governs through prayer” meme. I’m still waiting for an example of when Bush himself made a faith-based decision (as opposed to the warped analysis of some right-wing religious fanatic who supports something Bush did). This is nothing but noise in the channel. Don’t let it terrify you…

    Wow. Are you aware how similar your language is to the last 1,000 or so years of justifications for war?

    Wow, indeed. By “gaining control of the supply ourselves,” I meant producing enough domestic oil so that we can stop buying foreign oil. I didn’t mean invading existing oil producing nations and making their oil supply our own. Do you see how quickly these arguments degrade into fallacy?

    Huh? I thought the market was all-knowing, all-seeing, and infinitely wise. What is preventing the market from doing this now?

    Another example of your sharpened sponge, I’m afraid. This isn’t about the markets “deciding” to move away from oil. Markets don’t proactively set policy. This is about making oil a less attractive alternative, so that the markets naturally move in that direction.

    As is often the case in our debates, the trees have obfuscated the forrest. My original comment that we “likely agreed on the non-financial aspects of this” was as follows: $4/gallon gas touched off a massive movement (public and private sector) to make alternative energy a reality. I assumed that we’d agree that this is a good thing, although from your comment above, it sounds like you’d question that this movement has even occurred. Also (principally because I can afford higher gas prices), I’m in favor of keeping prices high to encourage this (market) trend. Again, something I assumed we’d agree on.

    Where I assumed we’d disagree is where to draw the line between incentivizing change and pummeling the lower income crowd with high gas prices. I’d rather see us move away from foreign oil and then control the supply ourselves (another way of saying “allowing the market to chase…”), rather than constantly reacting to a perennially unstable Middle East. This isn’t a staunchly held position on my part, though – Obama’s previously held position (no offshore drilling – use the high oil prices as incentive to move faster on alternative energy) has it’s merits, as John McCain seems to have suddenly realized. Then again, Obama has suddenly come to realize that maybe some drilling in the meanwhile wouldn’t be so bad, either. And so they meet in the middle, and energy becomes one less thing we really have a choice about in November…

    I didn’t see a place where I argue against “adaptive” measures

    Well, there’s this comment thread for starters. After that, I’d point you here.

  9. Jeff Porten says at August 19th, 2008 at 4:28 am :
    it suggests that you read somewhere that “it will take ten years for new oil to reach consumers” and decided (as the two candidates and scores of pundits have implicitly decided) that the markets will only move when new oil reaches the consumers.

    Not at all. What I’m saying is that, IMO, an objective analysis of the risks involved in oil production, taking into account the ten-year lead time, makes it fairly obvious that Bush’s executive order has almost zero impact on the long-term risk. Yes, it supplies a necessary precondition for all else that has to follow in terms of drilling the hell out of the Gulf Coast, but there’s such a long road to follow afterwards that any immediate market impact strikes me as akin to placing futures bets on an eight-year-old kid someday getting an NBA contract, on the day he learns to dribble.

    Based on what I’ve been reading (and I’ve been reading a bit more since we started this thread), I can come to three possible observations: 1) either most of what I know about energy production is wrong, or 2) the market is moving in response to factors completely separate from Bush’s announcement, or 3) the market is irrational. I’m guessing that an accurate weighting of these factors is around 10/50/40%, respectively, and I’m willing to increase the odds of “irrationality” on a moment’s notice.

    Bush’s action was enough to move the markets. A lifting of the Congression ban would move them again, and the approval for additional onshore drilling would move them again. Investors don’t wait for the oil to arrive to decide that supply is going to increase.

    We might be arguing the same point here — what I’m saying is that, if indeed it was Bush’s pronouncement that affected the risk/reward ratio of future oil supplies, my reading on both the political situation and the quantities of oil we’re discussing puts any such moves firmly into the category of “irrational behavior”.

    Some traders may have seen it clearing a regulatory hurdle, others may have seen it as pressure on Pelosi/Reid to lift the Congressional ban

    Exactly. Point one, any regulatory hurdle that was cleared can be easily reconstituted by future presidents, since these are unilateral actions. Point two, the relationship between Congressional pressure in 2008 and Congressional action in 2009 is completely undetermined until November. (And one area where we probably agree: I think this Congress will go down in history as the most ineffectual since the Buchanan presidency; I have absolutely zero faith in the Democratic party’s ability to show political leadership in this branch, which could mean drilling or no drilling depending on which side has stronger winds in its favor.)

    others may have simply been sitting on huge investment gains and jumped ship at the first sign of something that might lower prices

    Conceded; this is well in my sharpened sponge area. In fact, insofar as this effect is true, it provides a rational explanation for otherwise irrational behavior. On the other hand, as a purely economic indicator it’s not about oil, it’s about the social structures around oil which I think most people mistake for the real thing.

