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An open letter to the Prime Minister

Lionel Orford is new to Webdiary. He is a professional electrical engineer with a long standing interest in renewable energy, energy sustainability and climate change, and has studied the Peak Oil issue in depth snce 2004. This is his debut piece for Webdiary - thank you and welcome, Lionel.

An Open Letter to Kevin Rudd, Prime Minister of Australia

3 December, 2007

The Hon Kevin Rudd MP
Prime Minister
Parliament House

Dear Prime Minister,

Firstly, congratulations on your historic election win. Your promise of “new leadership” and a focus on Australia’s future are certainly needed at this time.

You have come to power at a time of a looming worldwide economic crisis; a time when we desperately need new leadership to deal with the immense problems ahead of us and an end to the deception, denial and neglect that characterised the Howard era. The news is in and it is very bad news indeed:

  • We have now almost certainly reached Peak Oil. The highest ever level of worldwide production of “all liquids” was in 2006 and conventional crude oil was in 2005. It would now take a minor miracle to raise production above these levels and the rate of decline is almost certain to accelerate over the next few years such that “business as usual” is impossible.
  • Global Warming is proceeding much faster than most scientists expected and we are completely clueless on how serious the problems will be and how fast they will unfold.

I do not address the Global Warming issue in depth in this letter because no actions by your government alone can have any significant impact on the problem as it is a worldwide problem, where extensive damage has already been done and major consequences are now inescapable. However, I must stress that I fully support major initiatives in renewable energy development, energy conservation and a global plan of action through the UN because these are the correct actions to mitigate the crises being brought about Global Warming and by Peak Oil.

Even though the effects of climate change are likely to be very serious, they are largely unknown and will play out over the coming decades. However, Peak Oil will have major consequences over the coming years – during your time as Prime Minister.

The unfolding crisis is in several ways analogous to the sinking of the Titanic. We are now at the stage where the ship has hit the iceberg and is already taking on water; its fate is sealed.

The crew is now trying to avoid panic by the passengers by announcing “All is well, the ship is unsinkable, there’s no need to launch the lifeboats”. Unfortunately most of the crew is yet to realise that this is simply not true – they are optimists, still in the denial of the dreadful truth.

There is an urgent need for recognition of the problem so as to best manage the crisis. Denial of the problem at this time will lead to inaction and a far greater disaster, just as it did on the Titanic.

Like the Titanic, this crisis was caused by gross negligence and hubris that led to the belief that the ship was unsinkable. The inevitability of Peak Oil and its effects have been known for decades, but rigorously denied, based on the belief that our technological prowess has made us invulnerable to reality.

Welcome to the job of Captain of the SS Australia.

Peak Oil and the Unfolding Economic Crisis

To those unstudied in PO, it initially seems “no big deal” - something that, to some Greenies, will stop us destroying ourselves or something, to the economists, that the market and technical innovation will deal with.

Both are extremely misguided by their respective ideologies and just flat wrong.

The bad news for the Greenies is that far from being that which will save us by reining in capitalism, it may well result in our demise through social dysfunction and the use of any available energy source, no matter how environmentally destructive.

The bad news for the economists is that the market and technical innovation is completely unable to provide solutions to the demise of its staple food source – cheap energy. It has been assumed that as crude oil declines, we will turn increasingly to “alternative” sources of oil. This is a ridiculous assumption, based on hubris and blind faith; it is completely detached from reality. There are simply no alternatives to oil – no combination that can be obtained fast enough and in sufficient quantities to replace the dwindling supply.

What we have seen over the last three years of significantly higher oil prices is massive stimulation of efforts to increase supply, but the small increases in supply have not matched the declines in the large mature oil fields. We have seen demand fall to match supply by means of poor countries simply falling by the wayside.

Now the world is guzzling its way through its trading reserves, but this can not last for long.

Very soon we will face an oil supply shortfall which results in dramatic escalation in the oil price. As the price increases, people will do what they can to reduce their usage. However, very quickly the discretionary use of fuel (trips to the coast, overseas holidays, interstate travel, etc) will be reduced to almost nothing.

At first this doesn’t sound that bad, but consider what it means for our service based economy. At best, it means a downturn and at worst, a collapse of the tourism industry, the airline industry and the rest of industries based on selling us stuff we want but don’t actually need. It means unemployment for many thousands, along with the bankruptcies and foreclosures of people’s homes.

The result will be a recession, which drives down demand to match supply through “demand destruction”.

A mild rate of decline (say < 1.5% p.a.) may result in a mild recession that goes on and on because there is insufficient oil to allow re-establishment of economic growth. The world economy would grind to a halt and a failure of the market system would probably follow.

However, it is far more likely that the economy will overshoot into a recession far more severe than what is required to cut back oil consumption to match supply. Ironically, as in the 1980’s, we would then see an excess of oil supply and a dramatic fall of the price. However, unlike the recovery of the 90’s, any economic recovery would be short lived due to significantly reduced oil availability due to depletion in the intervening period.

The magnitude of the coming decline in oil availability is truly alarming. In October 2007, the Energy Watch Group – a research body that provides advice to the German government – released a report which states that which is becoming more and more obvious; that we passed the worldwide Peak Oil in 2006.

Furthermore, EWG forecasts that the decline rate will be much higher than that foreseen by any other group, including ASPO. EWG predicts that crude production will be down to around two thirds of current production by 2020 and to half by 2030. If these well researched forecasts are correct, it is totally infeasible to reduce consumption by this amount in 2 decades, except through a collapse of our current system.

But the story gets worse. Petroleum geologist Jeffrey J. Brown has developed an ‘Export Land Model’ which models what happens to exports from the major oil exporting nations whose domestic demand is still growing while their oil production is in decline. These nations include Saudi Arabia, Iran, Venezuela, Kuwait, many of the smaller middle eastern oil producers and most importantly Russia – the worlds largest oil producer. The model suggests that it will only take about nine years from Peak Oil for exports from the major producers to reduce to zero. This is very much in line with what actually happened to Britain, where it took only six years from peak production for Britain to again become a net oil importer. This spells disaster for major oil importers, particularly the USA and Western Europe.

