Monday Message Board

It’s time for the regular Monday message board, where you are invited to post your thoughts on any topic. Discussion starter: What did you do for the Easter holiday? Civilised discussion and no coarse language, please.

61 thoughts on “Monday Message Board

  1. I see that on the weekend our Governor General appeared in the same platform as Franklin “Islam is a wicked religion” Graham. General Jeffrey gave the audience a little homliy on what ails our society, which is not enough worship of God (the Christian variety, that is).

    The message from General Jeffrey is clear enough, and much cruder than anything William Dean ever attempted – not so much dog whistling as elephant trumpeting. I’m glad he did it. The more the office of Governor General is politicised, the harder it will be for the monarchists to argue that the GG is apolitical, above the fray of day to day political debate, and the easier it will be to move to republic. What we have now, increasingly, is the worst of both worlds.

  2. With the oil price at a new record high of USD$57.00 what are the implications for our economy? Conventional conomics seems to have a large blind spot to the importance of energy to economy. A commentator on Seven breakfast show summed it up – quoting what I can remember “the high price is driven by strong demand from the USA and China. The world’s oil suppliers are not holding back but are at full capacity and as soon as the oil production increases then the price will drop”
    The assumption here is that there is more oil to supply. Practically all major fields are in decline and most oil companies and suppliers have overstated their reserves. What if there is no more oil to fill the demand – Peak Oil??

  3. With the oil price at a new record high of USD$57.00 what are the implications for our economy? Conventional conomics seems to have a large blind spot to the importance of energy to economy. A commentator on Seven breakfast show summed it up – quoting what I can remember “the high price is driven by strong demand from the USA and China. The world’s oil suppliers are not holding back but are at full capacity and as soon as the oil production increases then the price will drop”
    The assumption here is that there is more oil to supply. Practically all major fields are in decline and most oil companies and suppliers have overstated their reserves. What if there is no more oil to fill the demand – Peak Oil??

  4. With the oil price at a new record high of USD$57.00 what are the implications for our economy? Conventional conomics seems to have a large blind spot to the importance of energy to economy. A commentator on Seven breakfast show summed it up – quoting what I can remember “the high price is driven by strong demand from the USA and China. The world’s oil suppliers are not holding back but are at full capacity and as soon as the oil production increases then the price will drop”
    The assumption here is that there is more oil to supply. Practically all major fields are in decline and most oil companies and suppliers have overstated their reserves. What if there is no more oil to fill the demand – Peak Oil??

  5. The big question is, can the Tahs go on with it this year? Top of the table with four wins out of four, including two in South Africa, with eight games to go … it’s getting very hard not to become hopeful again. Caught Saturday night’s game live, to check the team out in the flesh. They do look strong, physically, this year, in what was a tough physical match … and did anyone see Morgan Turinui’s first try – pure magic. Go the Tahs, you born losers you!

  6. Stephen, over the last 3 years I have learnt a lot from reading this weblog. However for some reason the subject you broach rarely elicits much interest in this neck of the woods.

    Either economists are part of a wicked global cabal or else you are right about the blind spot. Perhaps their market theories are fatally structured to assume that commodity X can always be sourced as long as someone is prepared to pay the price.

    And that sellers of said commodity are only interested in the price they recieve and not the identity of the buyer.

    There is a bloke in South America who is risking life and limb by threatening to sell more of commodity X to the Chinese and less of it to the USA. Economically irrational behaviour, maybe. But with very real consequences for the “energy security” of the jilted party.

  7. In terms of the physical presence of a blog I believe Bernie Slattery’s new incantation of his blog is easily the beat.
    So I say hats off to you.Bernie you have set the benchmark.

    The Koran says Jesus did not die, the bile says he did and rose again.
    Even in your post-modern mind those two points are contradictory.
    One is right and one is wrong.

    CS as an historian has this event occured previously and if so what happened at the business end of the season?

  8. Homer,

    “The Koran says Jesus did not die, the bile says he did and rose again.
    Even in your post-modern mind those two points are contradictory.
    One is right and one is wrong.”

    You may profit from a quick perusal of this discussion of the “fallacy of the excluded middle”


    What? They Never Heard of WorldCom?
    By Gretchen Morgenson

    HAT a week.

