Should we fight for Oil?

[Cowperson]

Originally posted by Agamemnon@Oct 27 2004, 07:43 PM

Sure, that's why I said that Norway and Russia would cope much better than nations truly dependent on oil. Oil made the Middle East. Oil did not make Norway or Russia. Without Oil the Middle East is a pile of dates and sand. Russia and Norway have a whole lot to fall back on, I would argue.

I would argue that higher prices drive demand for more efficiency in the energy sector period, not just for oil extraction/use. High oil prices should mean that money gets put into alternative energy. In the oil price peak in the 1970's, people started buying Toyota's because they were more efficient. Now, with oil prices low (mid-late 1990's), people buy gas-guzzling SUV's. If gas starts going over a buck a liter, people will buy Toyotas again. I think that efficiency has been implemented largely for cost-effectiveness, not to conserve oil. Companies make more money when they're more efficient, that's all the impetus they need to develop their technologies... I doubt oil price has EVERYTHING to do with it.. they'll be pumping oil regardless of the price, may as well make it efficient.

That cycle says to me that when oil prices are high, innovation and efficiency are the result, not just in oil, but in energy.

I agree with Chomsky, subsidized oil prices are a bad thing, for the same reason he think so, it stifles innovation in other (gasp) Green technologies.

Chomsky's economic argument is totally viable, it rests on the principles of Full Cost Accounting. I'd love to get into a thread on that topic alone

Right. If oil cost what it should (Chomsky would argue), then it would be pretty expensive, urging corporations and governments to seek out alternative fuels. It's pretty expensive right now, 10-20 more dollars a barrel long-term and I could definitely see an increased intensity put into alternative energies.

I wouldn't be surprised if the price of oil did collapse. Too much is riding on low oil prices from both government and corporate points of view. Wars could be fought over keeping oil at a low price, long-term. Maybe they already have.

Are you and I actually disagreeing about something?

For example:

I think that efficiency has been implemented largely for cost-effectiveness, not to conserve oil.

Same difference. Eventually, China and India will head that way as well, as I noted earlier. Markets will take care of it. A guy like Chomsky would have his head explode before he'd admit something like that. He refers to the "insane quasi-market system" as evidence.

As to higher prices eventually pushing oil-dependent countries towards alternative fuels, I agreed with that in my original posts in this thread. But I sensibly added its also true that prices have dropped since 1973 in real terms (as Chomsky did) and the drive for efficiencies also rose at the same time. The latter is something Chomsky won't recognize.

Or should we recognize Ralph Nader in this conversation?

Are you trying to tell me Norway wouldn't have to dramatically alter its social infrastructure if it didn't have energy revenues to rely upon?

We agree - which seems different than where you started this thread from - that Muslim states are almost wholly dependent on oil revenues.

subsidized oil prices are a bad thing,

Somebody is subsidizing oil prices?

Cowperson

[Agamemnon]

Are you and I actually disagreeing about something?

For example:

I think that efficiency has been implemented largely for cost-effectiveness, not to conserve oil.

Same difference. Eventually, China and India will head that way as well, as I noted earlier. Markets will take care of it. A guy like Chomsky would have his head explode before he'd admit something like that. He refers to the "insane quasi-market system" as evidence.

Doesn't Chomsky say that in the "insane quasi-market system" that market factors are the most rational ways to organize an economy? I don't think its capitalism that gets Chomsky's goat, its the corrupt corporate-friendly regulation. He hates hypocricy, not the marketplace. It just so happens that the largest and most obvious forms of hypocricy take place in the (heavily regulated) markets.

As to higher prices eventually pushing oil-dependent countries towards alternative fuels, I agreed with that in my original posts in this thread. But I sensibly added its also true that prices have dropped since 1973 in real terms (as Chomsky did) and the drive for efficiencies also rose at the same time. The latter is something Chomsky won't recognize.

