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Oil prices will go ... up?

No easy explanation for continued price increases in the oil markets

Posted by Jason D Scorse (Guest Contributor) at 2:53 PM on 07 Jul 2008

At the end of last year I predicted that the price of oil would go down; so far I have been terribly wrong. My prediction, shared by many other economists and energy experts, was premised on a reasonable assumption: Since the world was headed for an economic slowdown, brought about the housing bubble and the financial crisis, global demand for energy would likely moderate, putting downward pressure on prices. While it was a sensible prediction, I am happy that no one took me up on my bet.

So what happened?

While many attribute the rapid price rise as validation of the "peak pil" theory, there is simply no way right now to disentangle all the forces influencing energy markets. The peak oilers may be right, but there are other significant forces at work. There has been large-scale political instability in major oil-producing countries (Iraq, Iran, and Nigeria) and the role of speculators is still not fully understood. Perhaps even more importantly, the majority of the world's oil is controlled and produced by essentially authoritarian powers, many of whom are using oil proceeds to line their pockets and for short-term political gain, instead of reinvesting in their oil sectors. The reality may be that there is plenty of oil in the ground, but not the production capacity to extract it at a faster pace.

Bottom line: No on really knows what's going on. Yes, the demand from India and China is rising, but not at a greater pace than it was a couple of years ago. Of all the markets I have studied over two decades, I have never seen so many smart people unable to agree on the causes of such a major economic phenomenon.

So what will happen to oil and energy prices in the future? I have no idea. Arguments for even further price rises seem as reasonable as those that predict a steep decline in prices over the next couple of years. We are truly in unprecedented times since global slowdowns have never been met with such commodity price inflation before.

What I do know is that what we are going through represents one of the greatest policy failures of a generation. Economists and other policy makers have for decades been calling for a gradual increase in energy taxes to help America transition to a less energy-intensive economy. Democrats and Republicans alike have opted for political expediency and missed opportunity after opportunity to get the American people on board (Clinton when oil prices were at record lows and Bush II after 9/11).

The worst of all possible scenarios has now come to pass: We are witnessing a massive transfer of wealth from America (and the Western world) to autocratic regimes that are openly or indirectly hostile to our interests; because of the suddenness of the price increases, people are feeling real and pronounced economic pain; and because the price increases have not come from higher taxes on energy, pollution-intense sources of fuel such as the Canadian tar sands are now booming.

But a paradigm shift is underway.

Americans for the first time in decades are driving less, sales of SUVs are plummeting, new investment in alternative energy and new technology is booming, and the average consumer seems to finally get it that conservation is not just a personal virtue but should be the basis for sound policy (even though they also now favor increased drilling too).

At the end of the day, the fundamental economic prediction always turns out right: Higher prices lead to changes in behavior. We are just now witnessing the tip of the iceberg of what will be a radically different world with respect to energy usage over the coming decade. It may not yet be the "end of oil," but hopefully the beginning of the end.

Ouch!

It's like the stage was set for this to happen. The oil industry in control, basically everywhere, world trade agreements being what they are, the devaluing of the US dollar, inability to look at, and make decisions based on actual reality- which has been going on for years now, blinders with regard to the fact that we live on a finite Earth, that somehow growth will, and should, prevail. Where we're at, as I see it, is a totally logical place. Many, myself included, have known something like this was down the road. But that's the thing - it was down the road. I figured that we had about five years before the current scenario (in some shape and form) played out. But it's like, snap, and here we are. But that's also true with regard to climate change. Snap, and here we are. So it makes a kind of wierd sense, and though what's happening is making my own life difficult, and a bit more precarious financially, the bottom line is the way we live is unsustainable and has to change. Somehow. We're being given a huge kick in the pants. Ouch!

Brain drain

Excellent article and thanks for being honest - there are problems with those who only see speculators versus market "fundamentals." It's complicated.

One interesting side note is that the big players in developing oil fields are losing experienced workers by the day, as they retire and few new workers are trained. "Brain drain" is a real issue - the only sector doing OK are those into 3-D underground geology, much of it based on computer modeling just like games.  

The two examples are Mexico (PEMEX) and Russia (Lukoil I think). Both counties have existing fields that are being played and need new investments in technology and trained manpower. Watch, Venezuela will have a similar problem soon, as they booted out most of the US technology companies.  

Of course, maybe brain drain isn't so bad if you want less oil!

Onward through the fog

Darn, should have taken your bet!



I know I sound like a broken record, but...

Some things bear repeating until people get it.

It isn't just consumer habits that are going to undergo a change. Energy is fundamental to the whole economy. In fact it is the only true basis for an economy. Reduce energy and you reduce the amount of work that can be done. It really is that simple. Assume, for a moment, that peak oil production is the biggest component in the run up of oil price (supply and demand!) Now think about what happens in the years ahead as oil production declines each year.