    Humans are, for the most part, irrational, but large groups of humans (i.e., markets) tend toward rationality.

    Huge philosophical argument to be had here, so I’ll just state my view as an assertion: I agree that markets aggregate to the closest approximation of rationality in a given culture, but I don’t think this is anywhere near asymptotic to, if you will, a Platonic ideal of rational behavior. It’s instead asymptotic to the most rational behavior that culture is capable of — and if the culture is substantially deluded or deceived, the markets will completely miss it as well.

    Historical analogy: we had highly efficient slave markets in the 18th century setting the value of human beings of African descent, which largely masked the possibility of discussing the idea that you shouldn’t be able to buy human beings. When such things were brought up, they were countered with the premise that Africans weren’t quite human. When this issue was resolved, well, it had come to a crisis point and was rather costly. I don’t mean to equate oil to the slave trade, mind you, I’m just pointing out that markets will marginalize many aspects of the discussion.

    Second, the war really didn’t move the markets all that much.

    Huh? The price of oil on 9/11 was $25 or so, according to the wrtg.com graph I’m looking at. The invasion of Afghanistan (which, I’ll remind you, is crisscrossed with oil pipelines) was two months later. And I can use your own points to show that that 2002 rise in prices can be seen as the market’s prediction of the 2003 Iraq invasion.

    I’m so thoroughly gobsmacked by the idea that we disagree on this point that I’m just going to keep my mouth shut until I see what you say next. I had rather thought that the one-to-one correlation between Gulf War II and $150 oil was accepted as given.

    I will say that I’ve never seen anyone suggest that we’ll run out of oil in our lifetime and be taken seriously, but I don’t pretend to be an expert on that subject.

    And the gobsmacking continues. Okay, here’s a really good introduction on the topic: . Beyond that, Google “peak oil” and read as much as you like.

    In summary: “running out” of oil is a bit of a misnomer. There’s basically three kinds of oil reservoirs: the kind we can get to cheaply; the kind we can get to, but it’s too expensive to think about; the kind we can’t get at all. Rising prices means we move some from category 2 to 1; i.e., extracting oil from shale fields in Alberta. Improving technology moves some oil from category 3 to 2 and eventually 1. This is why predictions that we’d run out in the 1980s were premature.

    But here’s a quick back-of-the napkin calculation, numbers supplied by first results for “global oil reserves” and “global oil consumption”. Total global supply of oil: 1.2 trillion barrels. Total global consumption: 87 million barrels a day. 1.2 trillion / 87 million / 365 = 37.8 years.

    But that assumes constant demand; it’s actually rising 1-2% per year. 1.2 trillion barrels below ground doesn’t mean that it all gets above ground. I have no idea if “proven reserves” includes the uneconomic or impossible oil I listed above, which could change the estimate in either direction. And it’s always possible that we’ll find more. That said, I’d say 40 years looks like the middle of the bell curve of “running out”.

    Oh, by the way: when we run out of oil, we also run out of plastic and the most common lubricant on earth. This isn’t just an energy issue.

    you’re still arguing that nothing will happen until Ohio is oceanfront property, even though a mere six months of $4/gallon gas in the United States has dramatically yadda yadda yadda

    I think we have two different ideas of what would be “dramatic” change. As we both agree, the dramatic change is calls to drill more oil. I would be heartened by the decline in consumption if it were connected to an understanding of “when it’s gone, it’s gone”; I’m less heartened by the connection to “we just can’t afford it.” Affordability is fungible, so give us a better economy and consumption goes right back up.

    Basically, and apologies for not saying this explicitly before: I’m not saying we’re doing nothing, I’m saying that we’re doing what we’ve always done. Americans love Manhattan Projects: let’s get together and build a nuke in four years, or crash-build the Y2K fixes, or gear up during WWII and build the equivalent of our 1939 armaments every month for four years. We’re very good at that. And we know it. So I would strongly suspect that we will be very late in the game changing our energy consumption models, and we’ll put it off as long as possible.

    Which is fine if it works. As I see it, though, reliance on oil pushes us towards several tipping point mechanisms with catastrophic results if they aren’t avoided. We have to bat 1.000 on this one if we’re going to handle this crisis the way we usually go about such things. And given how Americans have acted during the last 30 years since the founding of the modern environmentalist movement, I’m not going to think of six months as a particularly large change in a trend unless I see something radically different happening.

    BTW, you mentioned hybrid technologies as a solution. Think about what happens to the gas side of the hybrid car when gas runs out. And as for the electric side — well, that rather depends on what’s generating the electricity, no? As I see it, technologies that conserve oil only buy time — which I think is worthwhile (and here’s where I’m in favor of one form of “adaptation”). But I think we need to realize, and haven’t yet, that these technologies only add maybe a decade or two to that 40-year window. It’s therefore crucial what we do with that time, and honestly, Brian, the trendlines just aren’t encouraging as of yet.