Right now, the USA seems to be in the initial phase of “The Long Emergency”, as James Kunstler has dubbed it. I think that the only uncertainties are how fast their economy will fall apart and what the reaction of the US high command will be. A collapse of the dollar seems imminent because of the converging effects of the unsustainable boom financed by ballooning consumer debt and the unsustainable flooding of the world economy with US Dollars to import two thirds of their oil as well as a flood of consumer goods. The United States is bankrupt but nobody wants to admit it. The main reasons that in the US Dollar retains any value at all are that a large number of countries hold dollars as foreign reserve, almost everybody buys their oil in dollars and manufacturing countries, particularly China, do not want to see a collapse of their largest market.

The consequences and speed of the downfall of the American Empire are highly unpredictable, but it is certain to be a disaster for the whole world, which ever way it unfolds. I worry that the US high command may do something really stupid, like launching military action to seize oil by force by attacking Iran or Venezuela for example. My only hope is that their current war for oil is going very badly and I don’t think the American people will support any new resource wars. However, this may change if the economy collapses and there is massive unemployment and hardship similar to that of the Weimar Republic of the 1920s.

What your Government can do about it.

Prime Minister, it’s time to tell the crew and passengers the dismal truth and get everybody working together to launch the lifeboats.

Step 1. Tell the Truth

No government wants to tell the truth about the dire situation because that would cause a loss of confidence in the market economy and the government itself. However, you have an obligation to inform the Australian people of the seriousness of the situation and to take action to start to deal with it. You have an obligation to desist with the “all is well” denial and inaction of the previous government; to seek frank, fearless, honest and realistic advice from departments such as ABARE and DITR rather than covering up the problems by seeking only “optimistic” advice that will maintain confidence in the market economy, as your predecessor did.

I contend that it is far better to level with the Australian people before crisis hits than to wait for it to happen and then react by saying “who could have known? – I was deceived!” Well – after verifying what I’m now telling you – you have no excuse not to know! To claim that you didn’t know would be to claim your own incompetence and the electorate would be justified in throwing you out of office at the next election.

The news must be delivered so as not to cause panic and I do see how difficult that is. The finesse required here is to term the news in terms of planning for the coming oil supply and economic problems. I note that your election campaign rhetoric did mention this very briefly.

Step 2. Start Planning for Major Infrastructure Works

When the economy goes into recession or depression, the only known way that some economic activity can be restored and unemployment reduced is by government investment – Keynesian economic intervention.

At the same time as this government intervention is required; the nation has a burning need for infrastructure to allow our society to function with an ever declining supply of oil.

I suggest that these are the most pressing needs:

  • Major investment in national electric railway infrastructure – long distance freight, high speed passenger rail and suburban light rail. A vast amount of petroleum is consumed by road freight, air travel and commuting. The majority of it can be powered by electricity. This would also enable greenhouse emissions to be significantly reduced due to the large increase in efficiency of rail transport compared with road and air transport.
  • Major investment in infrastructure to better manage our water usage. We need to return the waste water generated by our cities to the land, together with the precious nutrients it contains.
  • Major investment in carbon capture and storage. I personally don’t think this will prove technically and economically viable, but none the less, we should pursue it until it is proven non-viable. We have no other resource except coal which can be readily deployed to provide the rapid increase in the electricity we need.
  • Massive investment in renewable energy. The most promising technologies here are solar thermal with heat storage and geothermal. There is no point in developing large scale intermittent resources such as wind, photovoltaic and wave power because such intermittent generation cannot be managed on a large scale.
  • Develop oil from coal technology in Australia, with the up-front requirement that any plant built must sequester the huge amount of carbon dioxide it produces. Again, this may never be viable, but the viability should be assessed.
  • Get serious about infrastructure to allow bicycles to be used safely for commuting. This includes bikeways, storage facilities, showers and possibly public hire bike depots.

There is a problem with major government investment during the current boom times because such investment would be inflationary. However, this boom will end very soon and the planning behind such major infrastructure works takes years, with only a relatively small amount spent during the planning phase.

Step 3. Start conserving what we have left

Rationing of fuel will be one of the first steps required to deal with the coming shortages. If this isn’t done, there will be mayhem – hoarding of supplies, black market profiteering, queues for fuel at petrol stations and crucially, shortages for essential services, particularly food production and distribution. I believe that tradable quotas are the best means of rationing demand as they would allow people with greater needs to buy additional quota and reward those who conserve most effectively.

If rationing was implemented via a worldwide “Oil Depletion Protocol”, where all countries reduce their consumption progressively to match the available supply, this would mitigate the problem in the most equitable way possible, hopefully preventing a breakdown of world order. However, getting the US onboard is bound to be difficult.

The rationing system must also reserve enough fuel to implement the infrastructure works required to adapt to the post-peak world.

Step 4. Get our best and brightest onto developing long term solutions

The size of the challenge that confronts us is truly staggering. I fully support your “Education Revolution” and regard the deliberate neglect of public education by the Howard government as reprehensible.

However, there is no point training more economists and bankers for the capitalist system which will not exist for much longer.

A new economic system

The fundamental problem behind all the problems we face; the reaching of practical limits to growth in the case of oil, water and deforestation, and the consequences of the waste products in the case of Global Warming, is that our economy is dependent on economic growth and fails to function without it.

We need an entirely new economic system which must be able to

  • function effectively without economic growth
  • function to equitably share resources in a world of declining resources
  • enable the development of local communities that are largely self sufficient
  • facilitate depopulation of the planet
  • restore planetary ecosystems

Such an economy may need to be a state run economy, which have a poor track record. We need to learn from the mistakes of former state run economies and come up with something that works. I have thought long and hard about this and can offer few practical suggestions.

A new energy system

We must face reality and understand that we are dependant on large amounts of energy just to meet our fundamental needs and this cannot be changed in years or decades; it will take lifetimes. We must also understand that while there is energy available, we humans will use it because availability of energy is standard of living.

A recent Energy Watch Group report tells the bad news that coal will be peaked out worldwide within 20 to 30 years. It will simply impossible to provide the minimum energy needs of a population that lives in cities once the oil, gas and coal are severely depleted.

Current technology nuclear power (based on the fission of Uranium235) is only able to provide a relatively small part of our energy needs because viable supplies of Uranium235 are very limited. Developing this technology for Australia would be very short sighted indeed.

