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Peak Oil

November 25th, 2005

I’m talking today at a Brisbane Institute forum on oil and whether it’s running out. 12:30 at the Hilton. I’ll try to post my presentation soon.

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  1. Crispin Bennett
    January 5th, 2006 at 16:42 | #1

    Andrew, what you say about humour is true. A pity, perhaps, but somewhat inevitable. There even seems to be some truth in the stereotypes about kinds of humour, ie. lefties’ being none-existent and right-wingers’ being full of nastiness and bile (lefties have plenty of nastiness and bile, of course, but tend not to express it humourously).

  2. Will De Vere
    January 5th, 2006 at 18:35 | #2

    I hope that the oil runs out soon. Walking is good for our legs. Legs are important for walking. QED.

  3. Andrew Reynolds
    January 5th, 2006 at 19:16 | #3

    Will,
    I am sure you have fabulous legs. A side benefit would be that most current power stations would stop working, so we would not feel compelled to continue this thread as we would have much more important things to sort out.

  4. January 10th, 2006 at 09:23 | #4

    Andrew Reynolds wrote in the “After the riots” thread on 9 Jan 06 :

    Nesmith is assuming the resource mix will not change between now and 2031 – an assumption I cannot see is supportable, and in fact he moots the change at the tail of the article.

    Andrew, it seems to me that you are not paying proper attention and, also, that you are not thinking things through.

    Andrew Reynolds wrote : If, for example, the US burned as much oil per unit of GDP now as it did 30 years ago they would be using more than double the oil they currently are.

    So, if, instead of consuming 118% of the current world’s consumption of oil, they were ‘only’ to consume 59% or even they were ‘only’ to consume what they are now consuming, you believe that there won’t be a serious problem?

    The fact is that there are few remaining undiscovered oil fields, and in any case, geologists have fairly good estimates of how much undiscovered oil is yet to be discovered, and if oil continues to be consumed at the current rate (at which rate will soon be physically impossible to extract) oil reserves are likely go be exhausted in 2035.

    Andrew Reynolds wrote : For the food problem, if the grain fields of the Ukraine and Russia were brought up to the efficiency of the US, Canada and Australia it would largely solve the problems of lack of food, and that is neglecting any improvement in the yield in the US, Canada and Australia.

    But how is this to be done with diminishing supplies of petroleum and gas? Are you going to argue that the productivity of the whole world’s agricultural system is somehow going to be maintained and improved using either nuclear or solar energy? Even if it were possible to do so with soils which have been so badly degraded and eroded thus far as a consequence of artificial farming techniques, can you envision just what an enormous project the conversion of the whole world’s agricultural system away from fossil fuel dependency would be?

    Andrew Reynolds wrote : A large part of the world’s paper is produced for newspapers and copying / printing – within 30 years I would be surprised if e-paper (or similar) had not largely replaced these uses.

    Let’s hope that you are right. However, do you think that perhaps it may be rather odd that how, some twenty five years after the commencement of neo-liberal globalisation ‘reforms’ to the world’s economy, that the ‘market signals‘, instead of bringing about this highly desirable outcome, have brought about the precise reverse? In any case, even paperless alternatives incur a significant environmental cost, and, to manufacture sufficient computer hardware to effectively wean China, and the rest of the world, off paper would require an enormous amount of the world’s diminishing stocks of petroleum. Of course, from humanity’s point of view, this would be a vastly better use of our remaining petroleum than it’s continued waste in the gridlocked traffic of cities of the world, or in consumer goods, intentionally designed to be in landfill after a few short years. Are you still seriously expecting us to hope that ‘market signals’ alone will, somehow, finally, after all these years, fix these sorts of problems?

    Andrew Reynolds wrote : The car problem is a simple space limitation – given the likely high relative cost of land in China’s cities, …

    Whew! Thank goodness for that!

    So, what you are saying is that long before the 1,100,000,000th car is bought in China, every available square metre of available land, which has been turned into roads and parking allotments, will be choked with cars, buses, trucks and motorcycles?

    BTW, why do you think that land is so expensive in China’s cities? Do you think it might possibly have something to do with supply and demand? What effect to do you believe a further increase in China’s population will have on the cost of land? And can you tell me how you believe that this will be of benefit to the ordinary Chinese?

    Andrew Reynolds wrote : … I would also be surprised if the Chinese had as many cars per unit of GDP output as the US does now. They are likely to consume in other areas. To say that, if China becomes as wealthy as the US it will consume in the same way with the same proportions 25 to 30 years from now is simply incredible – as in not credible.

    Of course it’s not credible!