    I’m wondering what has to happen before you realize that a significant economic incentive (both in terms of painfully higher expenses and available profit opportunities) are enough to bring about change.

    Look, here’s what I think about when I hear about “economic incentives” as a solution to the problem. Let’s add up all of the factors that go into the oil economy right now: drilling it, refining it, transporting it, burning it, and building things that burn it. What is that, globally? A trillion dollars or so? What’s the sunk investment on 20,000 American gas stations and two hundred fifty million gas-burning cars? Honestly, I don’t have the chops to research this properly; you’re welcome to make this a weekend project.

    I’m guessing that oil-based energy economically outweighs renewable energies by a factor of 1,000 to 1, maybe 5,000 to 1, if we include all those sunk cost factors. (Hell, toss in real estate, since we’ve moved so many people out to the exurbs, and not all of them take NJT.) The people who have made such investments (i.e., everyone who owns a car), and the people who make money off this system, will fight like hell to delay switching to something different. Human nature.

    So I’m guessing that we will see an upward trend in alternative energy R&D and deployment, especially if gas continues to go up. What I don’t see is the exponential rise that will counter the issue that right now, the equation is so lopsided. That’s not something that’s solved by markets; that’s something that’s solved by political and social will to live differently.

    Like JFK Jr.’s environmental stump speech, the “end of civilization” argument does nothing but weaken the more practical, market-driven reasons to move forward. And like Al Gore, when the market does get us there, the people who spend their time screaming about ice ages and floods today will be (wrongly) looked upon as kooks.

    Can’t see how my argument weakens any other efforts. My argument is pointing out that if my ridiculously overeducated interlocutor has never done the math on barrels in the ground divided by barrels consumed, not many other people have either.

    Let’s be clear on this: the way of life we enjoy now is ending. We just don’t know when. What we do between now and then will determine whether we’re talking about an end of civilization, the pauperization of America, or just another transition to new sources. Folks like me raise the first two possibilities purely to point out to folks like you that the consequences of failure are dire. And honestly, statements like “I will say that I’ve never seen anyone suggest that we’ll run out of oil in our lifetime and be taken seriously” are the oil that fuels the engines of making dire statements. Because folks like me, when they hear smart people saying things like that, tend to think, “Man, we are truly in the shitter.”

    Finally, I’ll raise one more point: I will be thrilled to be wrong about this. If your market theories get us to a sustainable and improving future without causing massive poverty and misery, I will gladly eat crow and continue consuming my imported coffee with my plastic laptop case, rather than try to use a Fresnel lens to heat a squirrel for dinner on the abandoned I-95. We Cassandras don’t want to be proved right; we want to convince others to make changes so these things don’t happen.

    Please…McCain didn’t turn into a bible-thumper overnight because some Democrat decided to news-catalog him in the “Bush governs through prayer” meme.

    Okay, moratorium on this topic until I get around to writing that blog post. That’s not what I was referring to. I was referring to this.

    I’m still waiting for an example of when Bush himself made a faith-based decision

    Oh, give me a easy one, why don’t you. Abstinence-only education, which increases unwed pregnancies across the board everywhere it’s been tried. There are literally hundreds of other examples, but most of them will get hung up over definitions of “faith-based”.

    Wow, indeed. By “gaining control of the supply ourselves,” I meant producing enough domestic oil so that we can stop buying foreign oil.

    Wow, indeed, indeed. How exactly do you intend to do this? A few numbers for you: total amount of oil in the Gulf Coast region is equivalent to 3-6 months of domestic oil consumption. Total amount in the Alaskan North Coastal Plain (of which ANWR is a subset): estimates vary, but probably 1-3 years’ worth. Extraction can begin at the earliest in 10-15 years, and will come out over a 10-20 year timeframe beyond that.

    Brian, we don’t have domestic supplies of oil sufficient to be self-sustaining. So when you say that we should secure it for ourselves, the only way to do that is to take it from other people. Pardon me for making a highly condescending statement, but when I jumped to the conclusion that you were talking about warfare, it was because I had previously jumped to the conclusion that you already knew this.

    Incidentally, we have shitloads of coal. Centuries worth. Problem is, clean coal technologies are largely a fraud, so switching back to coal would likely make the US a place where we’d go to Beijing to enjoy the fresh air. I do, however, predict that market forces will push us in this direction very shortly, and will make most of the “let’s switch to domestic” arguments that you’re making here.

    This isn’t about the markets “deciding” to move away from oil. Markets don’t proactively set policy.

    Huh. That’s exactly the point I’m making, and why I see them reacting too slowly and ultimately failing. So the question is, if markets don’t proactively set policy, why are you so comfortable relying on them for a solution? And has my discussion of timeframes changed this in any way?

