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Yemen again

April 7th, 2011

The news from Yemen is grimly familiar – more protestors shot by President Saleh’s security forces and plainclothes thugs. But now the US government has shifted position, letting it be known in various ways that it’s time for Saleh to go. Their hope now is that a replacement will allow the operations against Al Qaeda in the Arabian Peninsula to continue as before. A few thoughts about this.

The approach taken by the Administration here has been broadly consistent with that adopted in relation to Mubarak in Egypt. The Administration initially supported Mubarak’s proposal to stay in power and implement reforms, then shifted to the idea of replacing Mubarak with someone like … who could be trusted to pursue the same policies. When that became untenable, the Administration supported a transitional military government with elections to follow, and this outcome looks sustainable at present. However, there’s no guarantee that the government produced by elections will be as pliable as Mubarak’s, particularly in relation to Israel.

These developments don’t fit well with claims about continued US hegemony, at least if hegemony is supposed to entail a capacity to control outcomes. Obviously, the US is not a negligible player, and its change of side will probably hasten Saleh’s departure. On the other hand, the US changed sides only when it became clear it would be on the losing side otherwise. So, its position might affect the timing and consequences of Saleh’s fall, but it wasn’t decisive in bringing it about.

Libya is a more complicated case, but tells much the same story about US capacity to control events. In this case, the US Administration moved earlier to drop its support for (or rather, acceptance of) Gaddafi, but resisted the push for military intervention until the pressure from a variety of sources became irresistible. Calls for action from the rebels and their sympathisers in the Arab world, but the big push came from Sarkozy and the French government.

This push did not, of course, reflect a commitment to humanitarian values, but rather a public reaction against Sarkozy’s initial embrace of Ben Ali in Tunisia, made more influential by his general domestic vulnerability. Still, the fact that, for whatever reason, French pressure could drive the US to support intervention is certainly a further point against the idea of the US as hegemon.

It’s certainly true as Dan Nexon pointed out a few weeks ago, that the Libyan intervention points up the unique military capacities of the US state. As Nexon observes, despite being engaged in two wars, the US was able to allocate a carrier battle group to Libya and send ships to Japan in response to the earthquake. And when the intervention started, it became clear that only the US had the capacity for the kind of precise targeting of air defence systems demanded by the political exigencies of the case, with very low tolerance for civilian casualties directly caused by bombing.

On the other hand, as Nexon observes, it’s not at clear that this is a sensible allocation of resources, particularly given the consistent failure of the US military to deliver promised outcomes. Almost a decade after they began, the wars in Iraq and Afghanistan are still dragging on. In Libya, the intervention has yet to succeed in its UN-approved mission of protecting civilians who have been under siege in Misrata and elsewhere for weeks, which renders somewhat moot the question of whether the mission should be extended to include Gaddafi’s overthrow. And the Navy ships providing aid to Japan turned around after they detected high levels of radiation.

What does this imply for what’s left of the US support for autocracy in the region, most obviously in Bahrain and Arabia (and for that matter, in Iraq, where Maliki looks a lot more like the rulers who are being overthrown than a model for democratic aspirations)?
First, from the viewpoint of the regimes in question, and particularly the Al Khalifas in Bahrain, US support isn’t worth a hill of beans. Certainly, they aren’t going to get any military help in suppressing domestic opponents – the political cost of sending in the Marines would be prohibitive, particularly after the Libyan intervention in pursuit of diametrically opposed goals. And, while they’ll continue to give verbal and diplomatic support as long as it looks as if opposition can be suppressed without too much overt violence, that won’t last if popular resistance continues.
At some point, the Administration will look for a suitable successor, willing to negotiate continued basing rights for the Fifth Fleet. And, even that isn’t an absolute necessity. US support for Marcos in the Phillipines was cemented by Clark Air Base and Subic Bay Naval base, but both were closed after he fell from power, and the Seventh Fleet moved to Japan. The Fifth Fleet could operate from Diego Garcia if necessary. It’s even possible that the US might rethink the costs and benefits of maintaining a navy far larger than those of the rest of the world put together.
Then there’s the Saudi kingdom in Arabia. There’s no doubt that the US military-industrial establishment sees the maintenance of the Saudi regime as critical, on the basis of a mistaken belief in the crucial economic significance of oil.[1] But even though this belief is widely shared by the US public, the Saudi regime is so toxic, in political terms, that effective intervention to protect it would be a very hard sell.
Now let’s do what game theorists call backward induction. The crisis in the Arab world has shown that, when push comes to shove in the form of a popular revolt, the US state will have no choice but to leave friendly dictators to their fate. But, if that’s the case then a rationally self-interested US state would not commit significant (military, financial or political-credibility) resources to backing those dictators in the first place, since the benefits are likely to prove transitory. So, even if the current wave of revolts peter out leaving some of the autocracies in place, it would make good sense for the US state to disengage from them.

fn1. This kind of premodern thinking, in which the appropriation of physical resources is economically crucial, is characteristic of international ‘realism’. US oil imports from OPEC are worth about $180 billion a year, or 1.5 per cent of US national income. The premium paid by the US in additional military expenditure, largely justified by concerns about oil, far exceeds this.

