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Thursday, October 23, 2003

How to Flaw Yourself With Your Own Arguments: Part VII

It's been a couple of days now that I've wanted to get back to my Gloom and Doom Brigade Post of last Friday. As I've said previously I've had some interesting feedback. First Joerg:

The "Olduvai"-scenario couldn´t possibly come to pass without adding a few more elements to it - like nuclear war and asteroids hitting earth... That is the reason why I didn´t think it worthwhile to pass such an exercise in excessive negativism on to you.

But it is definitely not sensible to ignore or diminish the importance of energy and natural resources: Raw materials prices will go on rising for at least a decade and make deflation go away. That might even be viewed as good news by some, but does have inflationary overshoot potential. However, the bad news is that there really is a scarcity problem. While there are technological solutions available, the selection process is guaranteed not to be a stress-free, calm and peaceful experience.

One of the 20th-century finest physicists was Carl-Friedrich von Weizsäcker. His moral authority - among that of other leading scientists, which were dubbed the "Goettingen Seven" when they articulated their resistance against any attempts at arming Germany with nuclear weapons - contributed significantly to Germany´s emergence as a non-nuclear military power. In the early 80s he moderated the so-called "Gorleben hearings", named after the prospective site for a nuclear reprocessing-plant. Those hearings may well have marked the point of no return for nuclear energy in Germany. Weizsäcker himself, however, basically disagreed with the decision against nuclear energy, considering it impossible to find sufficient substitutes for coal, oil and gas among renewable energy sources. He regarded nuclear energy usage as an inevitability and wrote a book in which he characterised the option to remain non-nuclear as being synonymous with following an ascetic lifestyle and reversing the economic growth Western societies had experienced in the post-WWII era. Meanwhile he is over 90 years old and still tends to be on the non-opportunistic side of important issues: he didn´t think the war in Afghanistan was a good idea. I had a different view at the time, but I would say that he has been vindicated since.

In the not-so-immediate future we may be able to rely on using superconductors and improved solar cells for increased energy output and efficiency. But it would be excessively dumb for economists to conclude that new energy sources will be readily available when they are needed. In the past, whole civilizations have disappeared because their resources became (absolutely or relatively) scarcer. (And, yes, there is no guarantee we won´t be hit by an asteroid before having developed technology that would save us. It´s just not terribly likely. But if the precautionary principle is invoked to defend invading foreign countries that either may have or certifiably have developed a nuclear threat potential (I am not talking about Iraq here - rather about the coming conflicts concerning Iran and North Korea), why is it so frequently belittled by economists in the context of resource preservation and energy production? Shouldn´t these arguments run the other way (especially since it is not even evident how aggression constitutes effective precaution - against suicide attacks, e.g.?)

OK, so if that wasn't enough from Joerg, then came Christopher Anderson

I writing because I am not sure, but I think the following comment is over the line:

“Probably flawed, but why is it that only people with flawed ideas interest themselves in these (interesting and important) problems.”

I say I’m not sure because it’s not clear to me whether you are restricting yourself to the dieoff website and Dr. Duncan’s Olduvai thesis, or if you are including those who study oil and gas depletion as well.

Oil and gas depletion has been a pet interest of mine for several years. I am familiar with the sites you've linked to. If you are interested in the depletion problem, there are many other sites that are more informative and far less sensational. However, the broad message is the same: Hydrocarbon depletion represents a serious, near-term (meaning the next generation or two) challenge for society.

In the interest of not dumping a large number of links on you, below is a brief list of sites that I think are more representative of the depletion community than the dieoff site: ( here and here here and here and Andrew McKillop occasionally contributes to www.petroleumworld.com in their Sunday feature section).

“Flawed probably because it places too much emphasis on resource shortages”

I’m not quite sure where to begin here. Are you arguing that resource shortages won’t happen or that they will not have a significant effect?

A counterexample that comes to mind is the CA energy crisis. I have written about this before on Prof. DeLong’s site under the alias ‘chris_a’. It should be easy to find so I won’t repeat it in full here. In short, the crisis would never have happened if the underlying supply weren’t tight. I worked in research for the power industry in the mid 90’s. This problem was seen *far* in advance based on supply and transmission fundamentals. It was well known in some technical circles. Anti-competitive behavior made it worse but there wouldn’t have been an opportunity if the supplies weren’t tight. I don’t think there’s an argument over whether the effect was significant or not.

As far as depletion is concerned, consider the uproar over the Kyoto protocol and/or the scenarios presented in the IPCC’s TAR. There was no shortage of people/reports/studies talking about the economic damage associated with greenhouse gas (GHG) reduction strategies. If depletion were to force similar reductions in oil/gas consumption, it stands to reason that it would have similar economic effects. The Uppsala Hydrocarbon Depletion Study Group (the last link) has study that relates the IPCC scenarios to their depletion model. All of the scenarios, even those that assume a rapid, large-scale reorganization of society toward low GHG emissions, use substantially greater quantities of oil and gas than the depletion model suggests is available. The implication is clear: depletion would place even greater restrictions upon society’s use of gas and oil. By extension, the resulting disruption would be that much greater.

As I see it, there are three major holes to this argument:

1) The depletion model is wrong about the amount of oil and gas by a large margin. This is an argument over geology and extraction technology. Although I don’t feel qualified to judge, the roster of depletion proponents has a mix of experts from industry and academia. One society, ASPO (second link), is focused on what the total oil and gas endowment is and publishes a newsletter with updates. When I first started looking at depletion, I thought that the burden of proof was on depletion proponents. The underlying science has improved (as well as my understanding of it). I am now of the opinion that the burden of proof has shifted to its skeptics.

2) The consensus of economic damage is completely wrong. Again, I would argue that the burden of proof is on those who say the consensus is wrong.

3) (really 2b) We could rapidly adopt substitute sources of energy; coal, biomass, nuclear, wind, etc… AND alter our transportation infrastructure to use these alternative fuel sources. In this case it is not a matter of if it can be done. It is a question of how quickly it can be done.

I don’t think it is controversial to say that it would require a massive amount of investment, even if one ignored the costs of accelerated depreciation of the existing infrastructure. If transportation didn’t have such a large infrastructure, or if the conversion could take place over several decades, this would not be a problem. However, it is a very large industry and the current consensus within the depletion community puts peak oil production around 2010. Even if the political will to make such a change existed, there is still the issue of where the investment money is going to come from.

Other than mentioning some (easily verified) assertions concerning depletion, I don’t think I’ve said anything too controversial. I would be interested in any critiques, comments or questions you have and am more than happy to continue this discussion if you are so inclined.

In summary, if your ‘flawed’ comment was meant to extend to the warnings emanating from the depletion community as a whole, you’re taking on a large burden of proof.

I think I've already said this in another post, but just to leave things nice and clear: Chris, I accept your point, I was overstating things. I don't have an answer to the problem of possible energy shortfalls. I don't even know enough about the topic to hold a seriously informed opinion. I think the problem could arise: I am listening.

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