You seem to be implicitly tying low energy prices to technological/efficiency development. I'd wager that regardless of the oil prices, _oil-extraction_ technology will continue to develop and improve. However, _oil_ efficiency is different from _energy_ efficiency. Chomsky is contending that by focusing on oil efficiency (due to high prices, but I'd contend that it happens naturally) other alternative energies are being ignored. And he's right. I don't think a better extraction process or cleaner burning fuel is all that impressive, I think completely alternate energies are.

Are we disagreeing here? High oil prices will drive alternative energy reserach (and increased oil efficiency, yes), and low prices will remove the impetus for improving efficiency in energy sectors.

Or should we recognize Ralph Nader in this conversation?

Not a Nader fan then? I don't see anything wrong with the guy, he's just got too many morals and principles for politics. I see he's been effectively smeared by the 'mainstream' to appear as a whacko environmentalist. That's really too bad, the people that are actually concerned with everyone's future are marginalized as 'crazy'. Count me crazy.

Are you trying to tell me Norway wouldn't have to dramatically alter its social infrastructure if it didn't have energy revenues to rely upon?

As I said twice, what I'm trying to tell you is that Norway will get on fine without oil revenues. There are many, many European nations that do just fine with no oil reserves. Are you trying to tell me that a state needs oil revenues to have a social infrastructure?

Besides, as I said originally, and then again, Norway/Russia could take the hit MUCH easier than the Middle East could. You disagree?

We agree - which seems different than where you started this thread from - that Muslim states are almost wholly dependent on oil revenues.

No, we don't. I've addressed this issue twice, but you don't seem to want to get involved in it. You seem stubborn about refusing to recognize my thoughts on this issue, I guess I'll have to live with it.

Somebody is subsidizing oil prices?

Do oil prices exist in a perfect marketplace? Are the only factors in the price of oil supply and demand? Hardly. Oil prices are artificially influenced (if not subsidized) by a myriad of state-corporate relationships.

If you think oil is free to go up and down based solely on the free market (which doesn't exist), thats your opinion. I think that state-policies, corporate-policies, etc. all have massive impact in the price of oil. I do not think that its price, nor the price for many other commodities are "Full Cost Accounted".

If you're interested about Full Cost Accounting, read up on it.
http://www.epa.gov/epaoswer/non-hw/m...ost/whatis.htm
http://www.fact-index.com/f/fu/full_...ccounting.html
http://edis.ifas.ufl.edu/BODY_FE310

Its mostly environmental/economic theory, but oil is definitely involved.

[Cowperson]

He hates hypocricy, not the marketplace.

If Chomsky hated hypocrisy, he wouldn't have wasted years denying the holocaust crimes of his friend Pol Pot in Cambodia.

I don't think its capitalism that gets Chomsky's goat, its the corrupt corporate-friendly regulation. He hates hypocricy, not the marketplace. It just so happens that the largest and most obvious forms of hypocricy take place in the (heavily regulated) markets.

I have no idea what you meant by that. It reads like a political statement versus fact.

You seem to be implicitly tying low energy prices to technological/efficiency development. I'd wager that regardless of the oil prices, _oil-extraction_ technology will continue to develop and improve.

I demonstrated without ambiguity that energy efficiencies resulted in a declining oil price environment. Chomsky appears to say its only possible in a rising oil price environment. I said both could be the case, as you did. We both disagree with Chomsky.

High oil prices will drive alternative energy reserach (and increased oil efficiency, yes), and low prices will remove the impetus for improving efficiency in energy sectors.

Yes to the former, no to the latter. We have clear evidence of efficiencies developing in a falling cost environment.

What you should be arguing is that higher input costs for things like labour have forced companies to drive for efficiencies in areas they can better control, like technology that allows for greater energy savings.

Not a Nader fan then?

I have nothing against Nader. He did some great work that's benefited us all. I merely remarked on his impact in driving for increasing environmental regulations that may have forced greater energy efficiencies on industry looking to reduce costs.

As I said twice, what I'm trying to tell you is that Norway will get on fine without oil revenues. There are many, many European nations that do just fine with no oil reserves.

