That’s the trouble with the peak oil TEOTWAWKI scenario. Sure, a sudden price spike could have some serious economic consequences.
But faced with TEOTWAWKI then lots of things that we aren’t doing now become feasable. If the alternative is TEOTWAWKI then we’re drilling in ANWR, fuck the caribou. We’re ripping apart West Virginia and gassifying coal, fuck climate change and acid rain (Coal gasification - Wikipedia). We’re building nuclear reactors in every backyard, fuck the NIMBY protestors.
And so on. And the American people will cheer, if the alternative is TEOTWAWKI.
We have lots and lots of alternatives to imported oil–not pie in the sky technology, but proven decades-old technology. It’s just that we don’t think the alternatives are worth paying the price for. If the price of imported oil gets ridiculously high (and $4.00/gallon is NOT ridiculously high!), then those distasteful alternatives start to look pretty good.
So yes we could have some serious economic issues due to peak oil. And maybe the world will be more polluted and poorer and nastier. But that ain’t TEOTWAWKI, it’s more like a return to the 1970s, which is bad enough.
You’re missing the point. There might be some elasticity in end-use consumer demand for gasoline – we can take fewer trips, use mass transit or bicycles, etc. – but everything we eat and wear and use was shipped to the point of retail distribution by petroleum-powered trucks; everything we eat was grown with petroleum-powered tractors and harvesters; and so on. The mechanics of supply-and-demand don’t apply there. If oil costs more, everything costs more. It’s a form of inflation that has nothing to do with the Fed decreeing a loose or tight money supply, but one based on a real external cost to the whole American economy.
Yes, it’s a form of inflation. But if the cost of fuel doubles that doesn’t mean the cost of everything doubles. Only the fuel component of those costs double. So for some goods the cost comes close to doubling, for other goods you see a modest increase, and for many goods the price increase is negligable.
And the mechanics of supply and demand DO apply here. Yes, the cost of fuel is a large component of the cost of food, but not the sole component. And we DO have alternatives to simply paying more for fuel, regardless of cost. People really do decrease their consumption of fuel. Businesses really do find alternatives that don’t consume as much fuel. Our economy is not dependent on X amount of fuel in=X dollars GDP out. GDP/energy used has increased dramatically over the last few decades, we’re getting a lot more economic output for our energy consumption than we used to.
If fresh fruit airlifted from South America during northern hemisphere winter becomes twice as expensive, that doesn’t mean we’re obligated to pay that price, we can substitute. It’s nice to have fresh cherries in the middle of winter, but it is not a requirement for our civilization to continue–even if we’re reduced to the humiliating spectacle of eating canned or frozen cherries in the middle of winter. That’s an economic setback, but it isn’t quite TEOTWAWKI.
People have a hard time envisioning the global economy as a closed system. They see the price of oil rising and the price of everything else rising, and they assume it must be inflation. Yet because the total amount of money doesn’t change (unlike when the Fed prints it), many things will actually be forced to cost less. Also, it may seem that if costs oil a lot then no one can afford to use it, but in fact the total amount of oil won’t change. The same number of cars will stay on the roads and ships in the ocean.
A spectacular jump in the oil caused by inelastic demand cannot directly do anything to civilation, except shift the distribution of goods and services. A lot of the world’s production will be for the benefit of the people who control the oil. All the citizens will possess a lot less, but the world will produce the same. But when you look at the world today… that’s exactly the reality. We fat western fucks roll around in our civilization while the rest of the Earth roams its dirt highways like a lame version of Mad Max. The “end of civilization” already exists in all the places that never had it to begin with. What we fear is that the tables may turn, or at the fucking least we’ll have to share our wealth with the rest of the world. Oh, the humanity.
That’s not to say there won’t be consequences, especially consequences for Western Civilization (altho it’s easy to argue the status quo won’t change, and just be reinforced). That’s not to say there can’t be secondary effects. GDPs will plummet if the oil kings don’t spend their new money for some reason and don’t keep the economic wheel turning. But no whole-world variable (ie, the total GDP) will change directly because one good is now suddenly more exensive. In the economic cycle, more money will flow through that good, but the money will keep flowing in a circle anyway.
No, there will be no inflation unless the Fed actually prints money (which may be a good idea, but won’t change the basic principles of the situation). Yes, goods will want to cost more, but they just can’t. There isn’t the money in the world to pay for them. You’ll see some principles of deflation in effect. In the end, the goods with a relatively lower fuel component will actually fall in price and offset the goods that rise.
Such re-stabilization will take a few years and might cause instability. In reality the Fed will print money because even partial deflation is an annoying bitch. But in truth, inflation (ie, real inflation caused by printing money) never directly affects anything. It’s just like drawing different numbers on pieces of paper. The “cost” of producing goods, meaning measured in “real” money that’s adjusted for inflation, will [generally] stay the same even though oil will “be” more expensive! Any actual, “real” change in costs will come about if we physically run out of oil. Yet that’s not what the peak oilists are arguing: we simply won’t suddenly run out of oil. The scenario that serious peak-oilist propose, regarding unstable prices, is in its premise valid yet at the same time without consequence!