    Any teenager, who is capable of critical thought, can understand that this is just not possible in country with a population numbering in the hundreds of millions. Please give Jeff Nesmith credit for having at least that much common sense, even if the same cannot be said of most of our current economists.

    Andrew Reynolds wrote : In any case, (IMHO) before China becomes a wealthy nation it will need to have a political makeover – a process that will probably delay the entire process for a decade, at least.

    China, with a population of 1.3 billion and growing cannot possibly ever become a ‘wealthy’ nation in the same sense as we are wealthy. The whole world would have fried long before that could have been achieved. Let us hope that, at least, they can find a way to be sustainable and self-sufficient before the world’s fossil fuel stocks are exhausted.

    Let’s also hope that the Chinese can achieve a proper democracy (and one considerably better than our own, in which far-reaching laws such as the IR ‘reforms’ and the ‘welfare to work’ legislation, which are consciously designed to impoverish large sectors of the Australian population, were not even put to the Australian public at last year’s election, and are still opposed by the majority of Australians in spite of an unprecedented and fraudulent taxpayer funded propaganda campaign, have been enacted).

    Also, can you say whether or not you think that the Chinese leaders are wise to attempt to limit their population growth to 1.4 billion, or do you think that is of no consequence if they were to double again to 2.6 billion, or go all the way up to infinity?

    Finally, Andrew, would you be able to tell us what your thoughts are in regard to Lester Brown’s proposals, reported by Jeff Nesmith :

    He said the world needs to spend $US161 billion a year limiting population growth, restoring forests, fisheries, grasslands and water supplies and controlling global warming.

    ?

  5. Will De Vere
    January 10th, 2006 at 13:38 | #5

    Since we’re now repeating ourselves across discussions, this is what I wrote in ‘After the Riots’:

    ‘I’m in strong agreement with Andrew: the above figures [Nesmith's] have a static, monolithic tone to them. Technology alters our resource use all the time eg how many million of tons of paper have already been saved by the growth of email? I’ve no doubt that the growth of the Chinese economy will have an important environmental influence, but not in the form of this kind of commodity use, and it’s impossible to believe that the average Chinese could be as prosperous as the average American in only 20-30 years.

    The numbers cited remind me of Nikita Krushchev’s boast in the 1950s that the USSR would surpass America’s economy by 1970. He was right, but he had only been thinking of steel, coal, pig iron etc. The West was moving onto silicon.

    Another example of monolithic thinking: earlier in [After the Riots] J. Sinnamon quoted P.Ehrlich (St Paul of Bengal) as talking about ‘300 million’ American ’super-consumers’. 300 million? Many millions of Americans – the poor, the elderly, Native Americans, hippies in Oregon, children – might be bemused to hear themselves described as ’super-consumers’. The figure was a blatant exaggeration for rhetorical purposes.

    Perhaps the ultimate American super-consumer is Bill Gates. After building himself a colossal palace in Seattle, he has donated at least $7 billion to disease control in Africa and elsewhere. I just can’t find it in my heart to dislike him anymore.’

  6. January 10th, 2006 at 15:55 | #6

    Will De Vere wrote : Another example of monolithic thinking: earlier in [After the Riots] J. Sinnamon quoted P.Ehrlich (St Paul of Bengal) as talking about ‘300 million’ American ’super-consumers’. 300 million? Many millions of Americans – the poor, the elderly, Native Americans, hippies in Oregon, children – might be bemused to hear themselves described as ’super-consumers’. The figure was a blatant exaggeration for rhetorical purposes.

    Now, this is getting really silly.

    One moment, as ‘proof’ of Paul Ehrlich’s quasi-fascism – sorry, crypto-racism – you falsely accuse him of focusing only on countries such as India where people have darker coloured skin. Now that I have shown this to be wrong, he stands condemned for supposedly failing to acknowledge that poor people in the US don’t consume as much as the wealthy.

    I can’t really prove here and now that Paul Ehrlich has demonstrated his concern for the plight of poorer Americans, but my guess, from having observed what a decent and thoughtful human being he most likely would have.

    The fact is, even the poorest in countries like the US and Australia tend to have a significanlty larger ecological footprint than most people in third world countries.

    By comparison with typical person living in a third world country, a huge amount of non-renewable resources is necessary to maintain living standards of even most of the poorest in countries, such as Australia.

    However, if you read accounts of how the poorest American and Australians live, in factual accounts of life in low wage occupations in “Dirt Cheap� by Australian journalist Elisabeth Wynhausen (see http://tinyurl.com/7rfjv, http://tinyurl.com/dxth8), or Nickel and Dimed by US journalist, Barbara Ehrenreich, the actual output gained from such relatively large inputs of resources, in terms of the quality of life, is nowhere near as much better as should be expected.