France and Germany are going slowly broke and being forced to pare back their social structure to conform more closely with British and American standards. Norway would be no different. You can decide if that's an "impact" event or not. It certainly would look like a big deal to me.

Norway/Russia could take the hit MUCH easier than the Middle East could.

I said that in one of my first posts. Its a 100% killer in the Middle East if you remove oil. Its a modest pain in the butt if you're in Norway but serious nonetheless. I don't discount the impact. You do.

No, we don't. I've addressed this issue twice, but you don't seem to want to get involved in it. You seem stubborn about refusing to recognize my thoughts on this issue, I guess I'll have to live with it.

Well, I must have missed something because anyone saying Muslim states have some other commodity or product to sell besides oil isn't living in the real world. You can't remove hundreds of billions of dollars in revenues from a country with limited industrial capacity and a basic economy and say it won't impact something. That's plainly obvious.

If you think oil is free to go up and down based solely on the free market (which doesn't exist), thats your opinion.

Since oil is probably about $20 higher than it should be right now, I guess that IS my opinion. And also the opinion of the Chairman of Imperial Oil judging by his comments in the paper yesterday.

Cowperson

[Agamemnon]

If Chomsky hated hypocrisy, he wouldn't have wasted years denying the holocaust crimes of his friend Pol Pot in Cambodia.

Well, I suppose if he hasn't reneged on that support, then he wasn't a hypocrite in that case, just wrong, no? I'm not sure if he's apologized or renounced any of his work, but I haven't heard of it.

I don't think its capitalism that gets Chomsky's goat, its the corrupt corporate-friendly regulation. He hates hypocricy, not the marketplace. It just so happens that the largest and most obvious forms of hypocricy take place in the (heavily regulated) markets.

I have no idea what you meant by that. It reads like a political statement versus fact.

I'd call it a belief, but if you think belief = political bias, thats fine with me.

You seem to be implicitly tying low energy prices to technological/efficiency development. I'd wager that regardless of the oil prices, _oil-extraction_ technology will continue to develop and improve.

I demonstrated without ambiguity that energy efficiencies resulted in a declining oil price environment. Chomsky appears to say its only possible in a rising oil price environment. I said both could be the case, as you did. We both disagree with Chomsky.

Chomsky believs that if oil is low, money spent on alternative energies will be low. If oil prices are high, money spent on alternative energies will be high. Same page? (remember, the word 'alternative' comes up a lot, not to be confused with 'oil' or 'petroleum'. He's talking about energy efficiency, not oil efficiency.)

The fact that the petroleum industry has increased its effectiveness at pulling oil out of the ground, or refining it, does not reflect an increasing 'effciency' in energy.. just in the extraction, distribution, and pollution of oil/gas. You seem to be taking the whole alternative energy portion of this issue right out of the equation.

High oil prices will drive alternative energy reserach (and increased oil efficiency, yes), and low prices will remove the impetus for improving efficiency in energy sectors.

Yes to the former, no to the latter. We have clear evidence of efficiencies developing in a falling cost environment.

I think if oil was totally cheap, a company would definitely spend less on improving efficiency than if oil was very expensive. Am I wrong? Sure, the oil industry has improved efficiency... but so has every single heavy industry existing. Chomsky is arguing that lower oil prices will reduce the need (and reality) of improving effciency. Just because _some_ efficiency occurred (strictly within petroleum energy, not much in alternative) doesn't mean "our energy needs are more efficient", it means, "we've made extracting and burning oil more efficient". Its still an inherently innefficient process, no matter how you dress it up.

I have nothing against Nader. He did some great work that's benefited us all. I merely remarked on his impact in driving for increasing environmental regulations that may have forced greater energy efficiencies on industry looking to reduce costs.

I guess Nader's agenda (and one's attitude towards it) depends on your perspective. I believe that the economy is a subsystem of the environment. You can have an environment w/out an economy, but you can't have an economy w/out an environment. I see Nader as a guy who's thinking long-term, past the next election, past the next quarter. I think that short-term thinking has absolutely dominated environmental and economic policy, and is really short-sighted when it comes to the future. The biggest chip the anti-Nader crowd can throw out is "its bad for the economy". The biggest chip Nader's got is "its bad for the environment". Take your pick I guess.