    Bernard J. Ebbers, founder of WorldCom, got to add felon to his already colorful curriculum vitae. Maurice R. Greenberg, dictator in chief at American International Group, the global insurance giant, was toppled after almost 40 years at his post. The Federal Reserve told Citigroup it could not make any major acquisitions until it cleaned up its compliance act. And General Motors laid a big, scary earnings egg.

    Isn’t it nice to know these incidents are anomalies and that most American companies are chugging along, reporting good solid earnings?

    Sure would be. But contrary to popular belief, the quality of corporate earnings is on the slide again and, as a result, Richard Bernstein, chief United States strategist at Merrill Lynch, is advising investors to tread carefully.

    “There is an impression that the quality of earnings has improved dramatically,” he said. “That is true relative to the worst levels of post-bubble reporting, but relative to history, the absolute quality of earnings is quite poor.”

    And getting poorer.

    Mr. Bernstein reaches this depressing conclusion by analyzing the difference between the earnings that Standard & Poor’s 500 companies have reported under generally accepted accounting principles and operating earnings, the figures companies typically trumpet because they do not include write-offs and other unusual items.

    The difference between the two figures, Mr. Bernstein says, is the G.A.A.P. gap.

    And it is widening. In the most recent period – the fourth quarter of 2004 – the gap was 13.7 percent. In other words, operating earnings were on average 13.7 percent higher than reported earnings. While that figure is well down from the 40 percent gap reached in 2002, it is much higher than the long-term, pre-bubble average of 6.7 percent.

    The result: while stock valuations may not be so high as they were before the bubble burst, the quality of earnings appears to be worse….

  10. congratulations Dave for avoiding the point.

    Katz. that doesn’t apply here surely.Either a person has died or he hasn’t.
    Similarly Jesus either rose from the dead or he didn’t.

  11. But Homer, Islam, Christian orthodoxy and you have all excluded the possibility that Jesus just died.

    (Braces self for a torrent of faith-based special pleading.)

  12. Homer, you know perfectly well that Graham was making a political, not theological, statement, when he said that Islam is a wicked religion, just like one of Tim Blair’s commentators who calls himself Koranistoiletpaper. You are avoiding the point, not me.

  13. wbb

    I think you are right.

    I was actually interested in what economists say about the oil supply problem. I am not an economist and I would really like to hear what people think the economy will look like if you accept that the supply of oil is limited and perhaps falling.

  14. Dave, oyu can’t be serious as john Mcenroe would say.
    If the Koran is a lie and Satan is the Prince of all liars then what theological statement would you like him to make?

  15. Homer, a theological statement would be like:

    “Islam and Judaism are two examples of wicked religions.”

    Graham’s statement is political as it singles out one religion for special treatment. Now why would he do that, if not for populist reasons?

  16. I read the post you mentioned on oil. There still seems to be the assumption that “oil will never run out”. This is probably true however this is not the problem. If oil production cannot meet demand then this is the same thing. Mind you at sometime in the future the oil will run out. Our accelerating demand is depleting the finite oil reserves at an ever increasing rate. Simply assuming that it will never run out seem to me to be sticking your head in the sand.

    Tar sands and shale oil require more or the same energy as they release to refine. So these cannot be counted in reserves.

    The question is at what point does the fragile US economy, already heavily in debt, gets a bad cold from high oil prices and the rest of the world gets the flu.

  17. Had an interesting thought this morning about China.

    I run a small, unlisted Australian oil explorer. We’re doing a deal with a slightly larger, listed Australian mining company.

    The company is getting substantial capital out of China – as in, Chinese money is being inv ested in them.

    That China is a difficult place to invest in for Western companies is by now a truism, because the lack of transparency, rule of law etc makes it difficult to value assets appropriately.

    But what if it’s the same for Chinese companies ? A Hangchow based firm knows the way things work in hangchow, and isnt likely to fall afoul of stuff in Hangchow, but if it buys a Shanghai business, then all bets may be off.

    Thus, growing organically may be easy in China, but growth by acquisition may be difficult.

    Thus, Chinese compnaies may be interested in purchasing offshore assets (ie IBM’s PC arm, chuinks of Australian mining companies), as they can correctly value them.

    Ian Whitchurch

  18. Dave, I won’t argue that the GG isn’t politicised, but wouldn’t an elected head of state be ten times as bad? OK, at least they’ll have a mandate, but do we want to do things which further politicise the office?