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  1. Freelander
    April 7th, 2011 at 15:37 | #1

    These ‘strong’ men must be beginning to recognise that the US is only a fair weather friend. Noriega, Hussein and now poor old Saleh, each important partners, great friends and allies, at one time. Fun while it lasted but ending in tears. With friends like that what is an evil dictator to do?

  2. Ikonoclast
    April 7th, 2011 at 16:24 | #2

    JQ said, “… on the basis of a mistaken belief in the crucial economic significance of oil.[1] fn1. This kind of premodern thinking, in which the appropriation of physical resources is economically crucial.”

    I read these words with astonishment. Perhaps I have misunderstood them. You seem to be saying (on my interpretation) that;

    1. energy and physical resources are not economically crucial; and
    2. that the impact of resources on the economy can be assessed solely by their cost as a percentage of the national income generated by all finished products and services.

    Surely you don’t mean that no energy and physical resources are needed for an economy? But you seem to imply that substitutions are always easy and near at hand both in time and place for both energy and materials. I doubt this assumption holds up for oil (or many other key resources for that matter). Mind you, I agree that placing a huge expensive military presence in the M.E. is not a cost effective way to get oil.

    You also seem to measure the importance of raw inputs into the economy solely as a financial percentage cost of ultimate national income. Surely, this overlooks the crucial fact that without any raw inputs there would be no economy.

    With all due respect Prof. JQ, I think you need to take a course in Physics focusing on thermodynamics and also course in biophysical economics. Your apparent lack of awareness of the complete dependence of the real economy on the physical world is concerning. You seem to be focusing too much on the financial economy.

  3. Peter T
    April 7th, 2011 at 20:24 | #3

    what Ikonoclast said. Some 1.5%s are much more important than others. Oil is about the only source of portable energy in the US – and there is good evidence that oil price spikes have a disproportionate effect on the US economy. And the House of Saud is sitting on pretty much the only surplus of oil in an increasingly constrained supply situation. Any serious unrest in Saudi would send prices through the roof and, more crucially, remove enough oil from the market to cramp economies across the world. That said, the choice may well be between major disruption now or really really major disruption later.

  4. jquiggin
    April 7th, 2011 at 20:38 | #4

    Peter T, if you agree with Ikonoklast on the unimportance of prices, why the reference to “prices going through the roof”. If you think prices are what matters, lets suppose that the oil price doubles. Then, if nothing else changes, the US is poorer by 1.5 per cent. Big deal!

    And you don’t have to rely on economic analysis, you can look at recent history. The price of oil has gone up 500 per cent in the last 10 years with no obvious ill effects. As a result, not surprisingly, US gasoline consumption peaked in 2006.

    To Ikonoklast, if you think thermodynamics are what matters, why don’t you do an analysis of how much oil the US would need to consume if it undertook its transport task in a thermodynamically efficient fashion (within the limits of existing technology), say, with cars using 3l/100km and an average of 2 people per car. Then apply a similar analysis to other uses of oil, looking for a reduction of, say 75 per cent.

    I can safely say they could do it without imports from Canada, let alone from OPEC (calculations supplied on request). So, your biophysical limits are nowhere near binding – the problem is that oil has been cheap for a long time in the US and so it is used very inefficiently.

  5. Alice
    April 7th, 2011 at 20:46 | #5

    Trouble is, the 1% has wreaked complete financial havoc on the US economy and budgets already and the 1% may have trouble getting the weary US taxpayers to pay for yet more armies and armed support in the ME right now. The US government is, after all, threatening to shut down. It wouldnt be popular. Maybe the 1% might just realise they cant keep pushing the burden of their disparate wealth accummulation down to the ninth decile and below at the rate they have been and still maintain a show of might in the ME. My bet is the really really major disruption will come later.

  6. Christopher Dobbie
    April 7th, 2011 at 21:42 | #6

    @jquiggin

    That might be the case on oil but what has been the price change in petrol for the punter?

    I’ve found a graph dating back six years that comes out at around 65% from then to now (will endeavour to locate for the full ten).

  7. Christopher Dobbie
    April 7th, 2011 at 21:55 | #7

    Ten year percentage change in gas price: 1.52 per gallon to $3.68 per gallon = 137%

  8. Freelander
    April 7th, 2011 at 22:44 | #8

    @Alice

    Those in the US who have been using the US for their own benefit regardless of the short and long term damage they have caused the rest of that population don’t really need to worry about what will happen to the US. When things finally go bung and the place becomes unliveable, even within gated communities, because the costs of keeping the barbarians away are too great, they will move elsewhere. After the Lord of the Rings trilogy displayed some impressive scenery to the American public, many Americans began buying up big across the ditch. If things go bung we will be welcoming them to the neigbourhood.