France and Germany are going slowly broke and being forced to pare back their social structure to conform more closely with British and American standards. Norway would be no different. You can decide if that's an "impact" event or not. It certainly would look like a big deal to me.

I've already said that it would affect Russia and Norway... just nowhere near as badly as it would effect the regimes of the Middle East. Those regimes are 100% supported by these revenues, Norway and Russia are totally diversified in comparison.

Let me put it this way. An Arab regime (like Saudi), deprived of its oil, would be shattered. It would have virtually no economy. Norway/Russia, while they might have to pull back on their social programmes, would be doing much better comparatively. That's why I compared them when I first made that statement.

Well, I must have missed something because anyone saying Muslim states have some other commodity or product to sell besides oil isn't living in the real world. You can't remove hundreds of billions of dollars in revenues from a country with limited industrial capacity and a basic economy and say it won't impact something. That's plainly obvious.

You seem to be operating under the assumption that "Muslim states" and their governments and people are somehow a single entity. I'm not sure if you mean to miss what I'm saying or don't, but you seem to be ignoring it.

Arab regimes are the primary beneficiaries of oil revenues. Some of that money goes into that state's infrastructure, but not much (as we can see by the crappy standard of life most of them live in). Here's the tricky part. This regime is separate from the 'people' of that country. If joe Arab state gets 10 billion in oil revenues, puts 2 billion into the state, and pockets 8 billion, then I would contend that the entities dependent on the oil revenues are the ones receiving the bulk of the cash; the regimes. The 'state', which is the people, often gets screwed at the expense of the regime.

Thus, many Arab-states are not 'dependent' on oil because the 'state' doesn't see most of that money anyway. How can you 'depend' on something that you're not getting the benefits of? Surely some oil money makes it to the people, but the trickle looks pretty thin if you see the images of how these people often live on the government news stations.

IF these states were to gain full control over oil revenues, and eliminate corruption, then the Middle East would be able to fully exploit their resources and upgrade their societies. At THAT point, would those states then become 'dependent' on oil revenue.

I stand by my contention that many of them do not currently depend on oil revenues, their regimes do.

As I said earlier, if you can't separate a regime from a state, that's your hang-up, not mine.

Since oil is probably about $20 higher than it should be right now, I guess that IS my opinion. And also the opinion of the Chairman of Imperial Oil judging by his comments in the paper yesterday.

Well, I guess this is where we part company. I'm not a huge fan of listening to what the Chairman of Imperial Oil believes should be the proper market price. MY opinion is that oil companies and their relatives do whatever they can to artificially keep extraction costs low, and retail costs high. What reason would they have, at all, to tell us the truth about anything? Their priority isn't to publish the truth for you to read in the paper, its to make money.

As I stated before, there are a variety of major influences on the price of oil, only one of which is supply and demand, as I've already conceded. If you believe those are the only factors, have a good one.

[Cowperson]

The fact that the petroleum industry has increased its effectiveness at pulling oil out of the ground, or refining it, does not reflect an increasing 'effciency' in energy..

I haven't referred to such an argument once in this thread. Where did you get that from? At best you can say I made a comment that expensive secondary sources like the oil sands become more economical with higher oil prices.

Sure, the oil industry has improved efficiency..

Our argument has nothing to do with the efficiency of the oil industry as far as I can see. We're talking about the increased energy efficiencies of factories that make shoes and cars, the end users of energy.

I think if oil was totally cheap, a company would definitely spend less on improving efficiency than if oil was very expensive. Am I wrong?

Yes you are. As I've noted numerous times in this thread and even Chomsky has stated, the price of oil, adjusted for inflation, is substantially less than it was in 1973 yet we can see the energy consuming efficiencies of a typical American factory has increased dramatically in that time. In your theory, the opposite would have occurred.