Hence I contend that we should get started on developing safe breeder reactors which convert Uranium238 to nuclear fuel and/or breeder reactors that convert Thorium to fuel. Uranium238 is a large resource and Thorium is a vast resource, capable of providing our energy needs for millennia. This is a large technical undertaking that will take decades, but the long term need for it is really beyond question.

Conclusion

When one fully understands the magnitude of the problems that we humans have caused ourselves, it’s tempting to just throw up your hands in dismay and just give up. Like the Titanic, we are in a situation where no desirable outcome is possible. However, we must do what we can to work for the best possible outcome.

The first step is to desist with the denial of the problems and the fantasy that everything is OK; that the market will sort it out. This involves informing the public about the seriousness of our predicament.

The second step is to get stuck in and do what we can to adapt to our new situation.

If there is any aspect of this letter on which you would like me to provide references or further information, I am most willing to provide this. Stealing your line - I’m from Queensland and I’m here to help.

Most sincerely,

Lionel Orford

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An interesting story

Here's an interesting story and I think there is something in it for everyone to share their views on.

I was reading various brokers' analyses and catching up on news about Asciano Group, which describes itself as "Australia's leading transport infrastructure company". It's the combination of the Pacific National rail operations, with the Patrick ports and stevedoring businesses (a spin off from Toll Group that enabled Toll to avoid selling half of Pacific National, as it was required to do under the ACCC's original approval of Toll's takeover of Patrick Corp last year).

News just in is that Asciano has deferred its plans to withdraw from Victorian regional rail freight services in a month.

Looking further into the story I found that Asciano is withdrawing from the Victorian rail frieght market because of "the under-performance of agriculture markets because of the drought."

That withdrawal of service will mean the state's entire grain crop will need to be moved by road. This is probably good for Toll shareholders and not good when it comes to efforts to reduce greenhouse gas emissions.

I also found that Victorian Opposition transport spokesman Terry Mulder blames Victorian Premier John Brumby for this situation.

"He handed Pacific National $134 million around 12 months ago to take back the lines, and it appears there was no contractual obligation on their behalf to stay on as the operator," he said.

"In other words, we've got the cart and we've sold the horse. This is an extraordinary situation, the fact that we've been left with a rail line and without an operator."

Victorian Transport Minister Lynne Kosky has dismissed Mulder's claims.

"This is the Opposition that actually provided a 45-year lease to Pacific National with no requirements that they invest in the track," she said.

"We bought the track back, $133 million to buy the track back, and we are making major improvements on the track."

Now back to that news just in because there's a point made that goes to this underinvestment in the track over the years had been in Pacific National's hands:

Mildura intermodal operator Ken Wakefield says he is confident the Victorian Government is doing all it can to find a solution.

"The [State] Government's trying to facilitate the continuation of the regional services," he said.

"We went through a number of different options and how the Government may be able to assist in the continuation.

"They're particularly keen on the infrastructure requirements and the bottlenecks that are created through infrastructure, where they may be able to assist and assist promptly.

"They are saying if we present the information to them next Monday they will come back to us the following Monday."

So having bought the run down and degraded track, Victorians may now be investing in a "prompt" set of much needed repair and upgrade projects and the reincarnation of the company that let the track get run down has got us over a barrel.

This story has me mulling over a stack of questions. I wonder if that investment in the track by my government should be one that earns carbon credits. I wonder what this whole situation tells us about privatisations and "free market" ideology. I wonder what it tells us about the Kennett era and the Bracks/Brumy era. And that's just to start with. I'm a shareholder of Asciano and Toll, so I wonder what the result will be when I work through the ethics of what's happening.

No Alternative Fellas

Stuart McCarthy

Paul, I still don't know what the "proven market theory" is that you are referring to. Can you please provide a reference? Something that even a simpleton like me can read?

I believe in the "free market".

The question is answered for you. Market theory is a broad term a little like market failure. I was referring to free market theory. I will admit the "proven" part was a liberty taken.

Can you please describe what a "free market" is and how it will assist society to address the various problems arising from resource depletion, in particular peak oil, given that is the subject of this thread.

I would firstly have to know what's your definition of "assisting society"? Could you give examples?

That is why I am advocating measures which would allow people to lead their lives by using less energy. I do not claim that alternative energy sources can replace current energy sources on a one-for-one basis. I have argued the opposite case repeatedly.

So people want to live their lives with less energy? What makes you think they are unhappy with the current situation? Certainly the evidence is scant in this regard.

Competition cannot address the socio-economic impact of peak oil.

I never claimed it could. In fact I have been repeatedly writing what taking off subsidies will mean. This will have differing impacts on people depending on socio-economic circumstance.

Competition means that rich people will put ethanol into their cars while poor people starve to death (among other socio-economic impacts).

There is no proof in history that free competition will result in this happening any more so than under any other system.

Only cooperation can adequately address the problem. Cooperation is why governments exist, particularly democratic governments.

The Australian nation has just elected a government promising cheaper cost of living. Such things include gas, produce, and housing. How much of the vote did the Greenpeace party gain? It is obvious that democracy has decided that lower costs are a more important consideration at the present time. Probably not the best result or even a possible outcome. I believe that only individuals can make the choice that best suits their own situation (free market democracy). A government (crony organisation) will invariably work to find the best outcome that suits it. This results in misallocation of funds and inefficientcy. A prime example of this is the current subsidy situation.

Mark Sergeant

One more reason the glorious free market is incapable of dealing with climate change is the difficulty it has in dealing with distant low probability but catastrophic events - like a multi-metre sea-level rise

This should be reflected in the real estate prices of waterfront homes (down). It should also be reflected in the prices of the more mountainous regions (up). There is certainly no other economic system that would deal with such "low probability" outcomes any better.

The Glorious Free Market

Stuart McCarthy, you seem to think there is a problem:

rich people will put ethanol into their cars while poor people starve to death
There is no problem. Under the glorious free market, some people prosper and some go bust. That is as it should be, even if many of the people are legal fictions (mostly the ones that prosper), and the market's glorious freedom may be, ever so slightly, corrupted.

The ineffable glory of the free market is that everyone's a winner. Unfortunately, there are a few problems that mean we have never actually seen a free market, but I assure you it is so. The problems include things like: the limited liability company; legal personhood; unequal access to power; unequal access to resources; and so on. I am sure they can be overcome.