    After all, Halliburton which made enormous profits out of the Bush military adventures has moved and is now based in the United Arab Emirates, or at least that is where their current CEO now lives and works. They do remain incorporated in the US but that too would change very quickly if a change provided benefits.

    When the going gets tough, the rich get going.

  9. plaasmatron
    April 7th, 2011 at 22:50 | #9

    Anyone notice that Sweden has joined the Libyan no-fly zone enforcement by sending 8 Grippen (Saab) jets to Italy? Apart from the obvious attempt to include their hardware in the conveniently located military show, along with the French and US jets that are also competing for the multi-billion-dollar Brazilian air force contract, this raises questions again about Sweden’s neutrality and pacifist mirage. The world champions at brand marketing (including their own smiling IKEA/ABBA image), the Swedes are starting to look a bit on the nose after the Wikileaks affair and the far-right now has 20 seats in the national parliament.

    Latest is that the US won’t give the Swedes any fuel for their air show!

  10. Freelander
    April 7th, 2011 at 23:02 | #10

    The Swedes have a long and close military and intelligence relationship with the US as a counter to the Soviet, now Russian, “threat”. They also have a close and long relationship with north american right wing loonies which is why they, for example, went along with the scheme to create the faux nobel prize in economics, and awarded it to so many undeserving candidates who were also coincidentally members of the Mont Pelerin Society.

  11. Alice
    April 8th, 2011 at 05:01 | #11

    @Freelander
    Freelander says “when the going gets tough the rich get going”. Bring on tough so we can bring on the recovery!! Sounds very much to me that Halliburton, having been yet another wealthy firm with wealthy friends in the procession of same that has milked the US taxpayers dry, is now touting for business with anyone who will pay them in the ME.

    So Halliburton serving the house of SAUD now eh? The Europeans are broke. Cant be them.

  12. Scott
    April 8th, 2011 at 07:03 | #12

    Freelander :@Alice
    Those in the US who have been using the US for their own benefit regardless of the short and long term damage they have caused the rest of that population don’t really need to worry about what will happen to the US. When things finally go bung and the place becomes unliveable, even within gated communities, because the costs of keeping the barbarians away are too great, they will move elsewhere. After the Lord of the Rings trilogy displayed some impressive scenery to the American public, many Americans began buying up big across the ditch. If things go bung we will be welcoming them to the neigbourhood.
    After all, Halliburton which made enormous profits out of the Bush military adventures has moved and is now based in the United Arab Emirates, or at least that is where their current CEO now lives and works. They do remain incorporated in the US but that too would change very quickly if a change provided benefits.
    When the going gets tough, the rich get going.

    The US is a long way from this; the average American is as submissive as a labrador puppy, and the average American policeman is quite willing to shoot to kill anyone who would be a real threat to the security of the 1%, Wisconsin notwithstanding.

  13. Freelander
    April 8th, 2011 at 08:07 | #13

    @Scott

    I’m not putting money on it, but I would not be surprised if the union is no more by 2050. There is definite overextension, visible fault-lines, and large shocks coming between now and then. The vital ingredients Yugoslavia and the former soviet empire encountered in the nineties. New Orleans was a good example of how quickly it could all fall to bits following a shock. The police were a great help, there, in maintaining law and order.

  14. Ikonoclast
    April 8th, 2011 at 08:22 | #14

    @jquiggin

    JQ, you have said that I regard prices as unimportant and also that “The price of oil has gone up 500 per cent in the last 10 years with no obvious ill effects.”

    I am not sure that either statement is correct. I certainly do regard prices as important. I also regard physical availability of resources and EROEI as important. The two positions are complementary. They are not in opposition. With increasing demand for and/or increasing scarcity of a given resource, free market prices will generally rise. Scarcity can also reach a pitch where some (or all) customers can obtain little or nothing of a resource despite having economic capacity to pay.

    Price can limit the capacity to consume. Physical scarcity or unavailability can also limit the capacity to consume. I suspect that most functioning Japanese households and enterprises are currently consuming less electricity than they wish or require and less than they could actually pay for. This is because of the physical unavailability of electricity in the quantities thay have been used to consume. Sure, prices could be allowed to adjust. (I am not sure if they have been.) There would then be competition to avoid the brownouts. By either competition or rationing, the economy will be using less electricity than previously because of a new physical scarcity. The economy will consequently be less productive.

