Gregor.us

The GM symbolism is simply too ironic.

The failure to recognize that the US current account deficit, housing price bubble and consequent financial market implosion are not the CAUSE of the current economic malaise but rather the symptoms of the ultimate cause, i.e., resource depletion that a mispriced USD continues to encourage, via over-consumption and underinvestment (of/in oil, manufacturing, alternative energy, etc)– this myopia will surely go down as a sad but tremendous national folly.

We used to laugh about, or bemoan, Japan's squandering of its ridiculous bubble-era purchasing power on trophies like Pebble Beach, Monets in the corporate vault, or the (overpriced) Rockefeller Center (at least that one produced some cash flow!). They could have, after all, bid for Microsoft, Cisco, Boeing, or GE.

But, in retrospect, is not the US's squandering of insane purchasing power, unknown elsewhere in history, on lifting the consumption/GDP ratio to 72%, and all the McMansions and Malls of America it took to get there, a colossal birthright-toss that makes Japan's look childish by comparison?

The country that could, to an extent none would have thought possible in 1971, issue unsecured liabilities nearly at will in exchange for whatever goods or services it deemed fit, chose to buy very little of lasting or strategic value (even Patriot missiles, after all, require a carbon-fuel-based propulsion system). And it still fails to diagnose the problem, and react, while there is still time (perhaps).

Is there not a basic design mismatch between a resource scarce world and a fiat-reserve-USD-centric monetary system that cannot, as it currently functions, send the proper price signals to the consumer and capital? In essence, the current global monetary system arguably acts, for US resource consumption/investment, like a Chinese oil subsidy, encouraging self-destructive behavior? Until this system is dismantled, the “solutions” will, whatever form they take, be only temporary.

Thanks, as always, for your valuable insights.

Great macro insight. What seems to drive us is the power of advertising. Perhaps the companies of the stock markets should advertise themselves more, as investments.

One of the functions of getting oil back towards 70-80 will be, in my opinion, the deceleration of the supply destruction that was triggered when oil fell below 80.00 last year. All with lags of course. A lag on the original supply destruction from last year's price crash. And, a lag to the cessation of that supply destruction. Even now, my call is that not until late 2010 can the world be built back in terms of planning, for new supply projects.

Now. As for intention, in the sense of what is OPEC's thinking and intention–well, I don't know. I do know that OPEC is more cohesive when compared to its past, both in terms of behavior and in terms of self-understanding.

BTW, you should know I hold that view that very high prices and very low prices within tighter, and tighter timeframes are endemic to a depletion pattern, for a finite resource. So it matters less what OPEC thinks, or thinks it knows, or does.

So, um… If Peak Oil is such a problem, why isn't OPEC behaving like it is?

It's not an answerable question. Or, it has many answers. But my answer would be there is not a line of logic or discovery between the two parts–Peak Oil and OPEC behavior. OPEC is random, and may move back and forth between rational and irrational behavior. One could even make the case that it's benevolent behavior–an attempt to prevent non-OPEC supply from crashing.

I'll guess you won't like my answer too much.

G

Yes, volatility is not only endemic to the problem of depletion, it also masks the true state of affairs with regard to issues concerning long term sustainability, of which there is none.

Thank you for posting Jevon's book in your next post. In the preface was a quote from Adam Smith, which when read with depletion in mind, may help illuminate the cognitive dissonance associated with humanities' predicament.

“The progressive state is in reality the cheerful and the hearty state to all the different orders of the society; the stationary is dull; the declining melancholy.”

After all, who wants to be melancholy?

Nicely put. You should throw this up as a post, at your own blog, if you have one. I also like the theme of mismatch. Currently I am going back to re-read alot of the history and social thought that I was studying as an undergrad and I find that societies really have to be lucky when it comes to matching resources and demand, because they just don't plan for such things.

Of course, then there's countries like Sweden who are almost strangely alone in their ability to plan for the future.

I'd like someone to explain Sweden.

G

Thankyou. That is exactly right. Well spotted.