Demand doesn't show much destruction other than in the obvious personal transport sector. Unless there is a spectacular breakthrough in investment in alternative energy capital equipment and efficiency standards there will be less energy each year to do economic work. That means less stuff gets built and/or shipped. What does get built will cost more in dollars (since in reality money = energy and with the number of dollars staying constant with energy declining the dollars per Btu goes up).

We will witness economic contraction coupled with inflation. If you thought stagflation was a bitter pill...

Then some day some bright bulb will put 2 and 2 together and get 4. But if it comes later than sooner there won't be enough FF energy left to invest wisely in alternatives.

Question Everything

George
PS. I thought sure I did take you up on that bet! Are you sure I didn't???

George Mobus, Associate Professor, Institute of Technology, University of Washington Tacoma, and Professional Student for Life

I agree with most of this except.........

The autocratic regimes where oil is so prevalent have a MAJOR problem - water. They do not have enough to sustain their populations either in food production or in water for consumption or bathing. Their populations have continued to grow and have now grown well beyond their means to sustain them. Yemen, Saudi Arabia, Egypt (not an oil producer either, and dirt poor) and others have large populations and major challenges in terms of sustaining those populations.

Yes, the cost of oil is a major problem for us. But at the end of the day, when oil is largely gone, they will be left with no exportable resources and a huge population they can't feed.

So a massive transfer of raw power is unlikely. We all will have to make serious adjustments down the road, develop new energy supplies, and for the Arabs start controlling population growth.

Victory in Pattani

George.....

I don't remember you making the bet but if you can find the proof I will honor it. As for your points, I'll go with a counter-prediction, global GDP growth will not contract- we can bet on that too if you want. I'm not saying there will never be a global recession, but that there will not be a prolonged period of negative global GDP growth anytime in the forseeable future. In fact, it's quite amazing that global growth is still positive given the financial crisis and the commodity/oil shock- once we get through the former I predict robust growth even if oil stays reasonably high. I'm always the optimist....

Economic Illiteracy Harms The Planet! www.voicesofreason.info.
Fun with charts:P

http://greyfalcon.net/oilchart4.png

-David Ahlport
Mad Mac....

you're right with respect to the Middle East but the states there can import food and desal water so not sure it changes the game too much in the medium run.

Economic Illiteracy Harms The Planet! www.voicesofreason.info.
No problem Jason

 Low expectations and all. After all, you ARE an economist.  Hehey.

http://amazngdrx.blogharbor.com/blog John Schneider, Northern Wisconsin
Overshoot?

Good article.  Mostly.

One likes to think, as the author suggests, that a "paradigm shift" is indeed underway.

On the other hand, the global population is soaring toward 7 billion, with at least 9.5 billion of us projected by mid-century.  All needing food, clothing, energy, clean water.  Which means more land, more fertilizer, more transportation, more feedlots, more soil exhaustion, more hunting and fishing, more minerals and metals and plastics and wood.

Take cheap oil and natural gas and other fossil fuels out of the equation, and it could get ugly.  Fast

So it's great to hope we can each reduce our carbon footprints by, say, 25%.  But if our numbers increase by 25% in the meantime, we're right back where we started.

Gonzo, I don't think the numbers will continue..

... to rise like they have. Lack of food availability is really going to make itself felt in the third world. That's where population growth is happening, and most of those people are going to die of hunger.

Victory in Pattani
Up, up and away!

All indications are that we reached the production peak in conventional, cheap oil back in 2005.

Even the head economist of the IEA is coming around to the view of near-term peaks:

What I can tell you is that one day global conventional oil will peak. This will depend on many factors, including the role of technology, investment, and production policies. When we look at oil outside of the OPEC countries, when you put all of them together, I think it is going to peak very soon. But we have unconventional oil, and we have oil in the Middle East as well. How much will come to the market from unconventional oil?

With regards to Middle Eastern oil, he answers himself:

Therefore, the bulk of the growth in the future needs to come from the national oil companies, and perhaps price will no longer be the main determinant when they make their [production] decisions, because for many countries, oil is their only natural endowment. And those countries legitimately value and want to leave their one and only natural endowment for future generations.

(This naturally raises the question: Why are the national oil companies starting to conserve now? Why didn't they start that 10 or 20 years ago?)

Others concur with this view, like the U.S. energy secretary:

The U.S. energy secretary said Saturday that insufficient oil production, not financial speculation, was driving soaring crude prices. ... "Market fundamentals show us that production has not kept pace with growing demand for oil, resulting in increasing prices and increasingly volatile prices," Bodman told reporters. "There is no evidence that we can find that speculators are driving futures prices" for oil.