Chomsky is arguing that lower oil prices will reduce the need (and reality) of improving effciency.

Didn't happen that way. Sorry. And we're not talking about "some" efficiencies. It's been dramatic.

A story evidencing this:

“Our technologies (for improving energy efficiency) are vastly better and the savings are getting bigger and cheaper even faster than the stunning advances for finding and lifting oil,” said Amory Lovins, CEO of the Rocky Mountain Institute, an energy research and consulting firm.

“We are using 27 percent less energy per person for residential uses — home heating, cooling and lighting — than we did in the 70s,” said Dr. Marilyn Brown, director of the Energy Efficiency and Renewable Energy Program at the Oak Ridge National Laboratory. “And new homes have increased in size by 50 percent over the past 30 years. That’s a phenomenal improvement."

http://www.msnbc.msn.com/id/6249750/

All that while oil prices, inflation adjusted, were declining in the last 30 years.

You can have an environment w/out an economy, but you can't have an economy w/out an environment.

Every been to Jersey?

The 'state', which is the people, often gets screwed at the expense of the regime.

That means nothing to me. You're talking French as far as I'm concerned and I'm talking Greek as far as you're concerned. We can agree to disagree.

As I said earlier, if you can't separate a regime from a state, that's your hang-up, not mine.

I'll guess I'll have to live with myself.

I've already said that it would affect Russia and Norway... just nowhere near as badly as it would effect the regimes of the Middle East. Those regimes are 100% supported by these revenues, Norway and Russia are totally diversified in comparison.

Let me put it this way. An Arab regime (like Saudi), deprived of its oil, would be shattered. It would have virtually no economy. Norway/Russia, while they might have to pull back on their social programmes, would be doing much better comparatively. That's why I compared them when I first made that statement.

You just agreed with me.

MY opinion is that oil companies and their relatives do whatever they can to artificially keep extraction costs low, and retail costs high. What reason would they have, at all, to tell us the truth about anything? Their priority isn't to publish the truth for you to read in the paper, its to make money.

So, he says prices should be $20 lower, obviously contrary to his interests, and you're calling him a liar?

And there was NEVER a business executive who ran an honest business and told the truth?

As I stated before, there are a variety of major influences on the price of oil, only one of which is supply and demand, as I've already conceded. If you believe those are the only factors, have a good one.

If I understood your comments earlier correctly, according to your theory, only supply and demand are factors. I was the one who was saying oil is $20 higher than it should be, obviously implying a host of other factors are involved in the current pricing, including the two factors ALWAYS present in any market, fear and greed.

Cowperson

[Lurch]

Sure, the oil industry has improved efficiency..

Our argument has nothing to do with the efficiency of the oil industry as far as I can see. We're talking about the increased energy efficiencies of factories that make shoes and cars, the end users of energy.

While you might like to think energy efficiency has increased despite a low real-price environment in order to support your position, the reality is different.

[QUOTE]At the national level, energy use is measured in "quads" or quadrillions of British thermal units (Btus). Even though energy use in the United States rose from 66 quads in 1970 to 94 quads in 1996, a 42 percent increase, the US economy grew by 104 percent. Thus, the energy intensity of the US economy, as measured in energy use per dollar of gross domestic product (GDP), fell by 30 percent, indicating that economic growth is not strictly tied to energy use. However, since 1986, US energy intensity has stabilized, as energy use and economic activity have risen at about the same rate, which is similar to the pre-1970 trend.

After reaching its peak in 1978, per capita US energy use -- another measure of energy intensity -- declined dramatically for five years due to high energy prices. However, between 1983 and 1996, per capita energy use increased steadily back to 1978 levels, as fossil fuel prices fell. Despite this increase, the decline in the rate of growth has been dramatic, from 7 percent per year in the 1960s to about 2 percent today.[QUOTE]

I wish I had been around for this earlier - it's a bit of a hobby horse for me. The facts show that energy intensity falls during a price spike as companies adjust to the price change. Your contention that we are becoming more efficiency regardless of price is way off base - energy/$GDP has been flat for 20 years (maybe falling the last 2 with the price spike!!!) and energy use per capita has slowed down its growth rate but continues to rise - hardly a ringing piece of evidence we are using energy more efficiently.

