Peak confirmed in spades
Mainstream economics hides behind the bush
The world is "effectively" in the throes of peak oil. Crude and
refined product prices trend upwards while markets become increasingly
sensitive to news and rumors.
Bad weather around ports, unrest in a third-world producer country or
populist grandstanding by its leader with geopolitical flourishes, a
pipeline accident, a closedown for repair, new worries about exchange
rates – any of these would be sufficient for the financial media to
report that "crude futures jump on supply concerns."
But then a single credible opinion (even if it is shrewdly calculated
and timed) can make the shadows vanish momentarily: "Crude prices
tumble. Is the oil bear market rally over? Past data support
pull-back."
What we are witnessing is heightened awareness to availability
combined with a growing potential to amplify small margins into major
gains or losses. This is what being "effectively" at the peak means –
the summary result of economic, business, technological,
institutional, and political realities upstaging the squabble over
geological uncertainties.
Economic dislocation (i.e., recession or worse) will not solve the problem.
As Keynes would remind us from beyond the grave, why would private
capital make huge commitments to building and expanding the
infrastructure for a more expensive substitute input (nonconventional
oil products) when aggregate demand is sluggish?
Perhaps public authority could help. Yes, but where would
industrialized country governments, already struggling with debt, get
the wherewithal to supply the world economy with the coveted
substitutes for conventional oil? New taxes could worsen growth
prospects (threat of deflation) and "priming the pump" (create and
spend money) could accelerate inflation. Sell national assets? (The
unattractiveness of either of these approaches does not, of course,
exclude their future application.)
The independent Energy Watch Group projects a major decline in global
oil consumption from the current level of over 80 million barrels per
day to 58 million by 2020 and 39 million by 2030 (not even half of
current consumption). Since presently observed trends exclude filling
the gap with nonexhaustible energy and green substitutes for refined
oil products, the upbeat predictions about vigorous economic growth
(accompanied by a slow but steady rise in oil consumption) during the
coming decades appear to be unrealistic. Will the straining of Middle
Eastern production capacities alter these projections, pushing out the
time of reckoning by a few years?
There is no precise answer but it is clear that already the current
generation will have to adapt to an oil-constrained world. Given all
this, wouldn't you expect to see the best and brightest of the
economics profession out there where menacing winds blow on the hectic
frontline of general human interest, fending for our civilization;
analyzing, passionately arguing, advising national governments and
international organizations, never letting the sense of urgency recede
from public consciousness?
If you entertained such expectations you would be speechless upon
looking at the Table of Contents of top journals in economics.
As robustly demonstrated by the latest editions of the American
Economic Review, Econometrica, Journal of Political Economy, Journal
of Economic Theory, Quarterly Journal of Economics, Journal of
Econometrics, Econometric Theory, Review of Economic Studies, Journal
of Business and Economic Statistics, Journal of Monetary Economics,
Games and Economic Behavior, Journal of Economic Perspectives, Review
of Economics and Statistics, European Economic Review, and
International Economic Review, the looming oil emergency did not
unfetter the wings of creativity in the highest echelons of the
profession. (Ranking of journals was borrowed from Professor W.C.
Horrace, University if Syracuse.)
Does the bulk of academe still believe in the simplistic myth that,
thanks to the never-ceasing interaction between always-ready Mr.
Backstop Technology and irresistible Ms. Unregulated Market, the world
is already pregnant with a solution to its oil predicament, that the
everlasting neediness of material goods will never ever meet
unalterable physical constraints?
Dominant neo-classically (roughly neo-liberally) flavored core
convictions in economics imply that preoccupation with "peak oil" is
nothing more than fearing fear intensified into dreading dread. But if
you insist on an answer you may get it in a form of reproach: "You
don't have enough faith in the invisible hand." What young assistant
professor aspiring for tenure would risk such an explicit reprimand
from the department chairman?
Despite its ostensible diversity and seeming contentiousness,
economics remains stuck uniformly in a Newtonian worldview of
idealized cyclicality that shows the future as a symmetric reflection
of the past. Roland Barthes' "The Death of the Author" became
applicable to the Economist. The bottom line is that if a poll were
taken across mainstream professionals (a category that excludes the
refreshingly awakened group of ecological economists), it would
probably indicate an expected decline in crude prices to the vicinity
of $45/b by 2010.
The explanation that economic science is an ideology in the service of
vested interest does not hold. Encouraging policymakers in the belief
that nibbling on the margins, moral suasion, and lofty goal setting
can substitute for never-before-seen deep policy changes and drastic
programs harms everybody, including vested interest.
The global oil issue is perhaps more imminent and directly threatening
than the "environment." But where is the "Al Gore" of peak oil? At
least now we know where not to look.
~~~~~~~~~~~~~~~ Editorial Notes ~~~~~~~~~~~~~~~~~~~
Peter Pogany is an economist and author of the book "Rethinking the
World." Other articles by Pogany on Energy Bulletin.
-BA
Article found at :
http://www.energybulletin.net/newswire.php?id=43046
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