    (I’m implicitly assuming you want an elected HoS, which may not be the case at all, and I’m arguing against that, not against a Republic in general — I voted yes at the referendum)

    Ender, just because shale/tar takes more energy to extract than they provide doesn’t make them useless — oil is a more convenient form of energy than (say) gas for some purposes.

  19. Tom, we have the worst of all worlds right now – a GG whose hold on office is the play thing of the Prime Minister, and who pretends to be apolitical, but who plainly is running an ideological agenda. Hayden did it and Dean did it before Jeffrey. Hollingworth didn’t get a chance to di it, but probably would have if he hadn’t been distracted by the matters which led to his undoing.

    Let’s cut the pretense. Since it is a political office, let the head of state (contiinue to call him GG if you want) be either appointed by a political body, the Parliament (as per the 1999 proposal) or directly elected.

  20. Dave – It does matter as where do you get the energy to refine the shale/tar sand oil? At the moment stranded gas is used. This is gas that it is not economical to pipe anywhere. How do you get enough gas to the tar sands to refine the oil? It would be slightly better just to use the gas.

  21. The problem with oil at the moment is not that there is not enough in the ground to continue to supply the world’s requirements for the next few decades, at least. The problem is one of getting it out of the ground, on to ships and then refined either at destination or on the way. Because the price has been very low for the last couple of decades there has been no real investment in the infrastructure – no new refineries have been built in the US for the last 25 years for example. The only producer with surplus capacity has been Saudi Arabia and their oil tends to be the heavier thicker oil that cannot easily be made into petrol. This is why the price of WTI (West Texas Intermediate) and Brent Light Sweet crude have been climbing. The best oil for petrol and other light volatiles is these and that from Nigeria and they have not invested in production capacity for years.
    It takes time to get these wells drilled and the pipes, ships and refineries built. The error made in the 70’s on the forecasts for oil production is again being made. People seem to be unable to differentiate between transitory, supply related, issues and a genuine lack of oil in the ground.

  22. Oil will eventually run out. Nuclear energy won’t. Can someone perhaps remind me again why Australia doesn’t have neclear power plants?

    We have all the U3O8. We’re good at building big concrete things. And nuclear doesn’t pump CO2 into the environment. And its economics are among the best there is.

  23. Margo reviewing an ABC Compass interview before the previous Federal Election has determined JH is a hollow man, since compassion does not fit into his core values, let along core promises. I have just interviewed myself and found I am even hollower, although there is only a few degrees of separation in it.

  24. Tony Abbott’s long lost “son” has failed (or passed, if you are so inclined) a DNA test. The story gets weirder and weirder.

  25. Andrew Reynolds : “The problem with oil at the moment is not that there is not enough in the ground to continue to supply the world’s requirements for the next few decades, at least.”

    Supply which part of the world’s requirements? What for example would China’s requirement be? The answer to that may depend on the muscle they can bring to bear on the issue.

  26. HP, at number 14, consider Schrodinger’s Cat and multi-valued logics. Aristotelian or two-valued logic isn’t always the best tool, certainly not in areas of uncertain information. You can construct a multi-valued logic from any topology.

  27. “Tony Abbott’s long lost “sonâ€? has failed (or passed, if you are so inclined) a DNA test. The story gets weirder and weirder.”

    Yes. The wheels began to fall off the story when preliminary results of the DNA test showed that Daniel O’Connor was fully human.

  28. WBB,

    The reason most economists aren’t overly worried about Peak Oil is because we beleive higher prices will tend to reduce demand, ecourage further porduction and encourage shifting to substitutes.

    I think world oil producrtion is approaching its peak, however I regard this as on-balance a positive rather than a negative. Rising oil prices (which in inflation-adjusted terms are still far lower than in the 1980s) are a normal part of the market mechanism and will promote the shift to hybrids and other more fuel efficient technologies.

    Oil prices could double again (to reach the same real level as 20 years ago) and the world economy would survive. We might experience a moderately severe world recession but we aren’t talking Mad Max here.

    In the case of Australia in particular, we still produce around 50-60% of our own oil and within 2-3 years, if prices rose sufficiently, we could probably derive another 10% or so from ethanol.

    Additionally, we[‘re net energy exporters so any rise in natural gas and coal prices would tend to offset the impact of any oil price rises.

  29. < >

    Because the cost of electricity from nuclear power plants is several times that from Australian coal-fired power-plants and because the capital costs and lead-time for a nucealr power plant are several times longer than for a coal or gas-fired plant.