You may think there is a contradiction between "some people prosper and some go bust" and "everyone's a winner", but there isn't. Since everyone is a winner, those that go bust have won what they deserve, so they are winners. And they are winners in another sense, too, as they have had the opportunity to participate in the great arena of the market. Who could ask for more?

You might also think that governments should operate to control or ameliorate the starvation arising from the glorious working of the (approximately) free market. This is an entirely appropriate function of government, as long as they don't raise taxes to do it or interfere in the operation of the GFM. It is probably best left to philanthropists and bleeding hearts.

In response, Stuart, you might argue that to make a fetish of the market, to glorify a construct that does not and never has existed, to ignore or dismiss as trivial corruptions that go to the heart is to deify what is at best a moderately useful tool in understanding human conduct..

You might even argue that we should care if people starve. Even people we will never know. Even poor people.

To these arguments I have no reply.

GFM's Other Name

We dare not speak its name. We may call it GFM but its real name is the FYM (as in F*** You).

Those buying flood-prone real estate on the coast will be recompensed from the public purse. How can I say so? Just look at who's claims for compensation have been expeditiously dealt with in New Orleans. Why, it's all those folks who owned millions dollars homes on the sandy strips jutting into the Gulf of Mexico. The rest have been given the ole FY. The ones who have been FY'ed have now issued writs for quadrillions of dollars, more than the whole US economy. Just watch as the FY principle is made mandatory in the US courts by changing of the law.

Assuming that climate change does not give all of us the ole FY and turn the Earth into Venus, the reduction of the Earth's population by a few billion is actually regarded as definite plus in the boardrooms of the FY establishment. Gets rid of all the non-consumers.

Obviously, I am not one of the FY elite because if I was you would not hear a peep from me. Those whose birthright or bloodlust gives them FY membership will not suffer. Those who aspire to FY membership will feel some pain but the rest will become dust.

The Economics of Catastrophic Climate Change

One more reason the glorious free market is incapable of dealing with climate change is the difficulty it has in dealing with distant low probability but catastrophic events - like a multi-metre sea-level rise or widespread crop failures. (Governments aren't too hot dealing with them either). Mostly they are ignored, on the basis that the probability is low enough to ignore, and if the catastrophe happens then we're stuffed anyway - or the catastrophe will hurt others, so who cares.

But cost-benefit analysis (CBA) does get done, with the objective of putting a little away now to deal with the problem in the future. Trouble is, it appears, that conventional CBA is not up to the task. A recent paper (303KB PDF) shows (apparently, if you can cope with it - I'm taking it on trust) that when dealing with subjects like climate change, where the probability and magnitude of extreme events are not well understood, though it is known that the magnitude could be extremely high, the CBA breaks down.

My way of thinking about it is that the extreme events may be of a magnitude such that societies break down. We cannot deal with it by putting money in the bank, because the banks may not be available. The rational response is to do what we can to lower even further the possibility of the catastrophe.

Trouble is, the glorious free market is not equipped to cope with this. It falls outside the Five-Year Plan, is not amenable to conventional economic analysis, and even if it were, the majority of the costs would be borne by others and so don't enter into the analysis.

I found out about the paper from New Scientist (subscription required beyond the intro), and found this commentary on an earlier draft. I'd appreciate some more expert commentary than I can give.

Twisted Logic Of Government Illiberals

Ian McPherson: "Paul, there is probably no national economy on earth that does not subsidise fossil fuel production (and consumption) in one form or another."

I don't remember ever writing differently.

Hence there is no "free market" for energy; what you contend is a dream that does not exist in reality.

I know; hence, the problems are compounded.

But your statement is further distorted by your contention that this is wholly a government problem. It is the fossil fuel industry that lobbies for these subsidies; they are not just given away, willy nilly, by government.

Government is put there to make these decisions. If government is incapable of making the right decision (just saying no) it defies logic that they be given even more power in this matter.

Paul, you argue against subsidies, admitting that they distort markets. Yet if removing these subsidies raises costs to the consumer, you run for the hills shrieking "socialist evil".

No I don't. What I say is that prices will rise in the near future if this takes place. And I have given you a few examples of things that could take place.

Yet you say you believe that "free markets" are the best; even though a genuinely free market for energy does not exist on this planet. Is it any wonder people don't understand where you're coming from?

Just for your benefit: I think all subsidies, and taxes on all these products (including alternatives) should be removed. People should be free to make their choice in a free market about what best suits them.

With oil hovering around $100 a barrel, you'd think your precious "free market" could come up with something to help out?

The market is not there to help out (whatever that means). It is there to sort out. The market is operating exactly as it should (subsidies excluded) and is a reflection of where things are. It is the job of people to "help" out.

Stern is right to say that climate change is "...the greatest market failure in history".

Would this be the "greatest market failure in history" of the market that is not really a "free market"?

The role of the market in policy

But your statement is further distorted by your contention that this is wholly a government problem. It is the fossil fuel industry that lobbies for these subsidies; they are not just given away, willy nilly, by government.

Government is put there to make these decisions. If government is incapable of making the right decision (just saying no) it defies logic that they be given even more power in this matter.

Interesting argument. It might even work, except that the markets have made governments all over the world their lapdogs. The Howard government was blatantly in hock to the top end of town, which is why it was voted out. The Rudd government will probably end up being less so, but not by much...

Government can't make good decisions when it's in hock to vested interests, rather than the voters. The markets provide the money that corrupts the decision-making process. Your argument is untenable.

Yet you say you believe that "free markets" are the best; even though a genuinely free market for energy does not exist on this planet. Is it any wonder people don't understand where you're coming from?

Just for your benefit: I think all subsidies, and taxes on all these products (including alternatives) should be removed. People should be free to make their choice in a free market about what best suits them.

So you support higher energy prices, to remove distortion from the energy markets? Good luck mate. It's much more likely that the "powers" will subsidise future renewable energy production – leaving fossil fuel subsidies alone – distorting the market even further. Along with carbon credits, you'll need a spreadsheet to calculate the outcome; a plan undoubtedly based on advantaging the financial parasites living off the top end of town. The people will get no say in this. Your argument is, again, untenable.

With oil hovering around $100 a barrel, you'd think your precious "free market" could come up with something to help out?