Zero sum game, ehe? If you had just thrown in a couple of ‘means of production’ statements, and something about ‘workers and peasants’ it would given it just the right touch…
Of course, the amount of wealth (and even of ‘money’) DOES change…the total amount of usable energy DOES fluctuate and the total amount of oil as a commodity CAN also change. Other than that and your assertion that the same number of cars will stay on the road (something that is going up presently as China and India put millions of new cars on the road a year)…well, other than those minor things you are spot on.
Rather than address this line by line (because after reading especially the last few lines I had to admit…what’s the point?), or even directly, I’ll just indirectly address it.
As oil rises in price and become more scarce (if that in fact happens) the competition for oil is going to increase…to a certain point. At a certain point the price and scarcity of oil will simply enable alternatives to become viable…especially when it becomes clear that we aren’t in another oil bubble as we’ve been in the past, that oil really is going to become more scarce and cost more permanently. When that happens, civilization isn’t going to collapse, the Big Oil Kings™ aren’t going to rule over a population willing to give up their first borns for a tank of gas…we will merely switch to some alternative and eventually oil will be, if not worthless, at least worth less.
Spoken like a true believer in the zero sum game. Wealth is a fixed commodity (that must be seized by the state no doubt…for the good of the workers and peasants and such), etc etc.
Here is my own take (as a good and faithful believer in The Market™…long may it rule! Now bring me some peasants so I can light up my cigar…): Wealth is not a fixed entity but constantly shifts, and new wealth is constantly created. It’s not a fixed pot, it’s not a flowing circle. Wealth is dynamic.
As the price of oil rises new wealth will be created by the companies who market and eventually win the alternative fuels war. Perhaps our children will be talking about Big Hydrogen™, or Big Battery™…or Mr. Fusion for all I know. Whatever it is (and it may be Big Oil™…in the form of Canada with it’s tar sands and the US with our shale oil. Be a bit ironic if the US stays a superpower, much to the disappointment of many 'dopers, because of our vast oil reserves) civilization will chug on…and as is happening now, the technology will continue to flow into those third world nations you mentioned…who never had it, but conversely don’t have a vast investment in what may become antiquated technology.
The whole Peak Oil disaster scenario is built on a massive lack of understanding of how the market actually works. Unless something caused production of oil to pretty much grind to a halt the price of oil will simply continue to rise until some pressure point is reached…at which time alternatives will either be ramping up to take over or already in place. This isn’t magic or humanitarian concern for their fellow man…it’s because literally billions (maybe trillions) of dollars are at stake for the group or company (or nation) that comes up with the alternative that supersedes oil as the personal transport fuel of choice. I put my complete faith in greed as a motivator. SOMETHING will replace oil…that’s a given, unless there is some kind of global disaster or major war.
I should have noted that doubling the price of fuel doesn’t always mean doubling the fuel component of the price of everything, because of the substitution factor.
When fuel is cheap, it might be cheaper to ship steel tubes from China to the US. But when the price of fuel increases, you aren’t stuck shipping steel tubes from China to the US and increasing your prices to match, you can also change suppliers. Suppliers in the US might cost more than suppliers in China, but when you factor in the cost of delivery from China compared to the cost of delivery from the US, steel tubes from the US might turn out to be cheaper. And so you have a scenario where the increase in the price of fuel doesn’t increase the fuel cost of steel tubes linearly.
Each time you can substitute a product that requires less shipping for a product that requires more shipping, you’re reducing the global demand for fuel.
xtisme, I don’t think you understood me. I was arguing against the specific scenario of “ok, oil won’t quickly dry up, but something could happen and immediately drive the price sky high.” My argument had nothing to do with a zero sum game,* just that an expensive oil in itself will cause the economy to shift but not contract.
*what exactly is that, anyway? Some sort of communist rational? What I was saying that if wealth were to become concentrated, the economy won’t necessarily be hurt. Surely that’s not what the communists would say…
I tend to look at that as an underwhelming orgasm (from the woman’s point of view) that made the guys stand up an yell “Woo hoo! I"m da Man!”
As for the rise of fuel and its impact on my bottom line, I can say that my grocery budget has not doubled as compared to when gas was $1.99999999999/gallon and only recently has Fisher Scientific (where I purchase lab supplies) added a fuel surcharge of $3.50/order instead of charging me $360 for $180 worth of glass tubes. Likewise, my household budget for fuel has increased perhaps 10% relative to the entire budget, while the category has indeed doubled in cost.
Spilled oil oozes everywhere, but oil does not ooze into every part of my life. I don’t spend money on gas to get me to a library when I can do searches on-line. We pay most of our bills on-line, instead of adding to the load of mail trucked to God-knows-where to be sorted and delivered across town. I run errands on my way to or from work, reducing the number of extra miles needed to return home and “touch base” before going somewhere else.
p.s., also I’m obviously aware of all the alternatives to oil. I was the one who mentioned processed coal. My argument was against the one put forth by Kunster, that “if those alternatives didn’t exist or weren’t viable, an exorbitantly expensive oil, but not a physically scarce oil, will profoundly affect civilization.” It won’t, because money doesn’t work that way.
My apologies for the rant…I misunderheard you and jumped to a conclusion. That will teach me to read more carefully in the future when posting between meetings.
If the cost of manufacturing and distributing every possible good increases, how can you argue against the fact that production and distribution of goods would shrink?
Greatly simplified, why wouldn’t a 10% global increase in the cost to produce everything result in a 10% reduction in the production of everything?