    Since Australia has somewhere between several centuries and a couple of millenia worth of coal reserves, security of supply is hardly a pressing issue.

    To date, to the best of my knowledge, no-one has offered to build a nuclear power plant in Australia. But somehow, in this particular instance, there’s a view that the government should be taking the lead or intervening in the market to stimulate demand for such a plant.

  30. Interesting case of gender dynamics is raised by the Cuckolding of Abbott.

    One may legitimately ask why the actual biological father of O’Connor, and any other potential fathers, were not invited to the birthing room along with young Abbott.

    Did young Abbott seem to the mother to be the most suitable prospect for marriage and for support?

    Was the mother subject to some form of mental or emotional impairment during this stressful period, or did she have her thinking cap firmly screwed on?

  31. Ian Gould’s sanguine views on the price and scarcity of oil don’t take into account transitional costs – many careers and lives adversely affected by forced, unplanned transitions. Same problem occurs with economic modelling of global warming – maybe eventually a warmer world gets by with cactus farms etc., but in the meantime untold damage occurs.

  32. Gordon,

    I’m quite aware of the transitional costs. But I think that the sooner we start addressing the problem and the more we plan for the change, the lower the costs will be.

    I regard peak oil as a positive precisely because it may obviate the need for cactus farms down the track.

  33. Nuclear power is not an option. We do not know how to store the waste. Humans are not able to contemplate time periods greater that their own life spans. Nuclear Waste has to be kept for 20 000 years or more. The expansion of nuclear power to replace coal and oil would increase this problem a hundred times and increase the risk of proliferation of nuclear weapons. If you support nuclear power as a solution why is the US so strenuosly denying Iran nuclear power? Surely if it is the correct answer then there can be no problem with Iran or North Korea etc having it. Or is it a case of ‘only the good guys’ can have it?

    There is a lot less oil left than most people think. Suppliers have been overstating reserves for years and their real reserves are their most closely guarded secrets. Also even with all the new technology to find oil the rate of discovery of new fields is decreasing. No mega fields such as those in Saudi Arabia have been found in the past 30 years despite all the millions of holes dug.

    There seems to be a persuasive attitude that the market can create resources. It would seem from reading this thread that there is an assumption that higher prices will lead to a drop in demand or increase in supply. This is not the case at all. We have seen the price rise from $20.00 per barrel to $57.00 with no decrease in demand – why do you assume that there is some point when demand will decrease when the direct evidence is to the contrary. Chinese demand, not evident in the 70s, is driving demand through the roof.

    As we have not bothered to develop alternatives there is no fall back to oil. Hydrogen is an energy carrier not a source. It is being used to delay implementation of a real solution until the vested interests are ready. The fact that if we do not change we may all perish is lost on these interests.

    There is only one alternative. We must reduce energy demand through widespread changes in home and industry energy usage patterns. If we do this then the energy demands will fall into a range that renewable power can supply. Economics must be made to realise that the real root of our whole world’s economic system is in fact energy and without it it will collapse. We must acknowlege this and factor it into calculations instead of externalising it and regarding it as ‘somebody else’s problem’

  34. Ender,
    I agree with your first comment – nuclear is not an option for clear economic reasons – even discounting the costs of cleaning up the mess to the present does not reduce them below the initial start up benefits.
    You are also right on hydrogen – it is a carrier, just like the power lines.
    Where you are wrong is on the price of oil. The reason that the increase in price has not affected us much is that a large component of the price is now tax – a doubling of the price of crude does not result in a doubling of the price we pay for fuel. In addition, fuel is now much less a component of national income than it used to be, so we can simply shift consumption expenditure from other items to petrol.
    Any further adjustment will take time. The reason we “have not bothered� is because, at the moment, there is no real need – nothing can (yet) compete with oil as a fuel source. As the oil price steadily increases as it becomes rarer then the alternatives will be developed further and will become economic. These sorts of shifts have happened many times in the past and will happen in the future. There is no reason to think this will be any different.

  35. Andrew
    I am glad that you agree on nuclear – we need more opposition. The more you research it the worse it is and I do not want to see any expansion.

    With your second point you are illustrating a very important assumption that a lot of people make – that as soon as oil becomes more expensive the alternatives will take over. This is just not true. The alternatives do not exist that will enable us to drive our Prados and power our lavish lifestyles. We have to meet the alternatives half way and this will involve changes. This is why the we have not changed. Only fossil fuels have the energy density and ERI to enable us to use them as if there is no tomorrow and live the life of the Lotus Eaters.