The market is not there to help out (whatever that means). It is there to sort out. The market is operating exactly as it should (subsidies excluded) and is a reflection of where things are. It is the job of people to "help" out.

How can the market operate "exactly as it should" when it is distorted by subsidies? You want to have your cake and eat it too. It's not possible. You continue to promote a market that is flawed – and becoming more so – by harping on about how it "could" be perfect if it adhered to your terms and conditions. You're either supporting the market that exists, or one that only exists in a dream. Make up your mind. You can't continue to support both.

Would this be the "greatest market failure in history" of the market that is not really a "free market"?

Is this an effort at jest? I'll err on the side of caution. The answer is, of course, yes.

Free Market Is By Far The Best Market

Stuart McCarthy: "Comrade Paul, for somebody so attached to so-called “proven market theory” you appear not to have actually read even the basic literature, for that is where the term ‘market failure’ originates."

Don't try and insult my intelligence.

I've never agreed with subsidies. I believe in the "free market". I am not sure what part of this you are incapable of understanding? Now who is responsible for subsidies? Yes, the exact same organization (government) you believe can solve the situation - the situation that it caused in the first place. Now if you are wanting to take away subsidies on these products it is not very wise to promise cheaper costs of living, is it? Subsidies go and the cost of living goes up - something even a simpleton should be able to understand.

Your comment about being “linked to a paper that wishes to make energy more expensive” is very obtuse. Are you referring to Chris Reidy’s paper on fossil fuel subsidies in Australia? If so, this is yet another one of your frequent misrepresentations.

The paper makes reference to the fact that subsidies on fossil fuels should be reduced. In the section about electricity it even makes reference to the fact that the added costs for such removal would mean consumption will lower. In other sections it makes reference to the fact that because of the higher price of alternative energy the fossil fuel industry has an advantage. It is legitimate to assume that fossil fuel prices must rise for level competition. Therefore in the near future (at least) energy prices must become more expensive. It is a total misrepresentation by you to pretend that this is not the case.

You are also confused about the question of viability. What is not viable is direct substitution for oil in order to maintain our current truck/car oil based transport system. What is viable is building freight rail and public transport systems so that we can move people and goods with a huge increase in energy efficiency, using existing technology

I don't have a problem with any of these things taking place. I only advocate free market competition. Free market competition will decide what is viable and what isn't viable. Ultimately the market will and should decide the outcome of competition as it always does.

Paul

Paul, I still don't know what the "proven market theory" is that you are referring to. Can you please provide a reference? Something that even a simpleton like me can read?

I believe in the "free market".

Can you please describe what a "free market" is and how it will assist society to address the various problems arising from resource depletion, in particular peak oil, given that is the subject of this thread. What is your 'belief' based on? Can you please provide some sort of objective evidence for this 'belief'?

... the exact same organization (government) you believe can solve the situation ...

I have never claimed that governments can "solve" peak oil. What I have written specifically is that they can "make a good start" at "mitigating" against the broad socio-economic impacts of peak oil.

Now if you are wanting to take away subsidies on these products it is not very wise to promise cheaper costs of living, is it? Subsidies go and the cost of living goes up ...

I am not a representative of the Federal Government and I have not been promising cheaper living costs. On the contrary, I have been advocating alternatives to relying on fossil fuel transport and energy systems as one way of minimising their contribution to high living costs. For example, with improved public transport people will not be so reliant on cars and fuel costs.

... in the near future (at least) energy prices must become more expensive.

That is why I am advocating measures which would allow people to lead their lives by using less energy. I do not claim that alternative energy sources can replace current energy sources on a one-for-one basis. I have argued the opposite case repeatedly.

Free market competition will decide what is viable and what isn't viable.

Competition cannot address the socio-economic impact of peak oil. Competition means that rich people will put ethanol into their cars while poor people starve to death (among other socio-economic impacts). Only cooperation can adequately address the problem. Cooperation is why governments exist, particularly democratic governments.

Well said Stuart

Indeed, only cooperation can adequately address the problem.

Now watch as we're told something along the lines of "There is no problem."

Living In A Child's Dream

I've never agreed with subsidies. I believe in the "free market". I am not sure what part of this you are incapable of understanding? Now who is responsible for subsidies? Yes, the exact same organization (government) you believe can solve the situation - the situation that it caused in the first place.

Paul, there is probably no national economy on earth that does not subsidise fossil fuel production (and consumption) in one form or another. Hence there is no "free market" for energy; what you contend is a dream that does not exist in reality.

But your statement is further distorted by your contention that this is wholly a government problem. It is the fossil fuel industry that lobbies for these subsidies; they are not just given away, willy nilly, by government. Subsidies are the result of government and industry "working together" for mutual advantage (money).

The paper makes reference to the fact that subsidies on fossil fuels should be reduced. In the section about electricity it even makes reference to the fact that the added costs for such removal would mean consumption will lower. In other sections it makes reference to the fact that because of the higher price of alternative energy the fossil fuel industry has an advantage. It is legitimate to assume that fossil fuel prices must rise for level competition. Therefore in the near future (at least) energy prices must become more expensive. It is a total misrepresentation by you to pretend that this is not the case.

Paul, you argue against subsidies, admitting that they distort markets. Yet if removing these subsidies raises costs to the consumer, you run for the hills shrieking "socialist evil". Yet you say you believe that "free markets" are the best; even though a genuinely free market for energy does not exist on this planet. Is it any wonder people don't understand where you're coming from?

What we have now (the energy markets) is a cobbled together mish-mash of pork, kickbacks, rorts and "externality-dodging" going back almost a century. With oil hovering around $100 a barrel, you'd think your precious "free market" could come up with something to help out? But the best it can do is look to oil from coal and even lower quality fossil reserves (like tar sands and oil shale); the production of which may just cook the planet beyond recognition.

Australia's problem is a simple one; we're addicted to the car. If you read the Reidy paper thoroughly, you would be aware that we subsidise "...the price of petrol by about 38 cents per litre (at $1.20 per litre)". Where does this subsidy go? Into roads, urban sprawl and the pockets of the oil and car companies, along with the infrastructure merchants, home builders, supermarkets and others; all glued to the remorseless roll-out of the urban dream.