[Cowperson]

Your contention that we are becoming more efficiency regardless of price is way off base - energy/$GDP has been flat for 20 years (maybe falling the last 2 with the price spike!!!) and energy use per capita has slowed down its growth rate but continues to rise - hardly a ringing piece of evidence we are using energy more efficiently.

From a story I posted earlier:

Today, it requires half as much oil to produce a dollar of gross national product than it did 30 years ago.

Additionally;

“We are using 27 percent less energy per person for residential uses — home heating, cooling and lighting — than we did in the 70s,” said Dr. Marilyn Brown, director of the Energy Efficiency and Renewable Energy Program at the Oak Ridge National Laboratory.

And lastly;

But though the U.S. economy continues to make gains in energy efficiency, the pace has slowed since the mid-1980s.

http://www.msnbc.msn.com/id/6249750/

That's the bottom line for me. That happened in an environment of declining real prices for energy, which you've admitted in the numbers you posted. I didn't argue the pace has slowed.

So . . . . what are we arguing about?

I don't recall saying anywhere above that the average factory or consumer wasn't using more energy than 30 years ago. I said they were using that energy more efficiently which, it seems to me, is the same as your comment of "energy use per capita has slowed its growth rate".

Cowperson

[Lurch]

I think you misunderstand my point. Yes, compared to the '70's, we use less energy by most measures. However, if you look at when the reductions occurred, it was in response to high prices. Reductions in energy use have occurred in response to shocks - people and companies make investments that change the capital stock. Once these more efficient technologies appear during the shock, they slowly make their way into the overall stock as old equipment wears out. However, when prices are low, very little new technology hits the capital stock.

For instance, if you read my quotes, you'll note that energy intensity per $/GDP has been flat since the mid 80's. This is probably the best measure of efficiency, and it shows NO improvement for nearly 20 years now when prices were low. However, my guess is that if you look back on this measure in about 10 years, you'll see another blip downwards in 2003 through whenever prices collapse again. Further, as technology develops in response to the shock Kyoto will apply to many countries, you may see another drop when innovation will find a policy induced market.

In my view, the increases in efficiency are stimulated by a shock, which we are currently undergoing. The data backs up this opinion - comparing a point in the 70's to a point from today does nothing to explain how and why the improvement occurred. Anecdotally, you may want to think about consumer behaviour wrt automobiles when energy prices declined in real terms. I believe transportion accounts for nearly 1/3 of total energy consumption in the US.

[Cowperson]

For instance, if you read my quotes, you'll note that energy intensity per $/GDP has been flat since the mid 80's. This is probably the best measure of efficiency, and it shows NO improvement for nearly 20 years now when prices were low

To say "zero" improvement is to overstate your case.

The model used by the International Energy Agency seems to say otherwise. Its index measuring Energy Efficiency/GDP for the USA was at 295.7 in 1990 and 256.4 in 2000 as an example.

http://earthtrends.wri.org/text/energy-res...riable-668.html

Another reference which illustrates the period 1973 through 1986 wrought great efficiences and the trend flattened but continued to improve to the present.

http://www.eia.doe.gov/emeu/25opec/sld022.htm

Pretty obvious that while energy costs generally continued to decline in real terms, efficiency gains also were made in the same period. As there was an massive oil shock in 1973 there was also a massive collapse in the late 1970's/early 1980's yet the efficiencies continued apace.

I hear what you are saying though, that OPEC's sting of 1973 generated efficiencies in the following few years that comprised the bulk of what we have seen through the 30 year period we are arguing about. Its valid but I think you are overstating your position.

By the way, I'm busy so I'm not going to be flogging this dolphin much longer. . . . or at least until after Survivor tonight.

Cowperson