    If we simply replace Prados with electric Prados then we come back to how do we generate power to charge them up. If we would like alcohol or biodiesel cars then how do we get enough water and fertiliser to an already strained agriculteral system to grow enough plants to make the fuel.

    Wind and solar can never never supply as much energy as coal. If everyone powers down a bit then maybe we can generate sufficient power with renewables but only at reduced demand. Small battery cars integrated with the grid to use as storage can replace petrol cars eventually.

    The main point is that if we wait for the oil get scarce and petrol to cost $10.00 per litre then any alternative would take 10 years to be implemented. What do we eat in the meantime? The food on your table is transported in from sometimes thousands of kilometres away. Your local area would not grow enough food to support you and your suburb without transport and oil. So what do we do while the ‘alternatives’ are developed – starve? If we wait until there is no alternative then what do we do in the meantime?

  36. There are fall backs to oil. Curiously enough, biofuels are rational for Australia where they are not for the USA, because of the available capacity allowing for agricultural needs. But the biggest issue is transitional, not capacity – a sort of Malthusian limit not based on absolute capacity, but applied to fuel resources not food (see also Nassau Senior’s discussion on the theoretical possibility of machines competing with people for agricultural resources, in the introductory part of his “Wages”).

    Anyhow, we can probably ramp up production of alternatives fast enough, if there is no rapid collapse. There are already embryonic technologies just waiting to be justifiable, with all their research done. Wikipedia has material on “thermal depolymerisation” to synthesise hydrocarbons from biological feedstock.

  37. Ender,
    There are alternatives. LPG is currently being used in our taxis, no reason why it cannot be used in cars. It is also a good substitute in power stations, producing cleaner power. Ethanol is currently already in our fuel, again, the only reason it is not replacing oil there is the cost. The biodiesel option is live – is is produced mainly as a by-product of our food production. I would agree on the electric cars, they are like the hydrogen fueled ones – you need a power source.
    If we neglect the green house effects temporarily, there is no reason why coal cannot be used to generate the power – there is about 600 years left there.

  38. Ender – regarding your comment “If you support nuclear power as a solution why is the US so strenuosly denying Iran nuclear power? Surely if it is the correct answer then there can be no problem with Iran or North Korea etc having it.” Ah, no. That is like saying convicted peadophiles, who have served their sentences, should be allowed to work in child care centres! You are quite correct that only countries that have demonstrated democratic responsibility should be allowed to have nukes – like the US, UK, France, Israel, India. It’s bad enough that China and Russia have them, let alone PROK and Iran.

  39. LPG like oil is a limited fossil fuel and is a transition only. Already the Murray-Darling is salting up and millions of hectares of farmland are being overused. We can only grow what we do with the intense application of fertilizers. THis will eventually lead to the disruption of the environment. Now consider growing enough plants to replace all the liquid fuels used in Australia plus enough to feed us – I don’t think so.

    Electric cars are fine – as long as they are recharged from renewable sources. They may only have a range of 100Km or so however as in just about all studies done it has been found about 85% of all car journeys are under 100km. Longer range electric cars exist with new Lithium batteries and AC drives however the smaller the cars the less energy it takes to recharge.

    If we neglect the global warming effects of coal we will end up heating the earth and possibly making it unihabitable. The consequences of global warming could be catastrophic climate change. Neglecting this will lead us to think in the future “just why did I have to have that Ford F250 – was it really worth the earth?”

    If we clean up the particle emmisions we run the risk of reducing global dimming. This is reducing the amount of heating that the increased levels of CO2 are producing. Burning fossil fuels have a double whammy. They heat the Earth with CO2 and then conceal the fact, by emitting soot etc until too late. The earth has warmed about 0.6deg – without dimming that figure would have been higher. The only way out of avoiding 5 to 10 degrees of warming is to stop burning coal now.

  40. Ender.

    < >

    you might want to look at what the various combatant nations in WW2 did when their petrol supplies were cut off.

    Alternatives – from “nontraditional” oil sources; to bio-fuels to plug-in hybrids to increased public transport are already available.

    In the short term you’re correct that there’s significant inelasticity in petrol prices. Much of the cost of car travel is in sunk costs – car purchase and registration – and petrol is only one component of the total cost.

