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Re: [hreg] Federal energy policy

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  • William & Cynthia Stange
    This too, is a great article ,short to the point no time wasted here. I see reoccurring themes here, one is a national move to increase rail for both people
    Message 1 of 19 , Apr 27, 2006
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      This too, is  a great article ,short to the point no time wasted here. I see reoccurring themes here, one is a national move to increase rail for both people and freight. Second one being immediate conservation methods (car/van pools, light rail). Renewables definetly have their place in becoming the underpinnings to hold our country together while we solve our problems. What we do not have is a lot of time to do this, and a leader with enough balls to tell it like it really is. To do an FDR- type emergency program to redevelop our country so it not only survives but thrives!
      Bill Stange

      Jim Hofweber <hofweber@...> wrote:
      Robert, you and I agree that it's best to be committed to the truth and to be fair and openminded. Because of our insistence on eliminating bias we're willing to acknowledge any we find in ourselves. You can't defeat an enemy you don't identify. But powerful forces exist who for their own purposes seek to malign, marginalize or dismiss renewables. The last thing they would do is recognize the bias in themselves--"the log in their own eye"--much less own up to it. They aren't interested in defeating that enemy; they don't recognize it because they don't attempt to identify it. What relative positions does that put us in? What does that do to the prospects for renewables?
      The graph, while needing an update, is useful. Thanks for including it. By focusing attention on the spike it tends to make the overall trend look flatter than it is. As the graph demonstrates, the price of a barrel has more than quintupled since 1998--in constant dollars. Have your wages quintupled since 1998 as well? And if the graph was extrapolated beyond 2004 it would tell another story again.
      A major failing in the discussion of fossil fuels occurs when people don't distinguish between cycles and trends. Unconsciously we talk in multiple time frames: short, during which consumers really feel the pinch of accelerations in prices; medium, during which both price increases and corrections occur; and long, over which depletion will happen. A prudent investor can use short- and medium-term cycles to key investment activity today as ever. It's the long-range trend that's of concern.
      We've used approximately half of the petroleum that nature produced. Sometimes that realization causes people to panic; sometimes they realize that means there's a whole lot remaining. But we're going to use the second half much faster than the first. Even economists tend not to dispute those who, like ExxonMobil, quote a 50-70 year supply.
      That means it's going to run out in grandkids' lifetimes. Short of unforeseen developments, significant hardship due to price escalation will precede that.
      What kind of person is comfortable with this?
      Here's an article you might enjoy from Ronald R. Cooke, "The Cultural Economist".
      ----- Original Message -----
      Sent: Tuesday, April 25, 2006 02:39 PM
      Subject: RE: [hreg] Peak Oil not for decades yet

      I figured that article/comment would generate some discussion!   <ggg>
      Thanks, Charles, for the link to the article.  When I tried to link to the article, it said that a subscription was required.  Guess you know a way around that.
      Jim, I agree with many of your comments.  I am most certainly not knocking renewables.  I believe in them/their place (else I wouldn’t be a part of HREG).  One problem in the past, however, has been the overuse of “the sky is falling” argument which has damaged credibility with many since the sky hasn’t fallen.  I remember the last “oil crisis” and how people predicted then that the price of oil would keep climbing forever.  It didn’t happen.  That doesn’t mean there won’t come a day when this will happen, but I think predicting when that will be is difficult.  The point of the article was that it isn’t yet, despite the many “peak oil” postings I’ve seen here.  The Economist is a news magazine, written by journalists, not economists.  Regardless, I think that it is unrealistic to expect anyone—economist or otherwise—to predict pricing of oil or anything else (stocks, housing, gold, etc.); I agree that the forecasting track record of economists (and others) is generally poor.  Markets are simply too volatile and chaotic/complex.  However, rapid price increases tend to reverse themselves (“regression to the mean”).  Many learned that with their dotcom stocks 5 years ago, and may learn that with their houses soon.  Do we really think that oil is worth 3 times more today than 5 years ago?  Does that mean we think it will be worth 3x more 5 years from now?  9x more in 10 years?  27x in 15 years?  I don’t believe that myself.  I think that we’ll see prices decrease again in the future.  They may go up significantly before then, but in the end, if you can extract shale oil for $50 (p. 67 of article), or liquid fuel from coal for $40, then it would appear that current high prices are a temporary phenomenon.  Capacity of these other sources will increase rapidly if oil prices stay at current levels.  Here’s an interesting graph of oil prices in constant dollars:  http://www.wtrg.com/oil_graphs/oilprice1947.gif.  It suggests we could see prices climb quite a bit before they would reach historical highs, but also cautions us not to interpret sharp price increases as permanent.  The mere fact of a price increase is not an indication of supply running out.  The article suggests that supply is in fact not running out.  You may not agree with the arguments presented, and I am certainly not an expert or in a position to argue for their validity, but I did find the arguments rather compelling. 
      The renewables industry flared and then crashed during the last “oil crisis”, as all kinds of fly-by-night operators took advantage of tax incentives and preyed on people’s fears.  I think it did lasting damage to the industry that even now is difficult to forget.  Renewables will be most successful when they are cost competitive with fossil fuels’ and nuclear’s MEAN pricing.  If we artificially lower pricing of renewables (tax credits) or base renewables investments on unsustainably high fossil fuel prices, we are kidding ourselves or misleading others, and may fall into the same trap of 25-30 years ago.   

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