    The same is the case with oil. As oil becomes scarcer and more expensive, the economy will be using less oil (a key transport, heating and generation fuel and an industrial feedstock) and thus will be less productive. This holds true while and until (or if) a new resource set is found or developed which fills ALL the roles of oil. Every oil shock since the 1970s has had as its direct correlate an economic shock. These economic shocks have been overcome as oil availability and total production continued to rise. This can no longer be the case as we have passed peak oil.

    I trust your numbers regarding the feasibility of the US reducing oil consumption by 75%. I am sure your numbers are correct and that it would be feasible in energy terms. I even regard such a change by the US as approaching a necessity. My point is simply that this could not happen without significant economic disruption and a decline in US economic output. You seem to imply this change could be made without such issues surfacing. Yet, even wasteful consumption employs people. (I mean in the current economic structure.) Cutting the wasteful consumption of oil by such a massive amount (75%) would on its own result in a depression. Without major and continuing structural change, probably in a dirigisme fashion, the US could not re-tool, re-infrastructure (if that’s a word) and redeploy workers. A revolutionary change to the economy, with all the transition pains that implies, is required to convert from fossil fuels to renewables.

    At the end of the transition, if the peak energy flow feasibly available from renewables is less than peak fossils then it will be a lower level steady state economy at best.

  15. Scott
    April 8th, 2011 at 11:12 | #15

    Freelander :@Scott
    I’m not putting money on it, but I would not be surprised if the union is no more by 2050. There is definite overextension, visible fault-lines, and large shocks coming between now and then. The vital ingredients Yugoslavia and the former soviet empire encountered in the nineties. New Orleans was a good example of how quickly it could all fall to bits following a shock. The police were a great help, there, in maintaining law and order.

    I don’t expect the Union to break up until 2050 at the earliest. If at all. There’s plenty of fault-lines and shocks and I frankly expect it to be an awful dystopia by then. But the possessing classes will do okay.

    As for ‘New Orleans’ the police were ‘useless’ but in terms of protecting the ruling elites (who don’t spend a lot of time in N.O. they did a great job. The people in charge (and their police) don’t give two hoots for the people who drowned.

    And don’t forget that great big Army they have- a state or region trying to secede will have to contend with the military.

  16. Freelander
    April 8th, 2011 at 12:12 | #16

    @Scott

    I don’t expect the army not to break up either. After all the army split once before… Here is how it plays out…

    As the American sun sets, and they are no longer important in the world, US patriotism will start to wane. Patriotism will wane because with new found unimportance on the world stage the paranoid belief in external threats will falter and cease to provide the reason for their patriotism and for national cohesion. The reality that many sections of their society hate each other will come to the fore. It happened in the middle of the nineteenth century and they were probably more intrinsically cohesive then. In the twenty-first century there are so many more fractures and so many more hatreds to fuel the process.

  17. Peter T
    April 8th, 2011 at 14:46 | #17

    In reply to JQ – it’s not that I think prices unimportant. It’s that they are not infinitely flexible. When supply of a vital good is constrained, there is usually a price spike, followed by a fall as demand falls. So you have to look at how vital something is, how close supply is to the limits and so on.

    Sure, there’s a lot of fat in energy usage. But there’s a lot of cost in re-engineering the very large fixed networks and practices that revolve around oil. It’s an extraordinarily useful energy source – relatively safe and easy to handle, portable, highly concentrated. The alternatives are more complex, demand more infrastructure and are much less concentrated (current battery technology – 0.5 Mj/kg; theoretical maximum – 3 Mj/kg; petrol – 45 Mj/kg). So there’s a lot of pain in the transition, and it may not even be to the same level. This is what the US is trying to avoid.

  18. jquiggin
    April 8th, 2011 at 14:55 | #18

    @Ikonoclast
    Ikonoklast, you are now raising economic arguments, for example a change in oil consumption “could not happen without significant economic disruption and a decline in US economic output”. to assess the significance or otherwise, you need to look at oil consumption in relation to US output. And this brings us back to the post. As I point out, it’s easy to check that, in economic terms, US imports of oil are not particularly significant – much smaller than defence expenditure, let alone health care.

    In particular, as I was observing, it doesn’t make economic sense for the US to spend lots on defence every year to reduce the risk of an increase in the price of all. The military costs (certain, and paid every year) far outweigh the uncertain potential benefits.

  19. Sam
    April 8th, 2011 at 18:26 | #19

    I think petrol in the short term is very price inelastic. It would be impossible for the US to replace it’s existing vehicle fleet with newer, more fuel efficient cars and trucks overnight. Car pooling and public transport could take up some of the slack, but this is made more difficult by the way US towns and cities are planned. This is not to say we shouldn’t start working on this now of course.

    Also JQ, how much of the defence budget do you say would not be needed if the only change the US made was to relax it’s support for Saudi Arabia?

