|
|
|
|
|
|
The Newsnight Debate on Oil
Old Hickory
Once again, the Greens have pushed the end of oil to the fore and the public have welcomed a good fright. Back in the 1960s, they embraced horror films and went to the cinema for their thrills. Comics were one thing and newspapers quite another, though there were a few titles, like Reveille and Titbits, that bridged the gap, and the tabloid Daily Mirror was not so far off from doing the same thing. When the Sun was bought up by Murdoch in the 1960s, the Sun began to surpass the Mirror in sheer entertainment value. Today, the broadsheets have mostly gone tabloid, largely become comics and the Greens are grist to this new entertainment mill. The scare stories go well with gossip about celebrities like the very plain, if not downright ugly, Kate Moss and the other personalities that the dailies chronicle for the entertainment of their readers, in the guise of keeping them informed. Newspaper sales have been falling but a return to serious news would not revive them. It is haply that the newspapers have got to a state where they are pandering to what the customers want. The scares go from bird flu to GM foods, from nuclear power to the overpopulation fear, from global warming to computers not being able to handle the year 2000. The end of oil is just typical of those scares and it seems to be down to the need for entertainment rather than to actual fears. That is why the politicians dally with the Greens rather than act as if what they said were true.
Here is a very short history of oil. There was thought to be 20 years supply of oil left in the world before 1920. From the 1920s till the 1990s it was said to be 30 years; and then it went up to 47 years for a while in the 1990s. It tended to fall back to 30 years again after 2000. LA member Stephen Berry has pointed out that most of the world has yet to be adequately explored for oil. He points out that 20 years ago, around 80 per cent of the oil wells ever drilled had been drilled within the boundaries of the U.S.A. He thinks it hugely improbable that 80 per cent of the world’s oil supply is within the boundaries of the U.S. The upgrading of the oil in the former USSR is now held to be way more than was thought before the Western experts estimated what was there. The seas may well have lots more oil than we have so far found on land. In any case, the price system is best left to monitor what oil there is. The vulgar Green idea that the market is wasteful in doing this, and that a state plan informed by proper scientists, like physicists, chemists and geologists (instead of economists, whom the Greens feel are not dismal enough on environmental matters) would do much better seems to be a mere tyro hubris. Central planning is not more efficient or effective than the polycentric price system. This fact was pointed out by the economist, Paul Ormerod, in the Newsnight discussion.
The latest oil scare results from the price rise caused by the invasion of Iraq, the economic rise of India and China and the destruction of oil plants near New Orleans after of the Katrina and Rita hurricanes. This puts a bounty on the need to muster extra oil, which is hardly aided in the UK by Brown's windfall tax, for that takes the extra funds away from aiding oil production to other uses. Julian Simon in The Ultimate Resource (1981; II 1997) held that such problems challenged, but also rewarded humanity. The problem was, in the long run, not only solved, but over-compensation lead to easier conditions than before the initial problem arose. The price rise puts a bounty on the solution to such problems one way or the other; by either supplying more of what is needed or by developing substitutes.
Gathered to discuss the issue on Newsnight, December 2005, were Richard D. North, Tom Burke of Imperial College, on satellite from the USA the Green, James Howard Kunstler, and on another link, Sonia Shah. Later Sonia Shah left and was replaced by Paul Ormerod and a history professor from Oxford.
Kunstler began by saying that the Greens were right that the age of cheap oil is over. We will need to adjust by depending on local production instead of the fluent international trade that will no longer be affordable with oil being so scarce and expensive by 2050. 2050 was the date the programme thought would see the readjustment to the end of the oil age. Burke roughly agreed, but he thought it might be avoided if the public were willing to pay for what can be done to deal with it today. He noticed that the oil companies were diversifying into gas and other sources of energy and he took this to be a sign that oil was changing from the way it was being supplied today. North pointed out that they were not diversifying much, and that they clearly remained mainly oil companies. Sonia Shah held that there was lots of cheap gas but cheap oil is getting rarer. Yet there was lots of expensive oil. She agreed with the Greens that the full cost never was expressed by the price system which had encouraged oil to be wasted. Oil always had a very large external cost missed by the market, she said. Burke added that the expensive oil was abundant but that it would cost more in energy to put it on tap than we could ever get out of it so it was never going to be very useful. This insight from Burke is the main Green idea over the years, but hitherto technology has been able to supply cheaper oil from that which was earlier harder to tap. In the race between more efficient techniques and scarce oil, the price has been falling, not rising because the task of tapping oil is supposedly getting harder. What is hard now may well get easier as we become more technically efficient at extracting the oil. The Greens think this process is due to end as the degree of natural difficulty gets ever greater, but that may never be the case. It has certainly not been the case hitherto.