And the CEO of Total:

Christophe de Margerie, the boss of Total, thinks that the world's oil production may be nearing its peak... Last year he declared that the world would never be able to increase its output of oil from the current level of 85m barrels per day (b/d) to 100m b/d, let alone the 120m b/d that energy analysts predict will be needed by 2030.

The bottom line is that global oil production has been on a "bumpy plateau" since 2005. Net oil exports have declined since 2005. The majority of the big oil fields are in decline, and new production is not ramping up fast enough to replace them over the long term (after 2-5 years from today).

There is a debate over the causes -- some say geological and technical, some say political. At any rate it's a solid bet that oil prices will continue on an upward trend for the foreseeable future.

Ped Shed Blog

Gold star for honesty

Good for you, Jason, to write such a post.

Could I offer a non-professional hypothesis on what is happening with the oil price?  The oil price rise is essentially being driven by a change in perception about the availability of oil.

There have been several indicators in the couple of years. Russia is apparently close to its peak production. Mexico's phenomenal Cantarell field is in decline. North Sea oil is in decline. And it seems as if Saudi Arabia's ability to increase production may be very limited.

Millions of people are beginning to connect the dots. Many of the facts have been available for years, but for some reason we have reached a tipping point.  This realization set off other trends.

I think the speculation is an epi-phenomenon. Once one sees a trend developing, it's natural to bet that it will continue. If the price were to begin dropping, we'd probably see speculation favoring the other direction.

The desire for oil-producing countries to control their own resources is related. With the realization that supplies are limited, wouldn't you - as  sheik of Scorse-land - want to get the most value for your oil? Why drill more, if the current oil revenue is enough? Especially if you were going to be paid in dollars, the value of which declines with every day.

And if you were far-sighted, as some of the leaders are, wouldn't you want to leave some oil in the ground for the future?  

The conflicts in oil-producing countries also may be related. With oil near $150/barrel, control of the oil reserves are a rich prize.  (As versus a few years ago when oil was at $10/barrel). Some have argued that a concern with oil supplies was behind the Iraq invasion (some say this approvingly, others disapprovingly).

Ironically, as unpleasant as the price rise has been, it may be just the thing to save us. Just about everyone serious realizes that peak oil will be here sooner or later (now to 20 years from now).  Serious students realize that it is critical to make preparations beforehand, since being caught by surprise would be catastrophic. But serious students also understand that moral suasion is insufficient; real change requires the economic incentive of high prices.

And so we must thank the Markets for giving us this early-warning signal.  In this, at least, your faith in markets is vindicated.

Bart
Energy Bulletin

Oil Prices Will Go...Up?

Of course oil prices will continue to rise.  No one has any real incentive to put into place the controls that are becoming more and more required to return control of the marketplace to real investors instead of allowing speculators to thrive on the volatility of market manipulations.  In actuality, there are plans underway (before Nov) to obscure further those speculations and remove them from public observation.

It is easy enough to blame "foreign" countries, as Exxon blamed "those Ay-rabs" for the l976 crisis.  One of the Exxon executives decided that he was not going to pay what the owners of the oil wanted and that they would just have to take what he offered. They immediately jacked up the price and the USA shut down.

OPEC is more prepared to strike a bargain now, but with the current Iraq government under siege to force the Bush/Cheney solution that situation could change any time.

But with the cumulative change in world-wide climate, food shortages will soon result in human migrations more disruptive to civilisation than we can imagine.  

Des Emery

Hmmm

"...the role of speculators is still not fully understood"

Real forcefull position for a market expert allright!  You really stuck your neck out didn't you?  

Maybe it's as some have said?  Maybe it is not speculation raising prices beyond what the supply/demand effect would put it?  Maybe it is insider trading manipulation via the enron loophole and general unregulation.  Combined with OPEC and state oil companies that don't even pretend to care about free and fair trade?

Maybe OPEC and china are putting some cash into hedge funds?

"...global slowdowns have never been met with such commodity price inflation before"

Isn't that known as "stagflation"?  

"..new investment in alternative energy and new technology is booming"

But mainly in the wrong technology, like ethanol.

"...the fundamental economic prediction always turns out right: Higher prices lead to changes in behavior."

Ah, yes the mighty free market will save us.  The true believer returns to his faith.

http://amazngdrx.blogharbor.com/blog John Schneider, Northern Wisconsin

Doomsday

Good dialog but I am reminded of what Gonzo Don (love the monniker) said, "Take cheap oil and natural gas and other fossil fuels out of the equation, and it could get ugly. Fast."

That could be downright scary. Wars couldn't be fought with vehicles and jets. Ships would run out of Bunker C and global trade would stop. Farm tractors would sit idle and food would rot even if you had any. People would run out of the cities and chop down all the forests for firewood.

I am kidding in a way, but mankind shows a remarkable ability to put things off and get slammed by whatever comes next. Intelligent monkeys don't make good planners, I suppose.