    However since 1972 the amount of oil used per dollar of global output has decreased significantly (the total growth in output has swamped this though resulting in higher total demand).

  41. Razor
    I really don’t think the USA or France etc are in anyway a responsible democratic nations. Anyway I am sure that you do not want to go there. Pedophiles prey on innocents. You cannot compare countries that do not happen to share the same political view as you to sick sociopaths. Anyway China is good enough to manufacture our electronic goodies – we don’t seem to have a problem with that.

    Yes when the oil ran out they lost – Germany. German production peaked in the latter half of 1944 – they did not have the fuel to run the tanks and planes. The other nation’s populations knew that it was a short term expedient and accepted it as such.
    You have stated the problem in your last sentence – despite less oil needed for production total consumption has risen due to increased demand. This demand is showing no sign of decreasing.

  42. Glad to see Ender won’t play dead on this.

    Medium term is what I’m interested in, particularly. No matter who is right about the bumpiness of the transition long-term, in the meanwhile big countries with big weapons will make sure that their oil-security is looked after.

    And the implication of that is, very simply, war. This leads to loss of life. That is why the transtion which some say there is no hurry about is in fact very urgent. We are already in the crisis phase. We don’t feel it in the rich nations because we have high-priced gadgets that ensure nobody’s siphoning off our supply. But out there in the real world people’s lives are directly affected by oil wars now.

  43. Ender wrote, “Nuclear power is not an option. We do not know how to store the waste.”

    James Lovelock had a wonderful idea for nuclear waste. Dump it in areas you want to protect. No human will go there, and certainly no developer will develop that land. It is a way to protect our rainforests, national parks etc from human intrusion, destruction and development.

    Nuclear power isnt as scary IMO as it is made out to be. IIRC the Chinese are developing pebble-bed(sp?) reactors as a potential solution to any coming energy need of theirs.

  44. wbb, ender – please understand this. There is no global shortage of oil – there is plenty of it left for years to come and in enough locations that if a few have problems (more than likely to occur) the others can take over. The problem at the moment results from the very low price we have been paying for oil over the last couple of decades – underinvestment. The problems are in distribution and refining, not an absolute shortage of oil.
    Even if all the oil somehow disappears there are close substitutes that can be brought on stream quickly – gas, ethanol, methanol amonsgt others.

  45. Ender, you have the direction of causality wrong on German oil. When they lost, they were cut off from fuel (mostly Rumania).

    Hitler disagreed – correctly – with his generals advocating strategic retreats in 1943/4 on the grounds that “the trouble with my generals is that they don’t understand economics”. Hitler knew perfectly well that he couldn’t retreat past his oil resources.

    The result was, if Hitler had listened to his generals and not issued his stand fast order in 1943, your reasoning would have been sound. They would have lost from lack of oil, a year earlier. But as it was they lost their oil because they lost the war, a few months before the end.

  46. wbb
    You make a very good point – war. 80% of China’s oil is shipped through the Straits of Malacca. Guess who controls that waterway – the USA . China is desperate to modernise its Navy so that it can control its choke points. I foresee a war just on our doorstep. Who knows what weapons the USA and China/Russia will use to secure the last drops of oil.

    Pebble-Bed reactors are reputed to be safer and on the surface NP is not scary. It is only when you delve into the depths of storing waste and controlling the spread of nuclear material does it become murky. No human institution has lasted more than 1000 years. Yet we produce material that has to be kept seperate from humans for 20 or 30 thousand years. Assuming the humand race survives, in 5000 years the USA and our society could well be a legend told to children as fables much like Atlantis is today. How do we ensure that the waste sites are marked so that in 10 000 years people still keep away from them. One scientist tasked with thinking of a way only came up with an Atomic Priesthood that passed the knowledge in a series of religious taboos. Not very encouraging.

  47. Andrew
    You are right in one sense. There is plenty of oil left – but you misunderstand the problem. The problem is not the amount of oil but whether this amount can meet rising demand. Currently the average Chinese uses the equivalent of 664kg of oil per year – we use about 5341kg per year. China and India are growing fast and if they approach our level of development the current oil reserves of 1000 billion barrels will dwindle very quickly. Current usage is 80 million barrels per day. If China and India and others significantly increase their demand then this 80 million barrels per day could skyrocket to 200 or 300 million barrels per day. Do the maths for 200 million barrels per day and see how long the oil lasts.

    Read list article

    The main problem is not lack of oil but vastly increasing demand as others that look at our lifestyles and want the same.