  20. Ikonoclast
    April 8th, 2011 at 20:09 | #20

    @jquiggin

    JQ, I agree that “in economic terms, US imports of oil are not particularly significant – much smaller than defence expenditure, let alone health care,” IF AND ONLY IF by “economic terms” you simply mean price terms.

    However, two comparable economic “spends” may not have comparable effects on the economy if discontinued. For example, let us assume that the US spends X billions on oil imports and X billions on designer and fashion clothes imports (in excess of functional clothing imports for climate and modesty purposes.) The entire expenditure on optional imported clothing could be discontinued without any great deleterious effect on the people or economy outside the clothing fashion import industry, some retail and ancilliaries. A small portion of the economy would contract but the entire economy would suffer little overall impact. On the other hand, I contend that a cessation of all spending on imported oil would generate a greater contraction of the total economy. It seems to me that the energy “spend” is more fundamental to the overall economy than the discretionary clothing spend (to use my example). This real discrepancy compared to a money equivalence probably reflects the fact that the current market system is poor to useless at pricing consumption of natural capital and generation of negative externalities.

    I agree 100% with you on your second point, namely; “it doesn’t make economic sense for the US to spend lots on defence every year to reduce the risk of an increase in the price of oil. The military costs (certain, and paid every year) far outweigh the uncertain potential benefits.” (One typo corrected in this quote.)

    However, I did take issue with your earlier statements that “belief in the crucial economic significance of oil” was “mistaken” and that this was “premodern thinking, in which the appropriation of physical resources is economically crucial.” I think my argument above shows it is not pre-modern thinking (did you mean the Physiocrats?) but it is indeed modern biophysical economics which is far more developed than classical Physiocratic thinking.

    Surely “appropriation” of resources is always critical to production. (Let us assume that “appropriation” encompasses all of the actions of mining, cultivating, stealing and buying.) Without the resources of the environment man can fabricate nothing.

  21. Freelander
    April 8th, 2011 at 20:53 | #21

    I have to agree with the Prof. The US still has plenty of oil. Oil is still relatively cheap and the implied marginal price the US would be paying, if, indeed, its military expenditures were simply to get slightly favourable terms for the oil it buys, is horrendous. If they spent any significant fraction of that money extracting more oil within their own territory they would have a lot more oil than they import and their total oil plus defence costs would be the same or lower. Not only that there are numerous ways the could immediately reduce the volume of consumption by using oil more efficiently, and altering transportation practices.

    An important reason for the size of defence expenditures was identified by Eisenhower. That explanation is money and self interest by a relatively small group. Of course, the military brass like more expenditure and new toys, and the defence industry is even keener on increased expenditure. The money defence contractors spend lobbying and contributing to politicians election campaigns, etc. means that politicians too love the expenditure and hence has been very effective at keeping those expenditure levels high.

    That expenditure needs to be justified to the public and that means a continuous supply of public interest reasons for having a gigantic military machine. This has had politicians all singing from the same hymn sheet of justifications.

    The menu of reasons supplied has included, threats from the evil doers, Soviet Union, now Russia, China, North Korea, Iran, Iraq, Afghanistan, the Middle East and Muslim countries, terrorists, African countries, South American countries, Central American countries, Asian countries, Cuba… and strategic interests, protecting their access to resources (even though they have pretty well everything at home and those needs are only marginal). Since the fall of the Soviet Empire American policy has often involved trying to provoke Russia, as the end of the Cold War has necessitated a resurrection of that threat to avoid the “peace bonus”, or at the very least, the substitution of new threats. The outrageous size of their military and having bases all over the world has also even become a matter of national pride.

    Ultimately, this expenditure has become an irrevocable burden which (along with some other significant burdens, an unwillingness to tax to finance their budgets which is bordering on Greek like, and the coming fall in their standard of living) is likely to lead to the union’s collapse.

  22. Ikonoclast
    April 8th, 2011 at 21:14 | #22

    I hope this quote gets the figures right.

    “Based on the EIA data, liquid fuel net imports (including both crude oil and refined products) accounted for 57% of total U.S. consumption in 2008, and fell to 49% in 2010, primarily because of the Great Recession, and rising domestic production. And T. Boone Pickens said the U.S. spent $475 billion on foreign oil in 2008 alone, and projected over the next 10 years the cost will be $10 trillion.” – from:

    http://www.dailymarkets.com/economy/2011/02/28/ban-oil-imports-for-energy-security/

    I guess we can say that half of US oil use is imports. A 3 trillion dollar war (and counting) to supposedly assure supply and marginal price advantages (dubious anyway) for 10 trillion dollars in projected oil imports for the next 10 years is an extremely negative investment. I agree on that.

    However, I dont agree that the US could quickly reduce its oil use by 50% without large (depression level) economic consquences unless as follows. Maybe it could have been done if that 3 trillion military spend had been spent on renewable energy development.