    This is why I have argued elsewhere that neo-liberal capitalism is scandalously inefficient. The way that so many neo-liberal economists have been able to pretend otherwise, for so long, using such obviously deficient measures as the GDP, is one of the great confidence tricks of late twentieth and early twenty-first centuries.

    Regarding Bill Gates, whose name you have inexplicably brought out of nowhere into this discsusion:

    Of course, one has to give credit where credit is due, but even the seemingly massively generous donation of $7 billion is only a small fraction of what he has taken from the rest of the world by exploiting the monopoly stranglehold that his inferior Windows Operating system has on the world.

    Without the Microsoft stranglehold, Linux and other vastly superior operating systems, which are virtually free, would have become ubiqitous, and the huge amount of the world’s economic resources, which have been diverted into the pockets of Gates and Microsoft shareholders, could have been put to much better use.

    Also, the life spans of the mountains of computer hardware, constantly rendered obsolote by Microsoft incessantly forcing its customers to upgrade, could have been extended for much much longer, thereby saving huge amounts of non-renewable resources for ourselves and for future generations.

  7. Crispin Bennett
    January 10th, 2006 at 16:45 | #7

    James, I’m pleased to see mention of Ehrenreich’s and Wynhausen’s books. More people should read them, especially naive followers of neo-liberal economics. It all sounds so simple: let everyone loose and the genius of the market will magically reach various Schlaraffenland-creating equilibria. But the reality is so very different (always the fault of distortions of the market, of course).

    I specifically mention ‘naive’ followers, because bar-room talk of high-level business folk long ago convinced me that they (the cynical followers) are generally quite aware of the consequences of the ‘business friendly’ policies they ache for so much. But they just don’t give a toss.

  8. Andrew Reynolds
    January 10th, 2006 at 19:41 | #8

    Crispin, James,
    If you do know of a way of allocating resourses more efficient than the “scandalously inefficient” method of letting every individual decide for themselves how to do it, I suggest you write it up and wait for that Nobel Prize.
    I don’t, and cannot remember where I have ever espoused ‘business friendly’ policies. All I do is try to argue to allow everyone to decide for themselves how and where they work and what they do with their own lives. I see most government impositions on that basic freedom as being wrong. And, James, I also believe that people generally learn from their own mistakes and try to get it more right the next time. That is all a market requires to function and when I read history, it normally works: unlike every other system I have ever read about. I may be wrong, but I would need to see evidence of it and nothing you have said is showing me that evidence.
    Freedom is a good outcome in itself; that it also tends to produce good economic outcomes is a good thing, but not the final justification.

  9. Crispin Bennett
    January 10th, 2006 at 19:54 | #9

    Andrew, even if it were true that so-called ‘free’ ‘markets’ (terms deeply dubious when strung together in my opinion) were the most efficient means of allocating resources, it wouldn’t somehow follow as if it by theorem that we should allow them sway. It’s delusional and profoundly inhuman to think that one value (here ‘efficiency’) should trump all others. All non-fundamentalist moral systems have accepted that values need to be balanced.

    I’m curious to think if any free-market fundamentalists reading here think that the US is particularly ‘free’ economically. And if so, do you think it is a healthy example to follow?

  10. Andrew Reynolds
    January 10th, 2006 at 20:06 | #10

    OK, I have a few minutes now – I will start on James’ post.
    We have blogged on Oil and its possible replacements to death, James, so please read my posts above on this thread – and please pay attention, as you accusing me of not doing so is the pot calling the kettle black.
    On food – it looks like you have been reading Malthus again, James. If, in 30 years there is still no replacement for oil in agriculture I will be very surprised. I have no crystal ball, nor a strong knowledge of agricultural chemicals – but then I do not see that you have either.
    With paper, the market signals have behaved the way you would think they should: plantation timber is cheaper as is the methods to print on the paper. Ergo, more paper used. As the price increases (if that is the outcome) then the reverse will occur. Look under supply and demand. Just because you believe an outcome to be desirable does not make it so.
    The danger in Chna over the next 30 years is not a massive increase in population, James – but a reduction, as the one child policy really bites. I would suspect that the policy will reverse in the near future to prevent a collapse in population in 30 to 60 years from now. Supply and demand will then become very interesting.
    Nesmith was showing that this was impossible – I was agreeing that it was and showing why – in this case through relative price adjustment. I also showed why this did not necessarily limit overall wealth, a step he did not take.
    I would strongly disagree that China could not become wealthy – as a mechanism for ‘frying’ the world this would not be one. As I have said above, though, the freedom of the individual is the important thing. That it often leads to economic wealth is a good by-product, but as long as people can choose their own path in life, that is sufficient.
    As for Lester Brown’s proposals? I would be fascinated to see the world spend money. Only individuals spend money – sometimes it is their own, sometimes it is other’s – either given voluntarily or forcibly. The world itself has no money.
    If USD161,000,000,000 needs to be spent on something, it needs to come from the wealth generated by economic activity. Without that wealth there will be no such spending.