  48. Ender,
    To me, your links prove my point. Even if there was an immediate jump to 200,000,000 bpd consumption (not possible), no new reserves found or new extractive technologies developed (unlikely) and using the most pessimistic figures presented we still have a bare minimum of 14 years left. Using any logical assumptions about China’s and India’s growth blows that out to about 30 years. Long before then there will be a drop in comsumption of oil as the price gradually increases, perhaps by shifting to LNG for power production and to fuel our cars. The natural gas reserves are much larger and better spread than oil.
    Thanks for the links, I will use them in future to prove my point.

  49. I glad that you see the links as a positive. Most people would see this as a crisis not reassurance.

    There is no evidence that increasing oil prices will cause a drop in demand. This is an assumption based on classical economics which does not apply in the real world. Long before we get to the last drops of oil there will be conflict to secure oil supplies.

    Your assumption is only correct if the number of people consuming oil remains constant. The ‘new’ consumers of oil are increasing so despite increasing prices the overall number of consumers will rise increasing demand. There are 1000 million people in China and 900 million in India.

    If what you say is true then there should have been a drop in demand as oil prices rose from USD25.00 per barrel to USD57.00 a barrel. No such drop has been observed as far as I know. Therefore it is reasonable to assume that even if oil prices get to USD80.00 per barrel then there still will not be a drop in demand as millions of new consumers will be added to the demand. Demand could exceed 200 million barrels per day. 1000 million new people using 1 extra barrel per day is a billion barrels per day. Even if the only 10% of China and India’s population use 1 more barrel per day then that is an increase of 190 million barrels per day. This gives you an idea of the problem.

  50. Ender,
    Demand for oil is, I agree, inelastic in the short term. It takes time (and money) for people to convert their cars and power stations away from oil to the alternatives and a doubling in a year of the price, for clearly transitory reasons, is not enough, but it may slightly accelerate the rate. People just substitute other consumption to pay the higher price in the short term.
    In the long run, however the picture changes greatly. Per unit of GDP demand for oil has more than halved in developed countries since the 1970’s oil shock and this process is continuing, partially driven by tax changes and greenhouse fears. This tranfer rate will simply increase as the price rises as supplies deplete.
    Markets around the world have dealt with resourse depletion innumerable times before.
    I would contend that long before the last barrel of oil is pumped the world generally will have ceased to notice what the oil price is and the closing of the last well will only be a note of interest at the bottom of some bloggers page somewhere in the distant future.

  51. May I recommend this article dated 9 March 2005 to interested parties
    US report acknowledges peak-oil threat

    It’s about a US government report whose conclusion is “the world has never faced a problem like this. Without massive mitigation more than a decade before the fact, the problem will be pervasive and will not be temporary. Previous energy transitions were gradual and evolutionary. Oil peaking will be abrupt and revolutionary”.

  52. WBB,
    I seem to remember a previous report, put out in the 1970’s along the same lines. I will try to dig it out – not sure it is online.

  53. Club of Rome? The Limits To Growth? Turns out that that report is being shown to have underestimated the problem.

    It is clear that the skeptics and scoffers of the Club of Rome’s The Limits to Growth got the real message of The Limits to Growth wrong, at least from an energy perspective. They turned out to be as wrong about The Limits to Growth as they were wrong about the entire energy picture as the 20st Century came to a close. These name-plate energy economists ended up spending too much time criticizing this work and attributing doomsday dates that were never even part of this written work. They then spent far too much time pontificating on how energy was gradually becoming less important to the wonders of a New Economy and would obviously cost less as time went by.

    Instead of rolling up their collective sleeves to begin addressing serious energy issues, these kibitzers spent their precious hours attacking the few voices of energy sanity. Over the years, the energy economists’ incorrect dismissal of this important work was not only a mistake but their criticism also turned somewhat mean-spirited and at times even shrill! What a sad conclusion for such a well-intended work to finally produce.

    Lurking in the backdrop of this silly, misinformed chirping was a body of statistics, all in the public domain, that were proving that many of the key issues raised by The Limits to Growth were not only serious,but the magnitude of the problem was growing as the gap between the rich and the poor widened and the poor population expanded at a much faster pace than the rich.

    Perhaps the ultimate irony capping all the other mistakes which too many energy planners made as the 20th Century came to an end is that the work they lambasted so viciously turned out to be true.

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