Onward through the fog

I was joking Jason!

About the bet, anyway. I vaguely remember thinking I should, but got lost in other things. Damn.

As for GDP, I'm with Herman Daly on the worthlessness of that particular measure of wealth. GDP goes up when bad things happen as well as good. So the real question is will we be better off materially when energy inputs begin to fall and continue falling thereafter? I'm betting no. On the other hand, if we play our cards right we might be better off spiritually - that is we might be happier not chasing the consumerist American dream.

GDP is measured in dollars. Bad choice. Dollars don't do real work, energy does. If net free energy (physics talk) goes down over time, less work gets done. Measure true income in Btus and you will see real income/wealth decline. There is no breaking or bending of the second law of thermodynamics except in the minds of neoclassicists. Don't know if you are one, but if so, the future is going to disappoint you again.

George Mobus, Associate Professor, Institute of Technology, University of Washington Tacoma, and Professional Student for Life

Boy Sam, you nailed it

Intelligent monkeys don't make good planners, I suppose.

My other day job is trying to synthesize some work in psychology on 'wisdom' with neuroscience and sociology. Robert Sternberg has investigated the psychological aspects of wisdom and concludes that it is different from but related to intelligence (and creativity) in very subtle ways.

The real problem seems to be that humans are big on intelligence (as in local problem solving) and creativity (I + C = cleverness) but short on wisdom. As far as I can tell it appears that the part of the  brain that is most implicated in judgment (wisdom) processing is the newest part (the polar and medial prefrontal neocortices) to have evolved and therefore probably underdeveloped in relation to the cleverness part. The co-evolution of cleverness and culture seems to have deselected wisdom which might otherwise have down modulated greed and avarice as well as aggression. Oh well.

So we're clever primates (apes not monkeys) alright. And we don't do a good job of thinking into the future - strategic planing. But maybe the new world we are creating blindly will select better for wisdom in the future. We can hope.

George


George Mobus, Associate Professor, Institute of Technology, University of Washington Tacoma, and Professional Student for Life

Hard for us to see what's possible

George M writes:
The co-evolution of cleverness and culture seems to have deselected wisdom which might otherwise have down modulated greed and avarice as well as aggression.
Unnecessarily pessimistic, I think. It's important to be careful when generalizing about human potential.  Our thinking is likely to be skewed, living as we do in one of the most abnormal ages that human beings have ever lived in.

For all of history except the last 200 years, we've lived in local communities with strong traditions that provided some safeguards against short-term thinking.

Cheap energy and industrialization have broken down those communities and safeguards. Even in my lifetime, I've seen commercialism invade one sphere after another. We live in a society with the traditional restraints removed, and we are reaping the consequences.

The challenge is to look through history, anthropology and sociology to see which institutions and traditions helped us cope with our human weaknesses, and which ones exacerbated them.

Bart
Energy Bulletin

The altnerative to a free market.....

is a directed market. And who directs it? The government. A quick glance at history and current events tells you what you get there.

Amazing, do you ever pay any attention whatsoever to the world around you?

You either try and manipulate the market to get the desired results, accepting it's imperfections, or get a disaster by letting government decide for you who will control what, who will produce what, etc. etc. etc.

Of course, you think we are standing on the abyss anyway........ so I don't know why I bother.

Victory in Pattani

Dogma and flexibility

MAD MAC writes:
The altnerative to a free market is a directed market. And who directs it? The government. A quick glance at history and current events tells you what you get there.
I dunno, MM, I look in the papers and I see what a "free market" brings us [free market = controlled by the major players].  A plummeting dollar. The sub-prime crisis. An energy policy that stinks. Falling standard of living.

We've got problems and the "free-market" philosophy of the last few decades is largely what got us into the mess.

Our thinking about economics and policy has become so ideological - as ideological in its own way as the dogma of central planning in the old communist economies.

If you look at the most successful policies in modern history, I think you see a pragmatic combination of government intervention and the market.  Examples: New Deal, European social democracies, Chinese communism-capitalism, Asian Tigers (government-led capitalism).

I think the problems of energy and climate will challenge capitalism as nothing else has before. Capitalism is resilient, but will it be able to adapt?  An open question.  

Bart
Energy Bulletin

Bart - this is simple

You point out the current economic challenges - fine. This is a low point in our economy since the great depression. Yet the American people, even now, are living FAR, FAR, FAR better than any people EVER did in ANY communist society. More economic freedom, more wealth, more personal liberty - and a superior environment.

There is no third way. Either the economy is directed or it's not and it's a free market economy.  To be sure in both systems there are elements of the other. Public fire and police, public education, etc. are all elements of a communist (socialist) society. But we are talking about basic general principals here, not tweaking.

So you have one of two choices.

Rag on capitalism all you want, but it beats the alternative. Sort of like Democracy. Flawed as it is, it beats the alternative.