  23. Freelander
    April 8th, 2011 at 23:53 | #23

    The US consumes about twice as many barrels of oil per capita compared with other developed countries like Japan, Germany, the UK, France and so on. Hence there is great scope for reducing consumption. Congestion taxes to make vehicles in cities use the road more efficiently, road use taxes for heavy transport so they pay the full costs of their road use (which amongst other things would move some transport onto rail), and many other measures would immediately start reducing oil consumption. There is plenty of scope in most western countries to cut the use of oil and raise efficiency and productivity, and even more scope in the US given their heavy and wasteful use. The link you provide quotes the Yale Graduates Energy Study Group who suggest that the transition to zero imports could be made without too much difficulty in 10 years. Their estimates is probably conservative. It is amazing what markets can do if you put in the right incentives. Or at least that is what I have repeatedly heard!

  24. Ikonoclast
    April 9th, 2011 at 08:02 | #24

    @Freelander

    Freelander says a little ironically; “It is amazing what markets can do if you put in the right incentives.”

    More correctly, “It is amazing what markets can do if you take out the perverse incentives.” (As an example of a perverse incentive, Freelander mentioned that heavy road transport does not pay the full cost of road use and road damage.)

    Presumably, a free market will achieve good outcomes if you take out the subsidies (perverse incentives) and impose costs for using natural capital and creating negative externalities. Even I have a tendency to believe in the efficacy of the free market mechanism under such conditions.

    However, there is one thing a free market can never do and that is transcend the laws of thermodynamics.

  25. jquiggin
    April 9th, 2011 at 09:32 | #25

    Ikonoklast, you seem to be going back and forth. When I point out that in standard economic terms, oil is unimportant, you respond that oil is special because of the laws of thermodynamics. When I point out (as does Freelander) that the US could slash its consumption of oil, while getting the same transport and other energy services (and not violating the laws of thermodynamics) you jump back and claim (with no evidence) that this would be economically disruptive. Pick one claim and stick to it, then I will refute it.

    The fact is that most US use of oil (to fuel bigger cars than are needed, making more journeys than are needed to meet the transport needs of the economy) is exactly comparable to expenditure on designer label clothes – a luxury item that could be cut without any real adverse impact.

  26. Ikonoclast
    April 9th, 2011 at 10:39 | #26

    @jquiggin

    JQ, on the parameters of debate and argument followed in my post number 20 your post number 25, I consider myself incorrect and yourself correct. I concede the argument on those terms. All of the portion of oil consumption that is, very arguably, a luxury item is thus no different economically speaking from designer clothes.

    However, I am still troubled by your statement about;

    “This kind of premodern thinking, in which the appropriation of physical resources is economically crucial.”

    With my excessive tendency to argue to extremes or reductio ad absurdum (I admit it), I interpreted that as your saying, either that all physical resources are irrelevant, or at least that any specific exhaustible physical resource (even a currently important one) is irrelevant overall for a set of reasons. This set of reasons I assume would usually be (any or all of) that its supply limit is not near, its use is profligate and can be much reduced at necessity, and substitutions can and will be found by the market and growth in knowledge and technology.

    So I am not sure where that leaves me. With my reductio ad absurdum tendencies, I am still inclined to stick rather dogmatically to the basic argument that energy (for useful work) per ser is clearly not substitutable although its sources may be and it may be used more efficiently. This buys time but does not prevent or obviate the end point. The whole argument gets a very different twist I guess from whether one believes (or knows) limits to be near or not near. With my tendency to think to extremes I will always look for and ponder the nature, character and “crisis shape” of the end point of any and all exponential tendencies in a virtually closed system. [1]

    I would be interested in your further thoughts now that I have conceded conditionally on your ground assumption (that limits are not near) but not on my ground assumptions (1. that the limits are still there no matter whether near or not and 2. I think they are near in any case.) I mean if you think it worth elucidating your points further to a somewhat ponderous pedantic reductio ad absurdist dolt (I admit it) like me. :)

    FN 1. Remember that the correct definition of a closed system is mass cannot cross the boundary of the sytem but energy can. A system where neither energy nor mass can cross is an isolated system. No system is truly isolated except perhaps the universe itself.

  27. gerard
    April 9th, 2011 at 14:17 | #27

    Isn’t the whole point of government stimulus that there is a “multiplier effect”, so it isn’t a 1:1 relationship between what is injected and what is ultimately absorbed?

    Why then would we expect a 1:1 relationship (1.5%) with world oil prices on GDP?

    It’s a basic input into a lot of industrial processes and a large part of millions of peoples’ household budget.

    Just look around, most of the things you can see came in a truck or a ship.