Burke feels that most oil is intrinsically uneconomic. He thinks it merely complacent to think the oil that exists could become just as efficient to tap owing to new technology, as has been the case up till now. But he does agree that oil is abundant. It is the age of cheap oil that he thinks is over. James Howard Kunstler agrees with him, and they both seemed to think that cheap oil is now a thing of the past. So we will not have long to see that they are wrong. But the Greens always were quite good at bold testable predictions. Not so good when looking at the refutations after the deadline passed. They prefer to begin a new scare and all this seems to be entertainment rather than serious news.
Burke said that whatever the aims of the war in Iraq were, the result is to have made future oil supplies way less secure. He seems to be right there. Kunstler feels the invasion was basically down to the need to control that area as the USA has such an addiction on oil. But North, sadly a supporter of that immoral and rather foolish war, thinks that the USA are getting evermore efficient in the use of oil. That is true, but maybe more germane is that they seem to be getting more efficient in extracting it also. Kunstler cannot accept that. They are using it with all the same old abandonment he says. Kunstler is concerned about public behaviour and not one whit concerned about the actual prospects for oil. He would feel that what he sees is immoral even if there was no case that oil was on the way out at all. He does not like what he sees as a wasteful lifestyle. Most Greens seem to be like that. He does think that oil is now at an end as a cheap fuel and so he says that any greater efficiency is not going to change much anyway. We have got to go back to local economies and end the globalisation lifestyle. He did not seem to notice that he was not even coherent with his idea that any greater efficiency would not help globalisation out much. Clearly, if the technology speeds ahead of the new obstacles to oil extraction, the price will simply continue to fall over the future decades.
Sonia Shah agrees that they should all worry about the demand for oil from China. Burke says that there have been 20 million new cars in China in 2005 and that even more is due in 2006. He feels that the Chinese state may well want to co-operate with the USA to control the Middle East as they are as keen on oil as the USA.
We then got a report from Susan Watts that there is a sleeping giant that could well be woken up. She says, rather oddly, that the oil age was in its infancy in 1969. She maybe does not know that the Greens back then were saying that oil was about to run out. If we awake this sleeping giant there will be no prospect of going back, she says. 400 parts per million is the danger level. It is a worse problem than terrorism, another odd statement from her. But she presses on. 2005 was the hottest year yet and lately it has been realised that pollution offsets global warming For that, it appears, is her topic. Even the efforts to cut back on pollution can only make matters worse. If there is a resort to coal when oil is uneconomic then it will be the end of the world, even though she has just said that more pollution might offset the problem.
After that doomsday scenario, we get back to the main discussion. Paul Ormerod joins the discussion in a Julian Simon type mood. So did an Oxford history professor, Felipe Fernandez-Armesto. Both balance things up a bit. They both tend to doubt that the end is nigh, but the history professor, Felipe Fernandez-Armesto, felt things are getting morally worse even if we are not running out of resources. He always thought that actual progress was a myth and he never did accept it. Paul Ormerod says the future looks good. He expects new ideas to come up that will enable progress to continue. The price system is not perfect but it is good enough to regulate scarce resources. We simply do not know what things will be like in the next 50 years, he says, for we are not even sure of next week's weather forecast. This is thought by Burke to be ridiculous. He begins by saying that the forecasts are way better than those by economists. Paul Ormerod replies that that might be so but that they are not the topic under discussion. Paul Ormerod has written a book attacking economic forecasts, so Burke was preaching to the converted there. Paul Ormerod goes on to say that the scientists have been speaking like irresponsible politicians. It is clear that grand planning can solve nothing and it is way better to leave things to the price system. The Kyoto protocol looks futile. We need to keep things flexible if we are to adapt to changing conditions. Innovation needs leeway to meet the problems before us.