    $4/gallon gas touched off a massive movement (public and private sector) to make alternative energy a reality. I assumed that we’d agree that this is a good thing, although from your comment above, it sounds like you’d question that this movement has even occurred.

    Let’s put it this way. When you and I decide to spend time together, we have two energy sources at our disposal that allow us to be in the same city. The first is burning oil. The second is our legs. When there are discussions about a viable third alternative being available on a five-year time frame, I’ll say that massive movement has occurred.

    I’d rather see us move away from foreign oil and then control the supply ourselves (another way of saying “allowing the market to chase…”), rather than constantly reacting to a perennially unstable Middle East.

    We are in total agreement; I like the political advantages of not being dependent on foreign oil. The problem is that domestic oil can’t do it, either. So if we’re talking about building a domestic energy supply, we’re talking coal, nuclear, solar, or wind. I’m fairly certain we’ve already maxed out on hydro, but I could be wrong.

    Coal is cheap, but dirty as hell, and has a very high weight-to-energy ratio. There are good reasons why we switched to gas and left coal for houses, generators, and barbecues. Nuclear requires tens of billions to get going, and has all sorts of unwelcome leftovers, like nuclear waste and bomb material.

    The thing is, solar and wind are both very doable, but not with market-sized investments. You want to switch to renewables, you need to put billions in upfront, and you need to build an infrastructure. We did this for gas — it was called the National Highway Project. Any sort of serious discussion of this on a national level would also count as “massive movement” in Jeff’s book.

    (Aside: I’m reminded that I do see one way for markets to fix this problem, and that’s with a deus ex machina technology. There’s promising stuff on the horizon in a few areas. Again, part of the issue here is that the funding for this work is largely an afterthought; markets don’t generate the kind of capital to do fusion research. There’s a reason why the SSC and Hadron Colliders were government projects.)

    Obama’s previously held position (no offshore drilling – use the high oil prices as incentive to move faster on alternative energy) has it’s merits, as John McCain seems to have suddenly realized. Then again, Obama has suddenly come to realize that maybe some drilling in the meanwhile wouldn’t be so bad, either.

    I hope I’ve made my point that drilling is a sideshow. In the long run, conservation is a sideshow so long as we’re still dependent on the same sources of energy. This is probably why we’re arguing as to whether I’ve contradicted myself about “adaptive” measures. Buying time is a good thing only if we use that time wisely, and I don’t think we will. Change my mind on that, and you might very well hear me saying, “fuck the caribou.”

  10. Jeff Porten says at August 19th, 2008 at 4:32 am :
    Damn, got WordPressed. Link to article on peak oil: http://www.straightdope.com/columns/060224.html

  11. Brian says at August 24th, 2008 at 2:23 am :
    IMO, an objective analysis of the risks involved in oil production, taking into account the ten-year lead time, makes it fairly obvious that Bush’s executive order has almost zero impact on the long-term risk.

    OK, so now we’ve gone from sharpened sponge to 2,100 words to it’s “fairly obvious” that thousands of commodities traders all around the world, who spend their lives pricing their goods and have billions of dollars riding in their decisions, are completely and totally wrong. Nice…

    At this point, I feel the need to ammend and/or clarify what we’ve been discussing. If I implied that the oil market fell 20% solely because Bush signed an executive order, then I didn’t mean to. The market, by definition, takes in all available information, not just one item. It may be that a dozen other factors occurred simultaneous with Bush’s action to make the market fall, or even that those other factors helped cause both Bush’s action and the market movement. Personally (and here, I’m only slightly more qualified to say than you are), I don’t think that’s the case. I think Bush’s action had it’s intended effect of putting the offshore drilling question squarely on the political table, and that plus the subsequent reactions of the candidates, congressmen, and private-sector oil experts helped to accelerate the trend. I say this because the market started a 20% drop the same week as Bush’s action, after completing a 40% rise over the previous ~4 months.

    Your arguments about how Bush’s action can be easily reversed shows a lack of understanding on your part about risk management, not an irrational repsonse from the markets. Markets respond to risk in real time. If things look good, prices go up. If that changes, prices go back down. If both happen, the first move can’t be called irrational because the second move happened. People place their bets based on the information they have (a concept you should be very much familiar with).

    I’m so thoroughly gobsmacked by the idea that we disagree on this point that I’m just going to keep my mouth shut until I see what you say next. I had rather thought that the one-to-one correlation between Gulf War II and $150 oil was accepted as given.

    I stand corrected on this point. I honestly thought the price of oil had risen more gradually than it has (it’s been a while since I looked at the long term trends…). Anyway, point conceded.

    And the gobsmacking continues. Okay, here’s a really good introduction on the topic: . Beyond that, Google “peak oil” and read as much as you like.