    A model (fwiw): http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1703309

  28. Peter T
    April 9th, 2011 at 20:16 | #28

    It’s not the absolute limits of thermodynamics that applies. It’s that the physical world, unlike the financial one, is intricately specialised and interconnected. Things don’t move around that easily, and some bits are more vital than others. A good illustration is the effect of strategic bombing of oil and transport in World War II. The economists of the US Strategic Bombing Survey found, after the war, that German production of military material had climbed despite the bombing. This has ever since been used to claim that the bombing was ineffective. Later, more careful analysis showed that much of the increased production was of stocks of weapons either unusable because lacking some vital part, or inoperable because of lack of oil. And much of the rest was of weapons used to counter the bombing.

    I accept JQ’s basic thrust – the US spends too much on the military, and it won’t guarantee oil supplies anyway. But a line like “oil is only 3%” of the US economy misses the point that its the 3% that makes maybe another 30% work.

    In addition the US has spent the last three decades running down the skills needed to transition to a more fuel-efficient economy. It also has an aversion to government spending, and lacks the social solidarity to readily agree a large program of work on the commons. So I’d treat any estimate that said this could be done without too much effort in a decade or so with a large grain of salt.

  29. Christopher Dobbie
    April 9th, 2011 at 21:38 | #29

    By my calculations it would take 4 months and three weeks of US annual oil consumption* to convert all their passenger cars over to Prii.

    *energy represented as oil to manufacture said vehicles.

    Also unknown amount of oil within the product it’s self, i.e. plastics etcetera to consider but I’m not going to try to find that out but it would be interesting to know.

    This would halve their passenger fuel use (very liberal with the true savings but considering the size of US passenger cars probably more correct then not.)

    I will add this; you are neglecting an intrinsic part of any human economy, that of sex selection, this being more pronounced with our cousin’s in America I doubt it would be so comparatively easy to transform as these figures where to construct.

  30. Freelander
    April 9th, 2011 at 22:42 | #30

    @Peter T

    But it isn’t the 3% that makes the other 30% work. The US uses twice as many barrels of oil per capita as other developed countries because they use it very wastefully and as JQ suggests this use is comparable to the ‘need’ for designer clothes. As he also said this could be cut without any real adverse impact. Indeed, if some well known transportation policies which reduce oil use and increase efficiency and productivity were introduced as part of the adjustments, at least that part would not be adverse at all.

  31. Christopher Dobbie
    April 9th, 2011 at 23:14 | #31

    I think it can be surmised that it would take 15% of current yearly US energy consumption to convert their passenger car fleet to the fuel efficient Prius.

    By the way, please pardon the grammatical mistake in my previous post.

  32. Ikonoclast
    April 10th, 2011 at 07:45 | #32

    @Freelander

    As I stated above, I consider I lost the argument with JQ in the narrower context. While and so long as a significant portion of American oil use can be considered patently wasteful then it seems correct to say that the US could cut oil use with no greater effect on the economy than comparable cuts on other luxury items.

    Nevertheless, as I also said above, even wasteful consumption employs people. Thus, such a large cut as a cut in all US oil imports would still result in significant economic disruption. Without a concomittant state effort of New Deal proportions to build renewable energy infrastructure, rapid reduction of even wasted, luxury consumption of oil would result in a significant economic contraction.

    Finally, I do not resile from my basic contention which is that energy (and materials) are fundamentally crucial to the economy. JQ has not directly answered my doubts about his statement;

    “This kind of premodern thinking, in which the appropriation of physical resources is economically crucial.”

    If I invert that statement we get;

    “Appropriation of physical resources is not economically crucial.”

    Physical resources are matter and energy so JQ is saying “matter and energy are not crucial to the economy” which implies we can run an economy without matter and energy. Now admittedly, this is very literal reductio ad adsurdum logic and JQ is permitted to say “I didn’t literally mean that, you dolt!”

    If it is the case that JQ didn’t literally mean that then I need some clarification. The reason I need some clarification is that JQ appears to be treating the importance of all inputs, throughputs and outputs of the economy as solely equatable in monetary terms. This seems to come from the standard circular “perpetual motion machine” model of firms and households from orthodox text book economics; a model that fails to place the economy where it actually exists, namely in the environment and subject to the same biophysical laws as all other systems in the environment.

    Where non-renewable fuels from nature (like fossil fuels) are not properly valued for the full value of their embedded energy, then their costs, being merely recovery and utilisation costs, are artifically low. They subsidise the economy. Withdrawal of the cheap energy subsidy is likely to have economic impacts beyond that which seems to be implied by the market price of this energy. I really don’t think JQ has answered this question properly.

  33. John Quiggin
    April 10th, 2011 at 09:04 | #33

    Ikonoklast, I didn’t mean to say that resources are unimportant, rather that the kind of military/geopolitical thinking that regards access to or control of resources as being a critical goal of policy is premodern.