But this dream can't go on forever. And the "free markets" can't deal with the inevitable contraction as vital, finite energy resources – one after another – become rarer and more expensive; while they coincidently cook us like frogs in a pot. Stern is right to say that climate change is "...the greatest market failure in history".

I don't have a problem with any of these things taking place. I only advocate free market competition. Free market competition will decide what is viable and what isn't viable. Ultimately the market will and should decide the outcome of competition as it always does.

We have just established that a genuinely "free market" does not exist. Every national market is corrupted by the influences of government, industry and money. What you advocate does not – and will not – ever exist.

Your last two sentences are particularly delusional; you cast the free markets as a near-deity! I think you have stated these platitudes so many times that you are starting to believe the words are scripture. That's a pity. I hate to rain on your parade, but you're living in a child's dream...

Two Things Previously Missed

Ian McPherson

Paul, your perfect god, the market, had a major hand in the government distorting these "free markets", as you well know. Your argument is dysfunctional in the extreme.

My argument is not "dysfunctional" because this was never my argument. I've never claimed to agree with subsidies (actually I don't I am a free marketeer). All I've "argued" is that changing tax rates etc will have ramifications for prices - an apparent glaring fact that even a complete simpleton should be able to grasp.

You avoid the screaming obvious. A removal of fossil fuel subsidies would have to accompany a balancing program, to improve public transport and clean up energy markets, the very areas in the economy your free market "vested interests" have worked to run down since World War II.

The obvious is avoided by you in this paragraph. You have made the mistake of thinking that the fossil fuel and all other markets affected by it will remain constant (the art of looking at economics in isolation). This has led you to assume that it will merely be a collection and transfer of an exact number of tax funds. Do you see the gaping hole in this thinking?

In 2525

Stuart McCarthy: "By carping-on with your nonsensical ideological drivel you are actually advocating failure whether you care to admit it or not."

Fortunate that I wasn't in Red Square circa 1917. Sure comrade, there will be a few hard years ahead; however, in 2008 those capitalists pigs will find out about their failure - the future failure you're supporting.

Seriously, you tell me what you base this apparent market failure against? And what was promised that failed? With respect to the fact I lack access to the time machine.

Neo-Classical Economics 101 for Cargo Cultists

Comrade Paul, for somebody so attached to so-called “proven market theory” you appear not to have actually read even the basic literature, for that is where the term ‘market failure’ originates. Citing Krugman and Wells’ Economics, Wikipedia describes market failure as a scenario in which individuals' pursuit of self-interest leads to bad results for society as a whole."

I think even you would struggle to describe turning food into ethanol for gas-guzzling SUVs to the extent that it is threatening the food supplies of hundreds of millions of people as "good for society as a whole."

If you were to get in your time machine you could go back to 2007 for the evidence you're looking for, but I suggest it would be easier to read the news. Here is just a small sample:

  • The UN Food and Agriculture Organisation warning about rapidly decreasing world food stocks and increasing prices, due to competition from biofuels, and climate change, in the International Herald Tribune.
  • An article in the Herald Sun about large street protests in Mexico over a doubling of staple food prices due to competition for corn ethanol.
  • An article in the New York Times regarding the massive deforestation and other environmental problems in Malaysia and Indonesia caused by increasing palm oil production to meet the demand for biodiesel.
  • A Washington Post article about similar deforestation in Brazil due to sugarcane ethanol production.

Among the critics of burning food crops as fuel is the OECD, which has called for biofuel subsidies and preferential trade laws to be scrapped.

In summary, Paul, the biofuel phenomenon is a textbook case of market failure according to the very theories that you have espoused in this forum. Your own incoherent babbling does not reflect any school of economic theory that I have been able to identify.

Your comment about being “linked to a paper that wishes to make energy more expensive” is very obtuse. Are you referring to Chris Reidy’s paper on fossil fuel subsidies in Australia? If so, this is yet another one of your frequent misrepresentations. The paper makes no mention of “wish(ing) to make energy more expensive to make viable alternatives that probably aren't viable” for some abstract ideological reason. What it does point out is the perversity of subsidising fuels that are causing climate change. I have already provided a link to economist Nicholas Stern’s paper that describes climate change as the greatest market failure in history. Stern and others have also demonstrated that the cost of ignoring climate change will exceed the cost of mitigation.

You are also confused about the question of viability. What is not viable is direct substitution for oil in order to maintain our current truck/car oil based transport system. What is viable is building freight rail and public transport systems so that we can move people and goods with a huge increase in energy efficiency, using existing technology. Governments can do this very effectively; supernatural forces (‘invisible hands’ etc) cannot. And as I have already pointed out previously, they don’t even need to increase taxes.

Looking forward to your next post, Comrade. Hopefully one day you might produce an objective, evidence-based argument. I won't hold my breath.

Magic Pudding Theory

Ian McPherson: "The government builds and maintains roads, to advantage the car and oil companies, and charges the public, even though many people do not drive. Your argument is effete and cynical."

And hospitals are built and maintained for the benefit of doctors and medical supply companies; schools for the benefit of teachers and book sellers etc. Your argument is ludicrous.

What is this scare-mongering nonsense?

If you put extra taxes on or remove tax cuts from energy, prices of energy with respect to the present price of commodities will rise. Not scare-mongering, just a simple fact.

You avoid the screaming obvious. A removal of fossil fuel subsidies would have to accompany a balancing program, to improve public transport and clean up energy markets, the very areas in the economy your free market "vested interests" have worked to run down since World War II.

And the taxes already paid in Australia goes toward what exactly? Is there a magic tax collection number that will make government spend wisely?

You do, of course, claim that free markets (and by extension, exponential growth and capitalism) hold all the answers for the future

I never claimed free markets hold all the answers for the future. What I do claim is that based on the past and present they (free markets) are obviously the best choice available. The rest of your post does not deserve a response.

Stuart McCarthy: "Putting aside hermaphrodite poultry for the moment, the only thing “proven” about neoclassical economic theory in the face of resource depletion is that it is a dismal failure, akin to the ravings of a South Pacific cargo cultist."

"Failure" - now, that is an interesting frame. What exactly is this "failure" based against? And who exactly is it a failure for? Like is Australia undergoing a period of mass starvation, gas pump shoot-outs, looting, hoarding, society breakdown etc? If so it has been kept secret from me.