    If you keep smacking your gob, you’re going to go blind…

    Yes, I’ve heard of Peak Oil. But to suggest that, at face value, it’s taken seriously, is seriously warped. Here’s the first non-wiki hit in the “Peak Oil” Google query. First eleven words on the site: “Civilization as we know it is coming to an end soon.” I’m not sure when the site was last updated, but throughout the text, it predicts the peak of oil in the 1970′s, 2000, 2002, 2005 and 2008. It also says that oil prices significantly north of $100/barrel would cause “massive, last-ditch global resource wars.”

    Here’s a more reasoned analysis. Roughly 122 years of oil left, counting only current technologies for retrieving oil from the ground. It also points out that most of our oil reserves are replenished through upgrades to existing fields than from exploration, which speaks to the speed at which technology is advancing.

    Here is another graph showing the predicted end of oil – there’s at least a 100-year range of predictions (hard to tell because the graph’s legend obscures the most important part of the graph).

    And then there’s oil shale. Global deposits estimated at the equivalent of anywhere between 2.8-3.3 trillion barrels of oil (including ~800 billion barrels in the Rocky Mountain areas of the US alone). A 2005 RAND study claimed that (then) current technology would only be profitable if oil were above the $70-$95/barrel range, and that this breakeven price would drop to $35-$48/barrel after the first 500 million barrels were produced, and then to $30-$40/barrel after the first billion barrels. In the same year, Royal Dutch Shell claimed they could be competitive as long as oil was above $30/barrel, but no one seems to have verified that claim. More on Oil Shale Economics here.

    I’m not suggesting that oil is a renewable resource, or that the one example of oil shale is the saving grace that makes this a non-issue. I’m just pointing out that ignoring currently undiscovered technological advances is not just a footnote, it’s ridiculously foolhardy.

    We have to bat 1.000 on this one if we’re going to handle this crisis the way we usually go about such things.

    Not true at all. The current environment (no pun intended) has spawned a massive, global industry bent on solving this problem. Ten years ago, there were NO hybrid cars on the road. Today, there are millions. Ten years from now, I’m guessing just about all cars will be hybrids, if not something better. Honda’s got a passive system for cleaning diesel fuel prototyping in Japan right now, which could yield cars that get >150 mpg in the next few years. Scientists here at home are working on, as an engineering student I know so eloquently put it, “bacteria that shits carbon.” This is all in the last five years or so. Even if your numbers are right and my numbers are wrong, we’ve got 30-40 years right now. If the next five years are like the last five years, we could double that number and then double it again. This doesn’t have to be done in one fell-swoop. It can be taken apart in pieces, as has been the case to date…

    Let’s add up all of the factors that go into the oil economy right now: drilling it, refining it, transporting it, burning it, and building things that burn it. What is that, globally? A trillion dollars or so?

    Heh… Exxon and Chevron spend more than $500 billion on their own, and they rank #1 and #4 in the world, respectively (data on #2 – PetroChina, and #3 – Royal Dutch Shell, not easily available because they’re not American companies).

    The people who have made such investments (i.e., everyone who owns a car), and the people who make money off this system, will fight like hell to delay switching to something different. Human nature.

    I disagree entirely and, as above, the markets support me, not you. You’ll note in my examples above that the companies pioneering all of the new technologies are the companies of which you speak – RAND, Royal Dutch Shell, Honda, etc.. Their market-leading position in the current world gives them a huge edge, both financially and technologically, in the R&D horse race. They all understand that this is the future, and they want to get there first, not put their hands over their ears & scream “I CAN’T HEAR YOU!!!” until the money runs out. I know it’s fashionable to bash the oil companies (especially these days), but I can unequivocally promise you that the first company to successfully replace oil will be an oil company, just as the first company to produce an electric car will be a car manufacturer. My rationale? No one else has the capacity or knowledge to try…

    Let’s be clear on this: the way of life we enjoy now is ending. We just don’t know when. What we do between now and then will determine whether we’re talking about an end of civilization, the pauperization of America, or just another transition to new sources.

    Completely agreed. I just don’t see how you list those three options and expect me to assume that they have equal probability when the third option has been the case over and over and over again for the last 60+ years or more.

    Other topics:

    McCain as bible-thumper: you don’t seriously believe that a commercial that calls back The Matrix and The Ten Commandments was intended to talk about the anti-Christ, do you? Come on….