    On how long it would take the US to cut its oil consumption, as the discussion above indicates, the low-cost way to do it is to replace inefficient cars with efficient ones as they reach the age to be turned to scrap. Behind that is the need to retool factories to produce the right kinds of cars. This kind of process can be done relatively smoothly over 15-20 years (and has already begun following the big price increase of the last decade). If you wanted to do it more quickly, it would be more disruptive, but still nothing compared to the costs of maintaining the US military.

  34. Ikonoclast
    April 10th, 2011 at 09:38 | #34

    @John Quiggin

    Sorry to be so literal and reductionist which has led to my misinterpreting you.

    I agree 100% that “the kind of military/geopolitical thinking that regards access to or control of resources as being a critical goal of policy is premodern”.

    You still haven’t commented directly on the “energy subsidy thesis” contained in my previous post and whether you think this has any economic implications for the transition to renewables.

    On another point, I am particullarly concerned about the US transition because of my perception (shared by many I think) that the US is not approaching this problem with any wisdom or indeed any semblance of wisdom. The clear proof of this is the vast military over-spend and the lack of major state (or market) action on the necessary energy transition.

    Even if the energy transition to renewables is technically possible can we have any confidence that the US will follow that path in time when its political economy seems so deeply embedded in a different rut; this rut being imperialistic, militaristic, science denying, climate change denying and denying seemingly of any valid state and democratic role for planning but rather giving all this over to the market? The market has failed to initiate any real change so far.

  35. gerard
    April 10th, 2011 at 11:25 | #35

    I agree 100% that “the kind of military/geopolitical thinking that regards access to or control of resources as being a critical goal of policy is premodern”.

    What’s “premodern” about it? It’s still a dominant point of view where it matters. Unless you’re saying that it’s “premodern” in the sense that it was valid in the past, but is no longer valid now. So when exactly did it become premodern?

    It seems that if you can’t distinguish between what benefits the narrow set of interests that control foreign policy, and what benefits the population as a whole, you’ll be perpetually baffled at why “states” don’t seem to act “rationally”.

  36. Ikonoclast
    April 10th, 2011 at 12:31 | #36

    I took JQ’s “premodern” to be a broad perjorative. More precisely, I surmise he meant it was a general view when discourse was less developed but now informed discourse regards it as a “premodern” view whether it is still a general view or not in some quarters. However, I ought to let JQ speak to it.

  37. gerard
    April 10th, 2011 at 14:10 | #37

    It’s also worth considering that the importance of oil to the total US economy is less than the importance of oil to the US military. With all these aircraft carriers, fighter jets, armored vehicles, supply chains, it takes a lot of fuel to be able to project power effectively.

    So it’s not just that you need a global military presence to control the world’s oil supply. It’s also that you need control of the world’s oil supply to maintain a global military presence!

  38. Peter T
    April 10th, 2011 at 18:42 | #38

    On oil use, it might help to note that Europe has smaller cities, higher-density urban areas, a much more dense rail network, well-established intra-city public transport and a lot of high speed rail. It also has a history of urban planning and relatively centralised planning, and tax structures that can capture the diffuse benefits of this kind of investment. The US is well behind in all these areas. Transport is 40% of oil use in the US – the rest is industrial and heating (about 10%, mostly in the north-east). So major change is going to go well beyond replacing cars.

    On whether competition for resources is “pre-modern”, one might consider the Chinese effort of the last few years to tie up oil supplies and agricultural land. Are they pre-modern too? Or have they realised that with oil production flat since 2005, every ton that goes to China is a ton less for someone else?

  39. Freelander
    April 10th, 2011 at 20:42 | #39

    @Peter T

    Those differences don’t go too far in explaining the far greater consumption per capita of oil. Australia is much more spread out than the US, has proportionately fewer in living high densities and many more living in lower density areas. The Australian economy’s output also requires a lot of oil. Take for example mining. Nevertheless, US oil consumption is more than forty per cent per capita greater than in Australia, and the vociferous thirst in the transport sector is the reason. Military toys (as part of transportation) are also vociferous consumers of oil.

    “The developed economies use oil much more intensively than the developing economies, and Canada and the United States stand almost alone in their consumption of oil per capita (see graph). For instance, oil consumption in the United States and Canada equals almost 3 gallons per day per capita. (The difference is these countries’ transportation sectors, with their dependence on private vehicles to travel relatively long distances.) Oil consumption in the rest of the OECD equals 1.4 gallons per day per capita. Outside of the OECD, oil consumption equals 0.2 gallons per day per capita.”

    http://www.eia.doe.gov/pub/oil_gas/petroleum/analysis_publications/oil_market_basics/demand_text.htm

    In North America a lot of people like driving as a recreation; the taste for driving is not simply confined to serial killers.

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