Monday, November 24, 2008

More Peak Oil Debate

Sorry, but I couldn't resist putting up this reply on the peak oil debate . . .

I am not surprised to hear of this techno-optimism from The Economist.

Be wary of accounting tricks when considering unconventional oil sources. Tar sands can be turned into something resembling oil, for example, but it takes a lot of energy (oil) to do that. The only reason it is being done now is that light sweet crude has been in stagnation for several years and peaked in 2005, so it is profitable now, at least until they get all the easy-to-access stuff at the top of the deposits.

The key is net energy, or EROEI (energy returned on energy invested).

Corn ethanol is another example.

It is actually a net energy loser.

'Oil shales' are a complete joke too.

It can also be potentially misleading to focus on the price of oil when thinking about peak oil. Prices can drop due to economic decline and deflation, but this economic decline has been caused in large part by stagnating energy (and depletion of other resources) in the first place. Supply is the issue, not price. Prices rose wildly up to over $100 a barrel, partly due to speculation. They dropped as the market 'corrected' and also due to 'demand destruction' as the household debt bubble popped, but they are still higher than most peak oil researchers expected them to be at this time.I also think it is potentially misleading to think of demand as somehow separate from supply. When supply drops, 'effective demand' can drop, due to demand destruction.

The leaked IEA report says 'demand' will not be met, but effective demand will drop due to demand destruction (decline in the public's ability to pay for products, due to unemployment, lower wages, higher prices, etc).

But that in no way diminishes the fact that capitalism is in the beginnings of crisis, and that we are on the verge of nothing less than a new epoch. Just remember that the Chinese symbol for 'crisis' includes the characters for 'danger' and 'opportunity'. Oil is not just used for transportation to and from work and to the grocery store. It is central to production and transportation in the whole economy. Everything takes large amounts of oil and other energy sources to produce in our current system.

I checked out the claim that "Chinese symbol for crisis includes the characters for 'danger' and 'opportunity'". It seems this is not so . . . I found this:

How a misunderstanding about Chinese characters has led many astray

There is a widespread public misperception, particularly among the New Age sector, that the Chinese word for "crisis" is composed of elements that signify "danger" and "opportunity."

It goes on to explain further if you are interested.

Hmmm. I think I will have to send that link on.
I got this reply about the chinese characters:
I asked another student in my graduate program, who is from China, for a second opinion on what the website said. here's what she says:"Many thanks for forwarding the article to me. I think he brings up an important perspective, but the Chinese term for crisis is made up of two separate Chinese characters that can be understood in different perspectives. Generally speaking the understanding of it as an integration of crisis and opportunity stands. But of course, opportunity here doesn't refers to being an opportunist and making money at others' cost. It means an opportunity to bring justice and fairness back, an opportunity to do good for the people, etc.
This dialectic thinking can tract back to Taoist thinking. Here a quote from Laozi: “It is on calamity that good fortune perches; it is beneath good fortune that calamity crouches.” (Ch. 58, p. 85) So this should belong to same vein of thinking. Another example is the relationship between Yin and Yang. They're just two sides of the same coin. These opposite concepts or trends exist within each other. It's how we act that decides what kind of result we get. If you look up Laozi's Tao De Jing, you get to see how he explained the intergration and converstion of these pair ideas."
I stand recorrected.
Please also check out:
Peak Oil Debate
Global oil supply crunch looming
World Energy Outlook 2008

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