Victory in Pattani

Unfortunately, I think Mad Mac is right

Most of the population growth is going to be curbed when the poor start dying of starvation and disease at higher than current rates.  The resource extraction rates all over the world are unsustainable and something has to give.  Like that Anasazi of the American Southwest, many places will be emptied of populations in a matter of decades once it's not possible to pump energy, water, fertilizer, and other basics into areas to keep them productive.  

I don't think we in the west will be immune to it, but the Third World is definitely going to take the biggest hit.  Certainly some of our cities like Reno, Las Vegas, and Phoenix will dry up as people begin to realize that it was never sensible to have millions of people living in the middle of a desert.  Or...all those people in Phoenix could give up watering their lawns today and give themselves a few more years of water...but that's not likely.  History tells us that people would rather die than change.  Those that are willing/able to change are the ones who will survive.

Il faut cultiver notre jardin.

Call me a naive optimist but....

I think many of you are expressing much more pessimism than is warranted (I know it's in the environmentalists' DNA but for some reason not mine). Let's look at a few facts:

  1. Longevity is the highest at any point in human history

  2. Literacy is at the highest point in human history

  3. Hundreds of millions of people each of the last decades have been lifted out of extreme poverty

  4. Population growth rates are slowing- mostly because people are getting wealthier

  5. A person born today has the lowest chance ever in history to be killed in armed conflict

etc. etc.

of course there are big problems, but sometimes we need a little reality check- as bad as things are now they are nothing compared to other bad times- Depression, WW I & II, Communism under Mao and Stalin, even the Vietnam War- so let's put things in perspective.

And while I am an economist and believe in the power of markets, I have written extensively on this site about the various types of government policies that are needed to improve society so please, those of you who buy into the false notion that being in favor markets means complete Wild West capitalism, can you please pay more attention and be serious. Thanks.

J.S.

Economic Illiteracy Harms The Planet! www.voicesofreason.info.

"Unnecessarily Pessimistic"?

Bart,

There's nothing at all pessimistic about George's analysis.  The root of our problems is that human intellect is running wild while wisdom is ignored.  This has been going on at least since humans discovered agriculture.  At that time, human population began increasing substantially, but instead of wisely reducing birthrates accordingly, humans foolishly invented the "be fruitful and multiply" ideology, which gave the human species a cancer-like effect on the rest of the planet.

You forgot

Gas has been 8 bucks per gallon in Europe for years, and their economy seems great.  No mortgage crisis either.

Pickens has an ad running for renewables and he mentions using natural gas as an oil substitute.  that ad might be a good one to post on the blog, DR?  

As per the nano tech storage breakthrough I have mentioned, it allows storage of natural gas at ambient temperature and pressure at nearly the energy density of liquid fuel.  That means a natural gas tank in your vehicle that is not a 3000 psi bomb.

Natural gas is one dollar per gallon of gas equivalent.  converting long haul trucking would relieve the demand pressurwe on oil for a short breathing space for our economy.  Time to switch to plugin hybrids and geo heat exchange powered by renewables.

http://amazngdrx.blogharbor.com/blog John Schneider, Northern Wisconsin

the plan

http://www.pickensplan.org/

Replace oil with natural gas.  Use big wind.  The facts.

http://www.pickensplan.org/theplan/

I don't think he includes replacing natural gas heating with groundsource heat pumps.  But the wind plan could get rid of natural gas power generation.  

Has he heard of converting coal to natural gas? Naturally underground.  

Or biogas from waste to augment natural gas and offset CO2?  This plan is incomplete.

His plan may lead to peak natural gas.  Unless plugin hybrids take over most miles driven.  like 80% maybe?

http://amazngdrx.blogharbor.com/blog John Schneider, Northern Wisconsin

mr pickens' answer to peak oil:

replace oil energy with natural gas, replace natural gas electricity with wind electricity, replace coal with-- huh.

must be here somewhere. maybe he left that part of the plan in his other jacket.

except when he and the wind energy whatsamahoozy association when to ask for transmission lines they weren't asking for anything fancy in the wiring. just "transmit that energy to cities and towns." no solar or storage or distributed or nuthin. 20% of electricity's plenty.

it's win-win-win-win-win-win-win!

Bart, consider the irony...

Our thinking is likely to be skewed, living as we do in one of the most abnormal ages that human beings have ever lived in.

How did the age get so abnormal?

Wolverine summed it up nicely, but you can read more about the problems with human levels of sapience on my blog.

Question Everything

George


George Mobus, Associate Professor, Institute of Technology, University of Washington Tacoma, and Professional Student for Life

Oil Prices and the "market."

Mad Mac in another post opined that he likes living where he does because he can do anything he wants. I'm glad that he hasn't decided that he wants to rule the world.  He obviously allows his restraint to over-rule his impetuousness.