  11. January 11th, 2006 at 12:41 | #11

    Andrew Reynolds wrote&nbsp: The danger in China over the next 30 years is not a massive increase in population, James – but a reduction, as the one child policy really bites.

    This is truly loopy. Why is it that no-one else in the world seems to be concerned by this ‘problem’? Why do you think that this ‘danger’ has escaped the notice of the current Chinese government which is trying to rein in its population to 1.37 billion by 2010.

    If, as you say, China’s population were to ‘collapse’, over the next 30 years, to say 1 billion or 500 million, what adverse consequences do you anticipate? If it were achieved through natural means, why should that be a problem?

    Crispin, glad you also see the value of Elisabeth Wynhausen’s and Barbara Ehrenreich’s books. As I have written elsewhere, they make utter nonsense of our Prime Minister’s claims, repeatedly used as a convoluted justification for his IR ‘reforms’ that real wages have risen 16% since 1996.

  12. Andrew Reynolds
    January 11th, 2006 at 13:06 | #12

    James,
    2010 is not 30 years away, but only 5. Look at the projections past there (or even think about it) and, with a one child policy still in place, what do you think happens between 30 to 60 years from now? It is quite a simple exercise.
    The bulk of the Asian population growth will come in India, not China. I see this as less of a problem as they have at least a type of functioning democracy – an attribute China lacks. You may see the enforced one child policy in China, including compulsory sterilisation and enforced abortion as a good thing – I am genuinely not sure – but there is no way I can.
    The adverse consequences of this are fairly clear – a rapidly aging population with a small and reducing productive group to support them. China, being a dictatorship, is then likely to rapidly reverse course and start rewarding having more children, possibly leading to a population explosion. As I have said before, dictatorships and other non-democratic governments are inherently unstable and, like all governments, are likely to come up with policies that are stupid from time to time – the difference is that a democracy cannot push policies that are opposed by too many citizens.
    The Chinese policies are examples of that. India’s policy seems the better, even if it leads to more population in the short to medium term, as it will lead to a more sensible and moderate outcome.

  13. Ian Gould
    January 11th, 2006 at 13:29 | #13

    Andrew,

    The “One Child Policy” is something of a misnomer.

    - The so-called “national minorities” such as Tibetans, Mongols and Koreans were always exempt from the policy;

    - farming families were exempted if their first chidl was a daughter;

    - the policy did not ban families from having more than one child, it reduced state benefits for a second child and eliminated them for subsequent children and also punished families through the subsidised housing and work allocation systems.

    State benefits have barely changed in decades and the state housing, employment and welfare systems have effectively collapsed.

    The combination of static benefits and rising incomes have made the policy increasingly ineffective – especially in country areas where private employment in farming is still heavily restricted makng children one of the few ways of expanding output.

    The Chinese government has been relaxing the policy in recent years but this is mainly just recognising the reality of what is already happening.

  14. Terje Petersen
    January 11th, 2006 at 13:50 | #14

    You may see the enforced one child policy in China, including compulsory sterilisation and enforced abortion as a good thing

    So much for a womens right to choose.

  15. Will De Vere
    January 11th, 2006 at 13:52 | #15

    A curious side-effect of the One Child policy is that in rural areas there might be many thousands of boys who are officially girls: families attempt to have a second boy without being penalised.

  16. Ian Gould
    January 11th, 2006 at 14:11 | #16

    Terje, read up on the treatment of women in traditional Chinese society.

    Forced sterilisation is less coercive than being beaten to death by in-laws for failing to produce a son.

  17. Andrew Reynolds
    January 11th, 2006 at 14:21 | #17

    Ian,
    The ‘misnomer’ is, however, embedded in the key performance indicators of the Party cadres. The theories of who it is not applied to are not frequently met on the ground – the senior cadres are rewarded for keeping the birth rates low, so the exemptions to the policy are frequently ignored. The Chinese government is right when it says that forcible abortions and sterilisations are not official policy, but they often actually happen as a result of the pressure to meet the KPIs.

  18. Will De Vere
    January 11th, 2006 at 14:40 | #18

    ‘than being beaten to death by in-laws for failing to produce a son.’

    Meet the ‘super-consumers’ of 2030!