    Bush’s faith-based decision: It turned out his “abstinence-only education program” only allocated 7 percent of its funding to programs that advocated abstinence until after marriage. Also, it drew praise from such stalwart supporters of the religious right as Bill Clinton and Bill Gates. Try again. I’m still waiting for that one example. Remember, you said this was an easy one…

  12. Jeff Porten says at September 2nd, 2008 at 8:55 am :
    so now we’ve gone from sharpened sponge to 2,100 words to it’s “fairly obvious” that thousands of commodities traders all around the world, who spend their lives pricing their goods and have billions of dollars riding in their decisions, are completely and totally wrong. Nice…

    More accurate to say that I don’t subscribe to your faith in the rationality of markets, and cf. my earlier discussion of the slave trade for the best analogy I’ll ever come up with. But to rephrase the argument: economic history shows that markets are the best way for the collective actions of individuals to trend towards rational behavior. But human history (a superset of economic history) shows equally clearly that cultures (again, a superset of economics) can collectively act under deluded and/or fallacious principles, and can be extremely vociferous in clinging to their delusions. (Cf. Thomas Kuhn’s The Structure of Scientific Revolutions for illustrative examples among highly educated people.)

    My inference is that a market can only approach a maximum of rationality that is allowed by the delusions and fallacies of its culture, and as I judge our present culture to be generally deluded about certain aspects of science, I can’t expect its markets to perform any better.

    If I implied that the oil market fell 20% solely because Bush signed an executive order, then I didn’t mean to. The market, by definition, takes in all available information, not just one item.

    Well, I think you did say that explicitly, but I’ll accept your restatement in good faith. And your argument about “all available information” is exactly what I’m talking about: “all available information” includes a great deal of bad information, and a great deal of deliberate misinformation generated by interested parties, so I think that in this area there’s a much better understanding to be had from “all available information after an educated filter has sifted out the crap“. The difference in our philosophies seems to be that you presume the market to be a crap filter, while I think it’s serving as a crap processor.

    Your arguments about how Bush’s action can be easily reversed shows a lack of understanding on your part about risk management, not an irrational repsonse from the markets. Markets respond to risk in real time.

    Hmmm. This could be one hell of a debate in and of itself. Let’s just say: stipulated that my knowledge of risk management as an economic discipline is highly limited. But my knowledge of the psychology of risk management is greater than the average bear; my perception is that this is the part that is inefficiently understood by the markets (because all of the actors thereof are psychological beings themselves). Again, cf. my argument about slave markets, which made abolition a fringe element for two centuries (and deferred that risk until it cost us a civil war). Our present markets are not immune to doing the same thing.

    If you keep smacking your gob, you’re going to go blind…

    For the record: “gobsmacking” is British slang equivalent to “jawdropping”. “Gob” is mouth. I love the term because “I am jawdropped” isn’t in the American vernacular.

    Yes, I’ve heard of Peak Oil. But to suggest that, at face value, it’s taken seriously, is seriously warped. Here’s the first non-wiki hit in the “Peak Oil” Google query…. Here’s a more reasoned analysis.

    Okay, this is one of the truly annoying things about debating with you. You have a consistent habit of assuming that the shrillness of the language necessarily means that the author’s data and conclusions are wrong, whereas anyone who says anything that you deem “reasonable” is by definition “more reasoned”.

    Which, now that I’ve pointed this out to you, I hope you understand is just as fallacious as if you presumed the exact opposite. Get past the language and look at the data. For example, your “more reasoned” analysis is single-sourced to a company that seems to make all of its money consulting for the carbon fuels industry. Such a company will have two products: what they tell their clients privately, and what they make public in order to support their clients. A “more reasoned” response would be to take that article as a single data point, and compare it to the last sixty years of research.

    Now, to concede your correct observation: there have been many instances of people saying that the sky was falling way too early. It is indeed likely that some aspects of what’s being said now is in the same category. Keep in mind that I consider myself a technological utopian, so I am biased in favor of the idea that new technologies will fix certain aspects of our current problems.

    However, everything that I’ve read says that the 3.7 trillion barrels estimate includes reserves that are presently impossible to reach; the argument you cite that presumes that we will be able to excavate all of it in the necessary timeframe seems to me to be an excellent example of the disinformation I cited earlier. Furthermore, there is a reverse Moore’s Law in effect here: the rate of increase of reachability is dropping. It used to be that 90% of these reserves were impossible to drill; that number has dropped to 65% or so. I’m sure it will drop further, but geological predictions imply that there is some floor to this number that is way above 0%. Likewise, oil shale and oil sands used to be in the 100% range, and that’s dropped to something like the high eighties.

    We’re in agreement that it is possible for some new technology to arrive that pushes this problem well into the next century: the two that come to mind are your carbon-shitting bacteria, and nanotechnologies that dissolve rock and leave the oil. The issue, as I see it, is that even if we presume such technologies to someday exist, we’re still left with the problems that result from burning carbon. The catastrophic scenario is hitting that five-year period when the climate goes completely bezonkers (and the loss of the Arctic ice cap in the next decade could be it; water absorbs much more solar heat than reflective ice), and we hit a sudden need to stop burning carbon immediately regardless of the size of our reserves. This possibility, in conjunction with the likelihood of running out of available carbon fuels, is where the doomsday fall-of-civilization scenarios come into play.