That same restraint needs sometimes to be mandated, like reins restrain a wild horse, making it rideable.  Unrestrained democracy would be as dangerous to one's health as unrestrained communism.

That's why a regulated marketplace is essential to the quiet enjoyment of democratic principles, not giving free rein to insiders, manipulators, speculators,controllers, et al.  

If the Oil Market had been more closely controlled by the government and the legal system, and allowed to operate on proper market principles we would not now be caught on the horns of a dilemma.

Des Emery

in the belly of the beast

Wolverine writes:
The root of our problems is that human intellect is running wild while wisdom is ignored.  This has been going on at least since humans discovered agriculture
G Mobus writes:
How did the age get so abnormal?
It sounds as if you are arguing that biology determines destiny.  Human beings are born with a certain nervous system, you seem to be saying, and therefore the present social structure is preordained.

One reason this is a weak argument is that history and anthropology present us with a multiplicity of different societies. Humans have essentially the same brain structures; to what can this diversity be attributed? There must be something more than physiology, and that something is culture.

China has been a continuous civilization for more than 4000 years, for example. The Chinese culture must have learned something about sustainability (too bad they're forgetting it now in the attempt to imitate the US).

Traditional peasant culture had many good features built into it. Unless one studies it, one will never learn about it, since our culture is virulently anti-peasant, anti-rural. Many people admire the Amish, but what they are admiring is a peasant society from 17th century Central Europe, which has sought to preserve itself.  

Peasant societies aren't perfect by any means, but they did solve problems that our modern civilization fails at.  We have a lot to learn from them, as well as from other kinds of culture.

The problem is, modern commercial culture assumes that it is the Only Culture, the Most Developed Culture. Therefore, if there are problems, it can't be with our culture -- it must be human nature.  Our problems couldn't be due to institutions that humans devised and that we could change; it must be due to the stars, to DNA, to fate.

Fortunately, modern commercial culture is only one of many possibilities.  

I'll admit, it's pretty hard to see other possibilities from inside the belly of the beast. Some people have their eyes opened by foreign travel (best if done on a shoestring, away from tour groups).  Others have friends or marriage partners from outside the culture.  Learning a foreign language is another path.  And there are always the fields of history and sociology, whether done academically or as a hobby by reading.  

That said, I think systems analysis and the study of the brain are fascinating fields. It's just that, by themselves, they can't answer what to me are the most important questions.

Bart
Energy Bulletin

gotta link?

I vaguely remember that old discussion, I think.  Was it mainly one thread?  Is there a link?  (I'm curious how my old comments might look with the new benefit of hindsight.)

ye gods!

"China has been a continuous civilization for more than 4000 years, for example. The Chinese culture must have learned something about sustainability (too bad they're forgetting it now in the attempt to imitate the US)."

I'd take recent Chinese (and Soviet) history as proof that industrial communism destroys nature even better than industrial capitalism.

To hammer China's plight in a backhanded attack on OUR culture is absurd.

(I take the general "Blank Slate" position, the book not the literal meaning, that cultures vary but along lines generally bounded by "human nature."  A reasonable and moderate recognition of what really is human nature ... that's the tricky bit.)

Green and Red

Odograph: I'd take recent Chinese (and Soviet) history as proof that industrial communism destroys nature even better than industrial capitalism.

If you look into the subject, O, I think you'll find it more complicated than the stereotypes. In the early years of the Soviet Union, there were apparently some far-thinking environmental policies. Also, the Soviets were leaders in soil science.

Remember that they were undergoing a transition from an agricultural society to an industrial society, and environmental concerns are pretty low on the list of priorities in any society undergoing that phase of its development - whether the society is capitalist or communist.

China is a strange case, since it seems to have more the characteristics of a capitalist economy after the time of Mao.  Even so, it has a green movement that periodically becomes visible.

On one thing you're definitely right -- after Stalin, environmentalism was NOT part of official communist doctrine. In fact, official communism was anti-environmentalist, labelling it "neo-Malthusianism."

However Soviet-style communism is only one segment of the vast spectrum of socialisms. It's dead now, and shows little sign of returning.

In any case, environmentalism is no longer verboten, although there's a residual suspicion of it among some old-timers. Many socialists now are active environmentalists. In Australia, for example, there is the publication Green Left.

One of the best of the socialist publications is Monthly Review, which has just published a special issue on ecology.  What's funny is that in spite of their association with Marxism, they don't sound much different than many current activists who have never heard of Marx. Editor John Bellamy Foster who co-wrote  the intro to the current issue (The Moment of Truth) is an environmental thinker worth reading. He teaches at U. of Oregon, Eugene. (I have no ties with him or with MR).