  19. January 13th, 2006 at 00:37 | #19

    Andrew, there is a lot more in your previous response which I mean to respond to (and I would suggest to you, also, a lot in my post which you have not responded to, but as I said elwehere, I don’t particularly mind). For my part, I will try to properly respond, when I can.

    Andrew Reynolds wrote : We have blogged on Oil and its possible replacements to death, James, so please read my posts above on this thread – and please pay attention, as you accusing me of not doing so is the pot calling the kettle black.

    I believe that I have been paying attention. I think most site visitors will see that I, Ian Gould and Ender, amongst others, have at least shown that the evidence against nuclear being a serious long term replacement for current coal powered generation, let alone, as a means to replace petroleum and gas in order to maintain current levels of agriculatral output, is conclusive.

    Whilst wind and solar are preferable, they have environmental costs and we cannot hope that they will allow our civilsation to continue using anywhere near the same amounts of energy to those to which it has become accustomed to using. I will try to put this more conclusively at some future point.

    Your response to my comment on the ‘danger’ of a collpase in China’s population is interesting and appears to be a small step forward in the debate, in that you have implicitly acknowledged that China’s population cannot be allowed to keep going up all teh way towards infinity.

    From what you wrote, I see that it is not the the threatened population collapse in and of itself that has you worried, but that it may actually lead lead to a further explosion in population numbers further down the track. Of course that could be a risk, but, nevertheless, China is in a difficult position and they really don’t have a lot of choice.

    Perhaps a democratic government could do a better job, but I wouldn’t count on it, particularly if ‘democracy’ in China turns out to be like the ‘democracy we now enjoy here.

  20. Terje Petersen
    January 13th, 2006 at 08:51 | #20

    Whilst wind and solar are preferable, they have environmental costs and we cannot hope that they will allow our civilsation to continue using anywhere near the same amounts of energy to those to which it has become accustomed to using. I will try to put this more conclusively at some future point.

    I strongly disagree. There is loads of energy to be extracted using solar technologies. Currently the cost of solar from various technologies (Solar Chimney, Photovoltaics etc) is higher than the cost (excluding the externalties) of coal. I think that by the end of this current century we will be vastly bigger users of energy on a per capita basis and that the vast bulk of it will be sourced from solar renewable technologies.

    I look forward to your attempt at conclusively refuting the viability of Solar.

    The total life cycle cost of energy from a scaled up Solar Chimney has been costed many times by many engineering experts. It seems to continually come out as only marginally more expensive than coal (eg BASIC COSTINGS:-

    http://www.sbp.de/de/html/projects/solar/aufwind/pages_auf/enprocos.htm

    PICTURE OF PROTOTYPE IN SPAIN:-

    http://theradblog.typepad.com/photos/uncategorized/solartower1.jpg

  21. Terje Petersen
    January 13th, 2006 at 08:52 | #21

    TAKE 2 – last post got truncated.

    Whilst wind and solar are preferable, they have environmental costs and we cannot hope that they will allow our civilsation to continue using anywhere near the same amounts of energy to those to which it has become accustomed to using. I will try to put this more conclusively at some future point.

    I strongly disagree. There is loads of energy to be extracted using solar technologies. Currently the cost of solar from various technologies (Solar Chimney, Photovoltaics etc) is higher than the cost (excluding the externalties) of coal. I think that by the end of this current century we will be vastly bigger users of energy on a per capita basis and that the vast bulk of it will be sourced from solar renewable technologies.

    I look forward to your attempt at conclusively refuting the viability of Solar.

    The total life cycle cost of energy from a scaled up Solar Chimney has been costed many times by many engineering experts. It seems to continually come out as only marginally more expensive than coal (eg less than 20%). Whilst this has not been confirmed in a commercial operation all the technical concepts have been thoroughly tested. In particular the prototype plant built in Spain in the 1980s showed high levels of reliability and ease of maintenance.

    BASIC COSTINGS:-

    http://www.sbp.de/de/html/projects/solar/aufwind/pages_auf/enprocos.htm

    PICTURE OF PROTOTYPE IN SPAIN:-

    http://theradblog.typepad.com/photos/uncategorized/solartower1.jpg

  22. Will De Vere
    January 13th, 2006 at 09:49 | #22

    J. Sinnamon said ‘I will try to put this more conclusively at some future point.’

    Hurry. Please hurry. Please.

  23. Peter2
    January 13th, 2006 at 09:57 | #23

    Andrew Reynolds Said:
    “All I do is try to argue to allow everyone to decide for themselves how and where they work and what they do with their own lives. I see most government impositions on that basic freedom as being wrong.”