    Which, finally, is where I think we’re destined to disagree. Again, I think you’re biased against any “unreasonable” statement as being “unreasoned”, so when it comes to any issue that has as part of its consequences the possibility of human extinction, you dismiss it as hysterics. My thinking, on the other hand, is that there are some numbers N in the phrase “N% chance of human extinction” which are simply too high, regardless of the benefits such risks provide. And I’ll readily admit that I don’t care too much about what that number N might be within several orders of magnitude. What bothers me most about our debates on these issues is that I think you’re a lot more mainstream than I am — and your tolerance of large N is way too high for my liking.

    Their market-leading position in the current world gives them a huge edge, both financially and technologically, in the R&D horse race. They all understand that this is the future, and they want to get there first, not put their hands over their ears & scream “I CAN’T HEAR YOU!!!” until the money runs out.

    Yeah, right. Again, I am faintly impressed by your near-religious belief in Adam Smith to save us all; from where I’m sitting, it strikes me as up there with the Rapture in its self-sustaining perfection.

    Where we agree: the major corporations will go where the money is, and any decent R&D structure will make their best efforts towards seeing where we’ll be in 10-100 years (depending upon the culture of the company) and try to prepare for that. Where we disagree: the focus on short-term profitability provides a large incentive for the companies, as you put it, to their hands over our ears so we can’t hear opposing points of view. It’s very comforting to think that our window on carbon fuels is 125 years. People prefer being comforted. That provides an excellent scenario for not doing much in the way of change.

    Again, it doesn’t make a damned bit of ecological difference if our entire fleet is hybrid or even purely electric, if the electricity we use is carbon-based. It does make a difference geopolitically, and it does make a difference economically. Here’s the crucial distinction you seem to be missing: ecology is an independent system from politics and economics. Our way of life is only sustainable if our solutions speak to both systems.

    My observation: economics and geopolitics are also substantially decoupled systems, and for proof I can point to both the Civil War and the war in Iraq as “costs” which were not included in the markets which preceded both wars. However, economics is not nearly as independent from geopolitics as it is from ecology, which is a blessing and a curse: it means that our economy can respond well to geopolitical failures (which I’d argue is what’s happening now, with the price of gas fueling alternative energy interest), but it can also cause our political interests to be warped.

    So I’d say I have some faith that markets can respond to political successes and failures, to some extent. But both politics and ecological impacts can be chaotic systems (cf. WWI for an example of the former), and I think it’s a case of blind luck whether market forces can keep up with devastatingly swift change in either arena.

    McCain as bible-thumper: you don’t seriously believe that a commercial that calls back The Matrix and The Ten Commandments was intended to talk about the anti-Christ, do you? Come on….

    Yeah, I do. Fact is, I’ve been generally terrified of the pro-Armageddon wing of the Christian Right ever since I attended the Billy Graham Crusade and heard it from the horse’s mouth. Take a look at the numbers surrounding the Left Behind books (another excellent example of how the markets can be used to spread some very dangerous memes) if you don’t believe me.

    I think we East Coast Jews live in a world where these ideologies don’t exist in any public sense, so it’s easy for us to pretend they don’t exist at all. McCain’s ad pandered to that crowd, in a way that was deliberately designed to make sure that you’d miss it. Looks like it worked.

    Bush’s faith-based decision: It turned out his “abstinence-only education program” only allocated 7 percent of its funding to programs that advocated abstinence until after marriage. Also, it drew praise from such stalwart supporters of the religious right as Bill Clinton and Bill Gates. Try again. I’m still waiting for that one example. Remember, you said this was an easy one…

    Yeah. We did this already; can’t remember if it was web-based or email, but the last time you sent me that link, I sent you around 10,000 words describing how Bush eviscerated the global women’s health programs at the UN, and how your article completely missed this fact. Pardon me, but I think I’ll just point you to Google Desktop to figure out what we both said last time, rather than attempt to reinvent that wheel.

    Anyway, here’s a start on just maybe providing you with a clear example: http://www.au.org/site/PageServer?pagename=resources_brochure_faithbased. Personally, once I heard that Bush thinks that God chose him to be president, and I heard his underlings refer to detractors as the “reality-based community”, it seemed clear to me what perspective the entire administration was running on. But you thought this was horseshit every other time I’ve brought this up, so I can’t see why it’ll be any different this time.

  13. Brian says at September 8th, 2008 at 3:51 pm :
    Okay, this is one of the truly annoying things about debating with you. You have a consistent habit of assuming that the shrillness of the language necessarily means that the author’s data and conclusions are wrong, whereas anyone who says anything that you deem “reasonable” is by definition “more reasoned”.

    Yeah, I’m a royal pain in the ass that way, aren’t I? Look – if someone uses crazy talk to make a serious point and I dismiss them as crazy, I see that as the speaker’s problem, not mine.