Bart
Energy Bulletin

"steel towns"

Did you concentrate that on certain segments of the economy, and not those "sky dark at noon" steel towns the two socialist giants shared?

photo

Benxi: Pollution from steel mills blows over residential buildings

The US

The US has used artificially low gas/oil prices to pump up the economy.  Oil war adds 1.50 per gallon, as a hidden cost.  Our low gas prices were a subsidy that allowed us to beat european manufactureres?  Except they countered with healthcare, a better subsidy for industry.

China and other countries with state owned oil companies set the price to boost their economy too.  But they are undercutting US.

Gas was 10 cents per gallon in pre-invasion Iraq.

So our economy is suffering.  But how about Europe?  They have taxed oil up to high prices all along?  That seems to have worked, their economies are stable despite oil prices.

Taxes turn out to be good for business, in the longer term?  Currency exchange and international trade turn price fixing within an economy into a way around trade agreements.  Low gas prices in the case of china, is like a tarrif for our medium (remember europe is double!) fuel price economy.

Natural gas at 1 dollar per gallon equivalent would be a great bargaining tool to get all the gas guzzling, trade gaming, monopoly pricing problems solved.  And get real GHG reducing treaties signed.  Right now the worst, oiliest OPEC and exxonmob actors, like darth cheney, have been placed in control of the world economy.

The largest consumer market in the world, the good old USA, could shrug off oil in favor of renewables, conservation, and natural gas.  That is the "big stick" we need to use to get global GHG reduction going.

If we control 25% of world demand for oil, we control the markets now monopolized by OPEC and state owned oil companies (or state owning companies, like exxonmob owning bush), so let's take control.  Start dropping demand and make them some offers they can't refuse.

With all the savings from stopping oil wars, invested in this renewable/conservation economy, the rest would fall in line behind GHG reduction.  Rapidly switching their energy economies to mimick ours.

http://amazngdrx.blogharbor.com/blog John Schneider, Northern Wisconsin

Roll On Columbia...Roll On...


Just went vacationing up to the Grand Coulee Dam!  Wow, what a spectacle...and saw the laser light show.  

http://www.grandcouleedam.org/

During one of the presentations they mentioned that a single generator there could run Chicago.   Wow.   It has so much energy it started a whole industry in Washington -- manufacturing aluminum.

The thing is, it almost seems like if a single generator could run Chicago, then almost the whole country could run on a single dam as big as the Columbia if we ran it at full tilt!

That leads me to believe there is a load of excess capacity in the system right now.

The other thing is, if we did need more power (which we don't) why don't we build a few more dams...it seems like we've got the environmental management angle down pretty well.  

Right now, China is going gangbusters building hydroelectric dams:

http://en.wikipedia.org/wiki/List_of_the_largest_hydoelec ...

That's a shame

Hedge funds getting hammered.

They lost money while oil has soared.  Now are mutual funds dumping them?  

Is that why oil is slumping?  Less cash for hedge funds to use for insider trading?  Less trust and cooperation amongst hedge fund crooks?

No honor amongst thieves?

Hehey, congress examining speculators, considering re-regulation (this just on CNBC).  Maybe the smart money is deserting hedge funds?  And going into safer, lower return investments.

http://amazngdrx.blogharbor.com/blog John Schneider, Northern Wisconsin

Bart

It sounds as if you are arguing that biology determines destiny.  Human beings are born with a certain nervous system, you seem to be saying, and therefore the present social structure is preordained.

That is a leap. The world isn't black or white. There is an in-between where nature and nurture combine. But it is the case that you can't do something that your brain isn't wired to do. I have written about the brain basis for sapience (wisdom and judgment) in my blog. Before making leaps of assumption about what I am saying it would be a good idea to do some background checking.

BTW: I did mention the co-evolution of brain and culture, didn't I?

China has been a continuous civilization for more than 4000 years, for example. The Chinese culture must have learned something about sustainability (too bad they're forgetting it now in the attempt to imitate the US).

You seem to be comfortable with logical inconsistencies. If the Chinese had 'learned' sustainable practices and they were wise enough to realize what they had, then how do you explain what is happening now? Forgetting? Would a wise person allow the forgetting of hard-earned knowledge? Better think your assertions through to logical conclusion before using such examples.

George
Question Everything


George Mobus, Associate Professor, Institute of Technology, University of Washington Tacoma, and Professional Student for Life

PS. Bart

Optimists and pessimists are on extreme ends of a spectrum of personalities and biases. A realist is in the middle and bases arguments on both positive and negative evidence. To an optimist a realist looks like a pessimist and to a pessimist s/he looks like an optimist. Go figure.

George Mobus, Associate Professor, Institute of Technology, University of Washington Tacoma, and Professional Student for Life
Chinese sustainability

If the Chinese had 'learned' sustainable practices and they were wise enough to realize what they had, then how do you explain what is happening now?