    This seems to me the main problem with you libertarian types. We can all agree that personal freedom is a ‘good thing’. The problem is that many of your personal choices have implications for others. Property crime and/or violence against others is the obvious example, and except for a few extreme libertarians and anarchists, most people (libertarians included) agree that private property rights and freedom from violence are a reasonable role for the state. But this line is a bit arbitrary. Your decision to drive a big SUV increases my chance of being killed in an accident, for example, so I’d say its not a clear cut case of personal choice. Your decision to consume coal derived power changes my environment, etc, etc.

    I’d like to hear a clear description of how a libertarian weighs up these issues. Flying the ‘personal freedom’ flag is easy.

    I’ll grant that the current government (and those before, and doubtless those after) go too far in intruding into our lives, so I’m not after a list of examples of government interference. What I’m really after is some coherent libertarian resolution of the inherent conflict between individual and collective rights.

  24. Ian Gould
    January 13th, 2006 at 10:12 | #24

    Andrew, as I said before, the Chinese government is ALREADY backign away from the One Child policy.

    I agree that it will produce some interesting problems down the road. China’s population boom started in the 1950′s and continued until around 1980.

    The OCP has probably helped Chian economically up to this point with an especially rapid decline in the dependancy ratio (i.e. the percentage of dependant children in the economy has been declining).

    People born in 1950 will be reaching (western) retirement age around 2015 and from then onwards the dependancy ratio is likely to rise rapidly.

    Of course, given the gross inadequacy of China’s pension system many of those people will continue to work past 65.

    Chinese agriculture may come to resemble that of Japan where land is farmed primarily by retirees, housewives and children while adult-age men work in other professions.

  25. brian feeney
    January 13th, 2006 at 10:40 | #25

    I agree with James that the historically high level of energy use over the past 200 years (together with the escalating global population) has resulted in the severe global problems that we face (climate change, collapse of ecosystems etc). The questions that we need to ask ourselves in response to the probable end of cheap(er) oil should be framed in this context.

    The question should not be how do we replace the energy now provided by oil & gas but it should be the broader question of how are the basic needs of 7-9 billion humans for shelter, food, water, education, psychological wellbeing etc to be satisfied in a way that doesn’t destroy the natural systems that human life depends on? This is an economic question in that economics is supposed to be about maximising utility.

    In seeking to maximise utility for all humans (both living and to be born), the approach of Herman Daly (see ‘Economics in a Full World’ Scientific American Sept 2005) is that natural capital needs to be sustained into the future and that humans must learn to live off the ‘trickle of interest’ from the stock of natural capital rather than run down the stock. Daly suggests a ‘cap and trade’ system with a limit placed on the total amount of throughput allowed. In a market system without a limit on total throughput, individuals seeking to maximise their utility will lead to depletion of resources, loss of ecosystem services and pollution of ‘the commons’.

    The dynamics of a financial system based on money issued as interest-bearing debt lock the economy into exponential growth so the interest on debt can be repaid – otherwise the eoconomy collapses. Money is a claim on real wealth i.e. on real resources including natural capital. The current financial system therefore creates exponential growth in claims on the finite and diminishing stock of natural capital. This is inexorably underming any positive action on maintaining natural capital and will need to be changed before we can move towards real sustainability

  26. Andrew Reynolds
    January 13th, 2006 at 13:57 | #26

    Peter2,
    Your request is probably one that deserves a very long response, but, as a start, I would answer your question on the SUV in this way – every action I take has a risk of some description of interfering with your freedoms. Most of those are manageable without interference by the State – some because they result in little or no loss to you require no action and others because you mention to me that I am annoying you and I agree to stop what I am doing. Some of those may require some civil intervention – i.e. you take me to court for some action and the most extreme should incur a criminal penalty.
    My decision (if I had one) to drive an SUV could fall into any of those categories, depending on what I do with it. To me, at least, this is the crucial point – if I exercise my freedoms in a way that curtails your freedoms then there may be a need for some action and the degree of that curtailment dictates the degree of the response – no more. For you to say that I cannot drive an SUV on the off chance that I may run you over with it would be an unjustified intrusion into my freedoms and for me to drive my SUV over you would be even worse. Most of the time these matters are easy to work out with some common sense. Where they are not that is what we have a court system for – another point where I see a government as being useful.
    .
    On the question of externalities, like GHG and other apparent pollution, the issue is that my exercise of my freedoms affect no other individual in a big way, but may reduce the wealth of society as a whole. It is in this area that government action may be justified, and is why I am being an active participant in this discussion. The appropriateness, direction and degree of intervention are all good and open topics for debate.