Whether it's the 19th Century, the 20th Century or the 21st Century the record is now becoming more clear: society will nearly always misinterpret writings or assertions about large scale problems or trends, or resource depletion, (or even just “pressures”) as rigid doomerism. Once misunderstood as such, even the most thoughtful expositions and musings can then be more summarily dismissed.

It was done against Jevons in the 19th C, and it's still being done against Jevons.

Consider for example how Paul Erlich's views about food, water, poverty are now treated many decades later. With more than 20% of humanity in extreme poverty, living in mega-slums, surrounding by industrial waste, and barely able to get enough water–Erlich and the Club of Rome “have been proven to be spectacularly wrong!”

G

I'll look past the snark and the picayune jabs one more time, and see if you can catch a glimpse of your own misunderstandings this time around.

First, your construct about OPEC behavior is your construct. Not mine. My answer was quite clear: you cannot back out in a math-like equation OPEC behavior and peak flow rates. This is a mistaken appeal to rationality. There is no evidence that oil producers are rational actors anymore than they are irrational actors. They are both.

My rebuttal to this false construct of yours is neither this tedious laundry list you have put together where you assert that I claim to know more than OPEC (yet another false construct of yours). Quite the contrary. What I know is that they are neither wholly rational nor irrational. They are both.

BTW, incorrect use of the possessive apostrophe is not the mark of illiteracy, no matter how many times you claim as such in ad nauseum fashion on the internet. Equally, your misunderstandings of energy and Jevons Paradox are not to be confused with deep, revolutionary insight. They are just misunderstandings, and tight, sarcastic prose won't change that either.

I suggest you run along now.

Discoveries of oil globally peaked over 45 years ago.

I agree with you on the phenomenon of reserve growth. But it works both ways. Price has to rise much, much higher from here in order to bring on economical reserves. Generally speaking.

More broadly, I see no reason why the oil market has to forever remain prices to ration near term supply and demand. Hotelling spoke to this issue in the early 1930's.

At some point it will be undertood to be the act of a rational oil producer to limit production at all times, in order to smooth out the depletion of those reserves and to better redeploy the capital from their sale and export.

G

“(Y)our construct about OPEC behavior is your construct. Not mine.”

Yet…

“There is no evidence that oil producers are rational actors anymore than they are irrational actors. They are both.”

How is that not a construct on your part? What evidence do you have for it?

“What I know is that they are neither wholly rational nor irrational. They are both. “

*How* do you know? What has persuaded you so? Aside from disagreeing with their behavior?

“(I)ncorrect use of the possessive apostrophe is not the mark of illiteracy, no matter how many times you claim as such in ad nauseum fashion on the internet.”

This would be more persuasive if you spelled “ad nauseam” correctly.

“Equally, your misunderstandings of energy and Jevons Paradox…”

What empirical evidence do you have for my alleged misunderstandings (aside that you disagree)? I've presented a link to the empirical evidence I use — where's yours?

“I suggest you run along now.”

I'll give your kind offer all due consideration.

Nicely put. You should throw this up as a post, at your own blog, if you have one. I also like the theme of mismatch. Currently I am going back to re-read alot of the history and social thought that I was studying as an undergrad and I find that societies really have to be lucky when it comes to matching resources and demand, because they just don't plan for such things.

Of course, then there's countries like Sweden who are almost strangely alone in their ability to plan for the future.

I'd like someone to explain Sweden.

G

Thankyou. That is exactly right. Well spotted.

Whether it's the 19th Century, the 20th Century or the 21st Century the record is now becoming more clear: society will nearly always misinterpret writings or assertions about large scale problems or trends, or resource depletion, (or even just “pressures”) as rigid doomerism. Once misunderstood as such, even the most thoughtful expositions and musings can then be more summarily dismissed.

It was done against Jevons in the 19th C, and it's still being done against Jevons.

Consider for example how Paul Erlich's views about food, water, poverty are now treated many decades later. With more than 20% of humanity in extreme poverty, living in mega-slums, surrounding by industrial waste, and barely able to get enough water–Erlich and the Club of Rome “have been proven to be spectacularly wrong!”

G