Preindustrial Chinese civilization demonstrably knew at least a few critical things about sustainability.  They have rice fields that have been under continuous cultivation for thousands of years.  You can't do that without attending to your nutrient cycles.  Their traditional agricultural model placed a high value on "night soil" for just this reason.

However, I doubt very much that the old model was based on "sustainability" as we understand the concept.  They were just doing what they had been traditionally doing.  And when the communist revolution came along, many old traditions were intentionally purged precisely because they were part of the old order.  I'm sure lots of bad old ideas went down the tubes, but it seems that some good concepts went with them, unfortunately.

The challenge that China now faces with regards to sustainability is of a whole different order: now they need to figure out industrial sustainability.  Towards that end, many of the old concepts (e.g. soil conservation and nutrient cycles) are key, but the traditions themselves are not really applicable: the manual collection of nightsoil, for example, is simply not feasible with their new level of urbanization.

But if there had been true and natural wisdom...

would the Chinese or any other culture be in the fix they are in today? That is the question at issue. Wisdom is the ability to recognize when you are doing something right and keep doing it. Or recognizing when you are doing something wrong and stop it.

The issue is that if humans were truly wise sentients they would not have forgotten their lessons. That is actually what writing is for! The original argument is that human beings lack adequate sapience, the ability to process wise judgments to guide decision processing (a part of intelligence and creativity). Bart thinks this is a pessimistic statement, but it is based on the evidence - look at the state of society, the leaders we elect, and the global challenges that arise as unintended consequences (or in other words not thinking ahead).

I imagine that a wiser species would not have let its population and gluttony get out of hand to produce these conditions. Hence they could understand and maintain sustainable practices. The big question in my mind is: Are humans wise enough to recognize their mistakes (before it is too late) and do something constructive about it? That is, I think, a very open question.

George

George Mobus, Associate Professor, Institute of Technology, University of Washington Tacoma, and Professional Student for Life

George, is wisdom the ability

or perhaps, desire would be the better word, to look far ahead and judge your behavior according to what it's effects far in the future will be?  Because it seems to me that humans, like all other creatures, are adapted to work best in short-term mode -- with the huge exception of taking care of children.  But the alleged free market system, for instance, institutionalizes this short-term outlook, which is supposed to benefit the system as a whole.

The other part of wisdom, it would seem to me, would be the ability -- or desire -- to understand, or even just want, that the well-being of the whole society would also be good for you.  So, in other words, most people are worried about the short-term, and generally their concern maybe goes to the family or a little beyond, while a wise person would be concerned about society as a whole, in the long-term -- or am I just projecting what I think a moral person would do?

Jon, you are projecting, but...

that's because we humans have gotten a vision of what wisdom is! Throughout history some people have been wise. We recognize it because we all have a little of it! But it is limited both in distance scale and time scale. Distance scale includes WHO we consider part of our tribe. Time scale includes not only your  children but future generations.

In human evolution we had not been selected for wisdom beyond our grandchildren and our tribe (also local tribes for trade). But the present conditions of our complex, technological, and energy-driven cultures, which emerged blindingly fast in evolutionary terms, has produced a need for global scale wisdom. Wisdom that can see sustainability for all future generations. That kind of wisdom is not ordinary in our population.

Wisdom depends on tacit knowledge (justified true beliefs) and models of how the world works. Wisdom is seen in the nature of judgments people make. It requires considerable storage capacity in brains, hence requires more than normal intelligence. But even normal intelligence should be able to serve a greater level of wisdom than you see in average individuals.

I see sapience as the capacity of individuals to think systemically and strategically with a strong moral consciousness. This capacity was just beginning to emerge in early Homo and selected for to produce Homo sapiens when the discovery of agriculture changed the selection dynamics (in my theory) to raise the need for short-term organizational skills and violence reactivity (to protect or invade land needed for food production). Still, sapience did develop. We have seen people with substantial capacity, and everybody has a little of it in themselves. So your projection is quite natural because we see a glimpse of it in ourselves. We just may need more than most people can muster to deal with the problems our species has created.

George

George Mobus, Associate Professor, Institute of Technology, University of Washington Tacoma, and Professional Student for Life

Fermi's paradox explained...

George, if your last sentence is true it would explain why there appears to be no extra-terrestrials out there. Nature has not been able to come up with a dominant species where individuals do not put there status ahead of group survival.

or maybe they're waiting to see what happens,Colin

maybe they've seen this play out before?  Or maybe it's a little late in the evening?  

Well, George, I bet that you could get most people to reel off long histories of...their favorite sports team, a large set of celebrities...I think it depends on what people are interested in, which unfortunately does not often include the long-term viability of the biosphere.

Or...

evolution is still playing with us.

George

George Mobus, Associate Professor, Institute of Technology, University of Washington Tacoma, and Professional Student for Life

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