  27. Ian Gould
    January 13th, 2006 at 18:30 | #27

    This paper makes the case that biodeisel from algae could be a good short-to-medium term option to replace fossil fuels:

    http://www.unh.edu/p2/biodiesel/article_alge.html

    Quotes:

    NREL’s research showed that one quad (7.5 billion gallons) of biodiesel could be produced from 200,000 hectares of desert land (200,000 hectares is equivalent to 780 square miles, roughly 500,000 acres), if the remaining challenges are solved (as they will be, with several research groups and companies working towards it, including ours at UNH). In the previous section, we found that to replace all transportation fuels in the US, we would need 140.8 billion gallons of biodiesel, or roughly 19 quads (one quad is roughly 7.5 billion gallons of biodiesel). To produce that amount would require a land mass of almost 15,000 square miles. To put that in perspective, consider that the Sonora desert in the southwestern US comprises 120,000 square miles. Enough biodiesel to replace all petroleum transportation fuels could be grown in 15,000 square miles, or roughly 12.5 percent of the area of the Sonora desert (note for clarification – I am not advocating putting 15,000 square miles of algae ponds in the Sonora desert. This hypothetical example is used strictly for the purpose of showing the scale of land required). That 15,000 square miles works out to roughly 9.5 million acres – far less than the 450 million acres currently used for crop farming in the US, and the over 500 million acres used as grazing land for farm animals.

    n “The Controlled Eutrophication process: Using Microalgae for CO2 Utilization and Agircultural Fertilizer Recycling”3, the authors estimated a cost per hectare of $40,000 for algal ponds. In their model, the algal ponds would be built around the Salton Sea (in the Sonora desert) feeding off of the agircultural waste streams that normally pollute the Salton Sea with over 10,000 tons of nitrogen and phosphate fertilizers each year. The estimate is based on fairly large ponds, 8 hectares in size each. To be conservative (since their estimate is fairly optimistic), we’ll arbitrarily increase the cost per hectare by 100% as a margin of safety. That brings the cost per hectare to $80,000. Ponds equivalent to their design could be built around the country, using wastewater streams (human, animal, and agricultural) as feed sources. We found that at NREL’s yield rates, 15,000 square miles (3.85 million hectares) of algae ponds would be needed to replace all petroleum transportation fuels with biodiesel. At the cost of $80,000 per hectare, that would work out to roughly $308 billion to build the farms.

    The operating costs (including power consumption, labor, chemicals, and fixed capital costs (taxes, maintenance, insurance, depreciation, and return on investment) worked out to $12,000 per hectare. That would equate to $46.2 billion per year for all the algae farms, to yield all the oil feedstock necessary for the entire country. Compare that to the $100-150 billion the US spends each year just on purchasing crude oil from foreign countries, with all of that money leaving the US economy.

  28. Andrew Reynolds
    January 13th, 2006 at 19:15 | #28

    Ian,
    So we may finally have found a use for the WA, SA, NT and Qld outback beyond keeping a few methane production units (cows) going. The Saudis will also be able to produce a lot of energy too.
    Even more possible solutions, James. Do we still need to push everyone out of the cities and make us all poor?

  29. Will De Vere
    January 14th, 2006 at 16:43 | #29

    Oops, I’d forgotten all about solar ponds, an Israeli development, I believe.

    Ian Gould has said: ‘At the cost of $80,000 per hectare, that would work out to roughly $308 billion to build the farms.’

    How many parts of the world cost $80,000 a hectare?

    This morning’s business pages were predominately about AGW, uranium, the FTA and a new all-hydrogen car by BMW. So much for the unthinking complacency of the ‘We Will Kill The Planet’ public.

    And in California, Arnold S has introduced tax credits for anyone who puts solar heating on their roof.

  30. Terje Petersen
    January 14th, 2006 at 20:07 | #30

    The dynamics of a financial system based on money issued as interest-bearing debt lock the economy into exponential growth so the interest on debt can be repaid – otherwise the eoconomy collapses. Money is a claim on real wealth i.e. on real resources including natural capital. The current financial system therefore creates exponential growth in claims on the finite and diminishing stock of natural capital. This is inexorably underming any positive action on maintaining natural capital and will need to be changed before we can move towards real sustainability

    I think we should denationalise money and get governments out of that line of business. Natural forms of market money (or commodity money) include some level of demurrage that ensures that NPV calculations (net present value) used in finance will lead to a heavier emphasis towards the future.

    It is only government created fiat money that is completely free of carrying cost. And our current high interest rate monetary regime ensures that every NPV calculation done before the private sector finances any endeavour of significance places a very high discount on the future.

    Whilst we continue to use modern fiat money that is notionaly risk free and without demurrage the future will not be valued.

    When demurrage was common place in the days of commodity money it was rountine for people to finance Cathedrals that would take 300 years to build, settlements that would take a decades to complete and all sorts of future oriented endeavours. Our current monetary system ensures that our focus is concentrated on the hear and now and only a very short distance into next week.