The interesting thing about this apparent "failure" is that it is not argued based on the past or even for that matter the present. This apparent "failure" is taking place in the future. So I might assume the time machine is another thing being kept secret from me.

However attractive an alternative may be, viability is another question altogether, as we have already discussed.

Well, why am I linked to a paper that wishes to make energy more expensive to make viable alternatives that probably aren't viable?

This is precisely what peak oil will bring about in your government-do-nothing scenario. In the face of this unmitigated market failure, the only successful peak oil mitigation strategies will have to be governments, as I mentioned earlier, governing in the interests of the public rather than waving their hands in the air and vacating the field to the “invisible hand of the market” or other supernatural forces. Public transport, regulation to protect food security and removal of perverse subsidies for fossil fuels are among the rational mitigation measures that can only be undertaken by governments.

I think I understand the part that taxes (making prices higher) must apparently be used to kill an industry that high prices cannot apparently kill; hence making an alternative viable that probably isn't viable. However, what sort of regulation do you have in mind?

Market Ravings Lack Imagination

And the taxes already paid in Australia goes toward what exactly? Is there a magic tax collection number that will make government spend wisely?

You do, of course, claim that free markets (and by extension, exponential growth and capitalism) hold all the answers for the future

I never claimed free markets hold all the answers for the future. What I do claim is that based on the past and present they (free markets) are obviously the best choice available.

Rubbish Paul. The free markets did not work for CFCs and they won't work for climate change or peak oil. Neither government nor the markets will come up with the energy system we need for the future; the ideas will probably come from scientists and researchers. Not from financial or political parasites.

Consider this idea for Australia. Maybe you will see some merit in it, and contribute something to this thread, instead of just attempting to sell "business as usual" as the best thing going? Heck, I thought we just voted you BAU guys out!

A Solar Grand Plan
By 2050 solar power could end U.S. dependence on foreign oil and slash greenhouse gas emissions

  • A massive switch from coal, oil, natural gas and nuclear power plants to solar power plants could supply 69 percent of the U.S.’s electricity and 35 percent of its total energy by 2050.
  • A vast area of photovoltaic cells would have to be erected in the Southwest. Excess daytime energy would be stored as compressed air in underground caverns to be tapped during nighttime hours.
  • Large solar concentrator power plants would be built as well.
  • A new direct-current power transmission backbone would deliver solar electricity across the country.
  • But $420 billion in subsidies from 2011 to 2050 would be required to fund the infrastructure and make it cost-competitive.

High prices for gasoline and home heating oil are here to stay. The U.S. is at war in the Middle East at least in part to protect its foreign oil interests. And as China, India and other nations rapidly increase their demand for fossil fuels, future fighting over energy looms large. In the meantime, power plants that burn coal, oil and natural gas, as well as vehicles everywhere, continue to pour millions of tons of pollutants and greenhouse gases into the atmosphere annually, threatening the planet.

Well-meaning scientists, engineers, economists and politicians have proposed various steps that could slightly reduce fossil-fuel use and emissions. These steps are not enough. The U.S. needs a bold plan to free itself from fossil fuels. Our analysis convinces us that a massive switch to solar power is the logical answer.

Solar energy’s potential is off the chart. The energy in sunlight striking the earth for 40 minutes is equivalent to global energy consumption for a year. The U.S. is lucky to be endowed with a vast resource; at least 250,000 square miles of land in the Southwest alone are suitable for constructing solar power plants, and that land receives more than 4,500 quadrillion British thermal units (Btu) of solar radiation a year. Converting only 2.5 percent of that radiation into electricity would match the nation’s total energy consumption in 2006.

To convert the country to solar power, huge tracts of land would have to be covered with photovoltaic panels and solar heating troughs. A direct-current (DC) transmission backbone would also have to be erected to send that energy efficiently across the nation.

The technology is ready. On the following pages we present a grand plan that could provide 69 percent of the U.S.’s electricity and 35 percent of its total energy (which includes transportation) with solar power by 2050. We project that this energy could be sold to consumers at rates equivalent to today’s rates for conventional power sources, about five cents per kilowatt-hour (kWh). If wind, biomass and geothermal sources were also developed, renewable energy could provide 100 percent of the nation’s electricity and 90 percent of its energy by 2100.

The federal government would have to invest more than $400 billion over the next 40 years to complete the 2050 plan. That investment is substantial, but the payoff is greater. Solar plants consume little or no fuel, saving billions of dollars year after year. The infrastructure would displace 300 large coal-fired power plants and 300 more large natural gas plants and all the fuels they consume. The plan would effectively eliminate all imported oil, fundamentally cutting U.S. trade deficits and easing political tension in the Middle East and elsewhere. Because solar technologies are almost pollution-free, the plan would also reduce greenhouse gas emissions from power plants by 1.7 billion tons a year, and another 1.9 billion tons from gasoline vehicles would be displaced by plug-in hybrids refueled by the solar power grid. In 2050 U.S. carbon dioxide emissions would be 62 percent below 2005 levels, putting a major brake on global warming.

Ah I Had Senior Moment

Ian, thank the power of the universe. Earlier I posted about your linked article which I was convinced I read in New Scientist. In fact it was in Scientific American which I would have seen immediately if I had bothered to pull the magazine from my backpack before blathering on.

The article is brilliant and holds out the tantalising prospect of a national power installation being sufficiently large to competitively produce hydrogen for those modes of transport, such as flight, that cannot directly use solar.

The use of compressed air for energy storage in place of batteries is also brilliant and, who knew, is actually an existing technology as are the High Voltage DC transmission networks that will be needed to replace the HV AC networks. 

Aussieland may well become Dumboland because our leaders' visions, political and business, don't extend beyond a hole-in-the-ground.

Australia has sufficient open sunlit space to create solar energy farms for the whole world. As the authors of the article keep saying over and over, after the initial setup, power can be generated for just the cost of maintenance because sunlight is free and has a known reserve of approximately 2 billion years. Let's get on with it.

Of course, there is still one little problem, plastic. We need a replacement.

Is 'Paul' dead? Or just always 'Late in '08'?

Is 'Paul' Rudd dead?

I mean, you'd think he'd show his face up around the national disaster zone in Northern NSW? Or at least have something to say about it?