    For example, your “more reasoned” analysis is single-sourced to a company that seems to make all of its money consulting for the carbon fuels industry.

    I meant the above link as an example, not a complete argument. Google Peak Oil and read past the first link. There appear to be two camps: one that does [current supply + annual production / annual usage = years until peak oil], and the other that talks about what what new technologies need to do to keep us moving forward. The former crowd typically footnotes it’s articles with a nod toward the latter crowd, as if it’s a minor point.

    Going back to the stock market as an example: in August of 2001 (earliest data available), the New York Stock Exchange traded, on average, just over 1.3 billion shares a day. If I had told you then that volume would triple in seven years, you may have told me that the market would collapse under it’s own weight. Between now and then, though, the NYSE has gone electronic, instituted decimal pricing, and pushed forward on several striaght-through processing (read: trades that settle without human intervention) initiatives. So in August of 2008, volume could be 4.3 billion shares per day (note: in the first week of September, the average is almost 6.3 billion!) Don’t like that example: how about Gates’ famous “no one will ever need more than 640K of RAM” statement in the early 80s. The list goes on…

    Where we disagree: the focus on short-term profitability provides a large incentive for the companies, as you put it, to their hands over our ears so we can’t hear opposing points of view. It’s very comforting to think that our window on carbon fuels is 125 years. People prefer being comforted. That provides an excellent scenario for not doing much in the way of change.

    Ominous as always, but the fact is we *DO* know how much is being spent on R&D (these are all public companies and are required to disclose all of that data). We’ve also seen massive movement in the last 3-5 years that you seem to be willfully ignoring. Hybrid cars being on example. Electric city buses being another. Passive filtration of diesel fuel being a third. Sarah Palin’s natural gas pipeline being a fourth. And on & on.

    As I’ve said before, “Green” is the new “Anti-Apartheid.” Everyone’s doing it for a variety of reasons (including public relations). And this presidential election, we seem to have sudden and universal agreement on the need for alternative energy sources. My personal prediction: the “energy economy” will be the next growth curve in our GDP. If it’s Obama at the helm, the story will be “Democrats cause economic growth again,” and if it’s McCain, it will be “McCain lines the pockets of his energy CEO buddies as Big Oil cashes in on Big Green.” Either way, though, our energy problems go the way of Y2K, and millions of Americans make billions of dollars.

    Not saying it will happen, but it’s something to drive toward, and it’s a whole lot more likely than the Artic Ice Cap Global Alarm going off, followed by armed guards keeping us from filling up our SUV’s.

    Yeah. We did this already; can’t remember if it was web-based or email, but the last time you sent me that link, I sent you around 10,000 words describing how Bush eviscerated the global women’s health programs at the UN, and how your article completely missed this fact. Pardon me, but I think I’ll just point you to Google Desktop to figure out what we both said last time, rather than attempt to reinvent that wheel.

    Turns out it was web based, and it’s here. You countered the 7% abstinence number with Avert.org’s Pepfar page, which says that 20-30% of the funding went to faith-based organizations (something the doctors on the ground considered a feature, not a bug, since faith-based organizations have more power and influence than the governments in many of these poor, African nations).

    I can’t find anything on Bush eviscerating global women’s health programs at the UN, but that is also well aside of the question I asked you: please show me one example of George Bush making a decision based on faith alone.

    Personally, once I heard that Bush thinks that God chose him to be president, and I heard his underlings refer to detractors as the “reality-based community”, it seemed clear to me what perspective the entire administration was running on. But you thought this was horseshit every other time I’ve brought this up, so I can’t see why it’ll be any different this time.

    I thought it was horseshit because it didn’t come from George Bush. Read this. Carefully. The author of the article is so bent on convincing us that Bush feels “called by God” that he offers, as evidence, the fact that George Pataki and Rudy Giuliani both said “Thank God George Bush is our president” on separate occasions just after 9/11, and theorizes that their comments were “almost certainly scrubbed if not written by teh White House.” He then quotes several right-wing ministers and conservative Christian magazines, all of which claim that they heard George Bush (or his parents?) say that he felt called by God to be president. In this, the Web/YouTube generation, not a single transcript or video of him saying anything remotely like that has ever existed. Quite convenient, huh?

    And I’m sure I don’t have to tell you that Bush isn’t the first president to talk about God publicly. He isn’t even the worst offender. If my memory serves, Reagan and Carter did it far more often. And don’t even get me started on the likes of Thomas Jefferson or Abe Lincoln.

    So yet again, I ask: One example of where Bush acted based on his faith, not his politics.

    I’ll even spot you one: He flew back to DC to sign a bill allowing an appeal on whether or not to pull the plug on Terry Schaivo. I’ll admit that that one was close (and a dumb move on his part). Any others?

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