    It is not our financial system that is the problem. The problem is with our monetary system that underlies it.

  31. brian feeney
    January 16th, 2006 at 10:27 | #31

    Terje
    I agree that we need to find a way of properly valuing the future in our investment decisions rather than significantly discounting the future as we do at present.

    With regard to the question of who issues money, the current method can be thought of as the government issuing banknotes as ‘symbolic tokens of electronic credit-based money that has already been created or more precisely, issued by private banks through fractional reserve banking.’ (Wikipedia) This suggests that the electonic credit-based money is the cause and banknotes the effect.

    It seems to me that in any interest rate regime, the money supply must grow to enable the interest to be repaid. If the money supply grows then claims on natural capital must also grow, resulting in escalating damage to that natural capital. For further details see http://homepages.picknowl.com.au/ERANet/cad.htm

  32. Terje Petersen
    January 16th, 2006 at 11:49 | #32

    With regard to the question of who issues money, the current method can be thought of as the government issuing banknotes as ’symbolic tokens of electronic credit-based money that has already been created or more precisely, issued by private banks through fractional reserve banking.’

    You could think of it that way but it would be wrong. Our currency is not a symbolic representation of electronic credit money. It is a fiat currency with utility as a “medium of exchange” that derives value from the market intersection of supply and demand.

    If the base money supply does not grow (in a growing economy) then the value of money will rise (deflation).

    You seem to impute some special power to private banks and fractional reserve banking that I am not aware of.

  33. brian feeney
    January 23rd, 2006 at 09:19 | #33

    I would be interested in any comments on the editorial on the website 321gold about a supposed ‘Iranian Oil Bourse’ The link is http://www.321gold.com/editorials/petrov/petrov011706.html
    While this editorial is not specifically on the Peak Oil issue, it touches on the general questions of control of the oil market as well as possible impacts on the US economy of the so-called ‘Iranian Oil Bourse.’

  34. Terje Petersen
    January 23rd, 2006 at 11:52 | #34

    Characterising the US dollar and its status as a global reserve currency as a form of empire tax is interesting although not strictly true. The world is not forced to trade in US dollars even though circumstances have conspired to make it difficult to do otherwise.

    I certainly think that any move to dislodge the central role of the US dollar will have significant repercussions for both the USA and the world. If it simply means a transfer of power to the Euro it will be a disappointment as we will be replacing one devil with another.

    I would prefer either an international fiat currency (eg the commodity backed Bancor favoured by Keynes) or else a natural commodity currency (eg gold). I have a strong bias towards the latter although the former is certainly not without merit.

  35. Andrew Reynolds
    January 23rd, 2006 at 13:48 | #35

    The reason why the USD is the global reserve currency is simple – network benefits. Because the USD is heavily traded and forex rates can be determined easily between the USD and any other currency anyone can walk into virtually any bank anywhere and convert their own currency into or out of USD. You can buy options, forwards, futures, cross currency swaps and any other instrument in USD easily.
    So, for example, if you want to sell your oil overseas in your own currency, your client would first need to agree a price with you and then get a forward contract from your currency into USD and another from USD into their own (if they want to lay off the currency risk). If you both deal in USD, then both sides are dealing with risks they are familiar with and may already have a hedging strategy in place for. It just makes things simpler and less expensive, even if the USD uncertainty appears to upset this, it would take a huge amount of instability, catching a lot of the market off-guard, before they even started looking at alternatives. Even then, it would probably be the Euro.

  36. Terje Petersen
    January 23rd, 2006 at 14:04 | #36

    Andrew,

    You are correct that the USD remains the global reserve currency for these reasons. However we should not forget the reasons as to why the USD gained this status.

    1. At one point the USA represented such a large proportion of world production that its currency was naturally more liquid and its capital markets deeper. Its significance (ie percent of world GDP) is now declining.

    2. It was a gold backed currency and inherited the credibility of gold (as did the previous dominant dominant world currency, the Pound Sterling).

    3. Brenton Woods.

    Economists like Keynes originally saw a Brenton Woods system being centred on a commodity backed currency called the Bancor. The fact that the USD assumed the central role was in no small part due to the dominant position that the USA was in after WWII.

    Regards,
    Terje.

  37. Andrew Reynolds
    January 28th, 2006 at 21:47 | #37

    Sorry to revive this thread, but I found this interesting article in the Economist while researching another point. I do not think it is for subscribers only.
    Any comments, PrQ? Their basic argument is that Hubbert’s peak is years off, may well form a plateau rather than a peak and that technology should allow for a maintenance of production for the foreseeable future.

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