Burke continues to be critical of Paul Ormerod's scepticism of the end of oil and of Green knowledge of due doom and he repeats that it is nonsense to attempt to say that we do not know that we have dire problems. We know both the problems we face and their remedy too. Burke says that all we need to do is to be willing to pay the price in higher taxation to deal with these problems. The solution is threefold, he said. It lay in energy efficiency, advanced coal technology/storage and renewables. They all need to be made carbon light rather than carbon expensive as they are now. Burke says that it is utter folly to leave it to the market. It will play a part, of course, but a very small one. What is needed is higher taxes and more science and then it can be sorted out fairly easily, but only if we are willing to embrace this solution.
James Howard Kunstler held that by 2050 we would be well settled into the local economies of the future. His dreaded globalisation will by then be a thing of the past. But before we submit to this future we will all have to face up to a great deal of pain which will, eventually, bring us to our senses. No hydrogen economy is due, nor will any new ideas get us out of the problem this time. We have to go back to earlier lifestyles, he says.
North feels, by contrast, that it could be an hydrogen economy instead of the oil we have today. Paul Ormerod thinks Simon's outlook is right, that new ideas will ensure that progress continues. He repeats that the price system is not perfect, but he thinks all the others are underestimating how it does monitor scarce resources. It does spur innovation. An example was the fact that recently the economy of the USA had grown by 150% but energy use had grown in that time by only 40%.
Burke continued to find Paul Ormerod unrealistic, and he criticised Ormerod's outlook by saying that the improvements in the wake of the 1970s price rise came once the price of oil had dropped again. It is not clear why he thought this a counter example to Ormerod's point that a price rise spurs innovation, but maybe he thought that only cheaper oil again could have allowed the innovations to get underway.
Further reading:
The Ultimate Resource (1981;II 1997) Julian Lincoln Simon.
The best book so far published. Clearly the work of an enthusiast, it provides the best introduction to economics. The general reader will find it full of paradoxes whilst the trained economist might just feel they are truisms. This book is even more uplifting than the author's book on 'pop' psychology which deliberately aimed at producing a: Good Mood. It refutes completely the idea of Carlyle's that economics is the 'dismal science'. The world is way better than most people think it is.
Buy it at - www.amazon.co.uk
Here is a very short history of oil. There was thought to be 20 years supply of oil left in the world before 1920. From the 1920s till the 1990s it was said to be 30 years; and then it went up to 47 years for a while in the 1990s. It tended to fall back to 30 years again after 2000. LA member Stephen Berry has pointed out that most of the world has yet to be adequately explored for oil. He points out that 20 years ago, around 80 per cent of the oil wells ever drilled had been drilled within the boundaries of the U.S.A. He thinks it hugely improbable that 80 per cent of the world’s oil supply is within the boundaries of the U.S.
He does not like what he sees as a wasteful lifestyle. Most Greens seem to be like that. He does think that oil is now at an end as a cheap fuel and so he says that any greater efficiency is not going to change much anyway. We have got to go back to local economies and end the globalisation lifestyle. He did not seem to notice that he was not even coherent with his idea that any greater efficiency would not help globalisation out much. Clearly, if the technology speeds ahead of the new obstacles to oil extraction, the price will simply continue to fall over the future decades.
Further reading:
North feels, by contrast, that it could be an hydrogen economy instead of the oil we have today. Paul Ormerod thinks Simon's outlook is right, that new ideas will ensure that progress continues. He repeats that the price system is not perfect, but he thinks all the others are underestimating how it does monitor scarce resources. It does spur innovation. An example was the fact that recently the economy of the USA had grown by 150% but energy use had grown in that time by only 40%.