Should business-section newspaper articles about tobacco companies ritually include statements such as, "The company's profits and future existence, of course, wholly depend on its ability to externalize the health effects of its products"? Probably not. The newspaper article is a genre narrowly focused on one item -- perhaps that's why newspaper articles are sometimes called "items."
So reader consciousness that tobacco companies profit by creating work for the healthcare industry must come from elsewhere, like the health section, or the Ad Council.
For the last few days, I have been chewing over this short Financial Times article about the global economic quandary created by high oil prices. The item is informative. The rub is that oil-producing nations tend to save money rather than invest it. When oil-consuming nations send their petrodollars abroad, the capital essentially disappears from the market, and global demand falls, potentially slowing the world economy. The solution to this problem -- massive investment -- creates another one: How should producers invest money from super-high oil prices? That's interesting. That's not what drives me nuts.
This is what drives me nuts: To illustrate just how expensive oil is, the writer begins with this lede: "At today's prices the value of oil in the ground exceeds the combined value of all the world's equity and debt markets."
In fairness, the FT is not expecting anyone to rip this statement from context and unpack it. But here goes. Energy reporters, energy economists, energy-industry players -- really anybody with the word energy in their job description -- may be looking backward rather than forward. We think about oil as energy, the heart of the energy industry, but to get slightly technical, it's not energy. Oil is matter. And when we burn it, this matter releases the energy it stores. Oil's combustion products are matter. Hydrocarbons reconfigure themselves into carbon dioxide and water and pollutants. And this matter, famously, joins the atmosphere and retains thermal energy trying to radiate out from the planet of the apes.
So at this stage of the game, to even insinuate that all of the oil in the ground has value as something useful, or that it is just "energy" rather than matter in destructive quantities, is at least as misleading as talking about the macroeconomic value (or cost) of tobacco companies without taking into account tobacco's cancer and heart-disease impacts. Certainly it's a gob-smacking factoid that the hypothetical value of oil reserves, at current prices and estimates, matches that of all equity and debt markets. But not as gob-smacking as the implications of burning all that oil and continuing to externalize the costs to future generations.
Man, that drives me nuts!
Nigeria’s oil pollution is stark example of resource curse, says Amnesty International
Comments View as Flat
Jon Rynn Posted 5:47 am
21 Aug 2008
a propos of all that dough
In the 1970s, after the last hike in oil prices, the OPEC had lots of extra cash. What to do? They stuck it in US banks, including Walter Wriston's Citibank, the guy who famously said that "nations don't go bankrupt", and led the banking community, pied piper like, to put those petrodollars in developing countries, particularly Latin America. Long story short, Latin America went broke, although the IMF arranged things so that the US banks didn't.
And to address Eric's main point: how much is all of that oil worth if you subtract all of the external costs? Probably wouldn't be worth extracting (not "producing", by the way, the Earth did that).
Permalink
WWAGD?! Posted 10:21 am
21 Aug 2008
You Can't Take It With You...But You'll Try..
There is a real problem for rich people in the 00's. In fact, I created a whole thread on it in my forum called The Poor Get Richer:
http://you-read-it-here-first.com/viewtopic.php?t=185& ...
I found more evidence of this today as I read about some starting assembly line jobs in the mid-West at are paying $26 dollars an hour ($56,000 per annum take home). The article contrasted that with Google engineers who started at $87,000 but who had to live in super high cost of living areas like San Jose....making them poorer than the blue collars.
The other side of the coin is the really rich, have been having to "downsize" because there's just no more ways to fund their party with the acceleration they got used to (see the thread). Why do you think Boone Pickens suddenly became best buddies with the Democrats...so they could bankroll his money losing wind operations.
See, what they keep doing is monopolizing commodities -- where there is a actually a huge surplus -- and creating artificial shortages to drive the price up as far as it can go until the bubble bursts.
Of course there is no shortage of "Greens" in the world who become their willing dupes and spread the world about the sky falling -- thus playing into the hands of these last gaspers.
Permalink
Sam Wells Posted 12:49 pm
21 Aug 2008
Doesn't drive me nuts!
Jaibailo drives me buts but I can see why energy prices have ballooned. It did not surprise me and was called for some very complex market signals several years ago.
The term "energy" just means the potential ability to do work, and "power" means unit of energy over time already done, like horsepower hours or kilowatt hours.
As Jon Rynn says, there were some goofs and blunders but that was yesterday, with some stories that would raise the hairs on the back of your neck. -sammie
Onward through the fog
Permalink
justlou Posted 9:23 pm
21 Aug 2008
Still Important
To ask what will be the end of all that oil wealth. Will it be utilized wisely to ease the transition away from oil? Or will the end be the further concentration and squandering by a tiny minority obsessed with luxurious consumption and building alien colonies on desert sands?
And among the users of that oil, will it be burned with tremendous inefficiencies while propelling 5000 pound steel chariots down the fire highway or will it be made into products like plastic tubing for geothermal systems that help us reduce our consumption of coal?
And within our own country, what becomes of the wealth we generate here partly by our wasteful consumption of oil? Much of that wealth is being stolen from us by wall street barons who are building up massive personal porfolios at the expense of investments in critical infrastructure.
While I also lament all the external costs of burning all that oil, as economic beings, we must ask the important economic questions about what leads us to destroy the planet while we ride on this black river to questionable ends.
Permalink
WWAGD?! Posted 11:38 pm
21 Aug 2008
OiM: "Afraid of Reality"
http://oilismastery.blogspot.com/2008/08/afraid-of-realit ...
Raymond J. Learsy asks: Why Does Abiotic Oil Theory Ignite Peak Oil Theorists' Fulminations?? I think the answer is obvious. (Hat tip: Anaconda)
Permalink
justlou Posted 12:45 am
22 Aug 2008
One further note
To put a little meat to this thought, the plastic tubing for one 150 ft. deep geothermal loop costs about $400.00 retail. I don't know how much oil is consumed to make that one loop. For a home heating/cooling system it takes one loop per one ton of capacity. So, for a 3 ton unit, the cost is going to be about $1200. There is a warranty of 50 years on the plastic loops.
Now consider that $1200 will purchase about 300 gallons of gas priced at $4.00 per gallon. At 20 mpg that 300 gallons will take you about 6000 miles or probably about a half year of driving for many US drivers.
My intentions are to illustrate the difference between using the oil resource wisely for lasting effect or using it unwisely for temporary and unsustainable "gain".
You can argue that we can do both, but our profligate use of it is raising the cost of using it wisely and could be making the long term use of it for beneficial purposes practically impossible. We should be squeezing the flood gates on this vital resource and turning a Mississippi scale flow into a very long lasting, seeping spring flow.
Permalink