Remember how John Howard was criticised for for his slowness to respond to Cyclone Larry?

I mean, where is the Prime Minister? We get more public exposure from Osama Bin Laden of late?

Spot the Prime Minister

We could perhaps direct some of these questions to the Prime Minister himself if anyone knew where he's gone.

Man, is that guy low profile or what? Maybe he shouldn't have given up his spot on Sunrise.

All Hail The Leader

Stuart McCarthy: "Perverse government intervention is already part of the problem, i.e. approximately $7.5 billion in annual oil subsidies that are exacerbating our dependence on oil while marginalizing the alternatives."

The Australian or any government can reverse subsidies at anytime (I note one such so-called subsidy was to do with personal income tax). Not only could they do this they could also raise taxes on these products. Naturally all such rises would be directly passed on to the consumer - which in turn would make a complete mockery of the helping cost of living promises. I am not the person stopping the Australian government from doing anything - merely pointing out the ramifications such actions would have.

Taken to the extreme: For Australia that would mean a massive hike in the cost of living, hyperinflation, negative productivity along with high unemployment - stagflation, and for most people economic oblivion (time for Australians to buy those gold bars). Would it mean an emerging alternative energy market? Probably not, as the funding for such ventures (most in their infancy) would not be something that would be easily found. In such circumstances the government would also be all but bankrupt (so no handouts there). The government would by this time long since have panicked and naturally the final failure (the land of the lost in peace time) price controls, rations etc would have been implemented. If any such course takes place; even at the bare minimum you will see a combination of all these things taking shape.

The alternative and I would say sensible idea would be to allow the market to run its course. You say peak oil is the end of a finite product - that it will result in the price rising as the product becomes more of a rarity and I agree. This will result in alternatives becoming more and more attractive. I would suggest $100, $150, $200 etc are all psychological stops. As each price becomes the line of support more and more will leave an overly expensive market. This I believe is much more desirable than the artificial shock treatment (which like all great government ventures in markets will go badly wrong) being bandied about in some circles.

So, now that we have dealt with yet another attempt to bog down the debate in ideological nonsense,

My ideological nonsense as you call it is proven market theory. The only ideological nonsense I hold is that I don't tell any person[s] what they have to do. I merely give an opinion on the probable outcome of their actions. Contrary to popular belief most people are not extreme ideologues. A person with an ideological bent on say population decreases and economic growth destruction would be advocating the leaders of the Rwandan genocide for a Nobel Peace Prize. Most people of course are not so crazy, and naturally this causes them to attempt to view every process in isolation - which is a dumbed down form of ideology. In Rwanda first two outcomes good; final outcome bad, Communism is not the problem; people are the problem etc.

Crossing the Fine Line between Ideologue and Cargo Cultist

Paul, your comment about “proven market theory” had me rolling on the floor in laughter! I haven’t laughed so hard since Brian Fisher (former head of ABARE) said to the 2006 Senate Inquiry that “if the price of eggs is high enough, even the roosters will start to lay.” Putting aside hermaphrodite poultry for the moment, the only thing “proven” about neoclassical economic theory in the face of resource depletion is that it is a dismal failure, akin to the ravings of a South Pacific cargo cultist.

[Price rises] will result in alternatives becoming more and more attractive.

However attractive an alternative may be, viability is another question altogether, as we have already discussed. Your much vaunted market’s first response has been to try and ‘find more’ of the black stuff in the ground as prices have increased. In 2005 the IEA assessed that all sources of non-conventional oil (including deepwater, arctic, EOR, heavy oil/bitumen and shale oil) would become economically viable in the $20-$70 per barrel price range. Yet last year, with prices consistently above that range and record industry profits and spending, world oil reserves increased by only 1%, with the increase coming entirely from the Canadian tar sands (which are viable only because of the presence of declining reserves of stranded natural gas to fuel the extraction process).

The second response of ‘the market’, as we have already discussed, has been to turn food crops into biofuels as tens of millions of people starve, in an exercise that David Pimentel calls “unsustainable, subsidized food burning”.

For Australia that would mean a massive hike in the cost of living, hyperinflation, negative productivity along with high unemployment - stagflation, and for most people economic oblivion (time for Australians to buy those gold bars).

This is precisely what peak oil will bring about in your government-do-nothing scenario. In the face of this unmitigated market failure, the only successful peak oil mitigation strategies will have to be governments, as I mentioned earlier, governing in the interests of the public rather than waving their hands in the air and vacating the field to the “invisible hand of the market” or other supernatural forces. Public transport, regulation to protect food security and removal of perverse subsidies for fossil fuels are among the rational mitigation measures that can only be undertaken by governments.

By carping-on with your nonsensical ideological drivel you are actually advocating failure whether you care to admit it or not.

Keep flailing Paul. You’re making about as much sense as John Frum, but at least you’re giving me a good laugh!

Paul Morrella on Ideological Nonsense?

The Australian or any government can reverse subsidies at anytime (I note one such so-called subsidy was to do with personal income tax). Not only could they do this they could also raise taxes on these products. Naturally all such rises would be directly passed on to the consumer - which in turn would make a complete mockery of the helping cost of living promises. I am not the person stopping the Australian government from doing anything - merely pointing out the ramifications such actions would have. 

Paul, your perfect god, the market, had a major hand in the government distorting these "free markets", as you well know. Your argument is dysfunctional in the extreme. Geoscience Australia does the basic geological work for the oil and gas companies, gives it away free, and charges the public. The government builds and maintains roads, to advantage the car and oil companies, and charges the public, even though many people do not drive. Your argument is effete and cynical.

Taken to the extreme: For Australia that would mean a massive hike in the cost of living, hyperinflation, negative productivity along with high unemployment - stagflation, and for most people economic oblivion (time for Australians to buy those gold bars). Would it mean an emerging alternative energy market? Probably not, as the funding for such ventures (most in their infancy) would not be something that would be easily found. In such circumstances the government would also be all but bankrupt (so no handouts there). The government would by this time long since have panicked and naturally the final failure (the land of the lost in peace time) price controls, rations etc would have been implemented. If any such course takes place; even at the bare minimum you will see a combination of all these things taking shape.

What is this scare-mongering nonsense? You avoid the screaming obvious. A removal of fossil fuel subsidies would have to accompany a balancing program, to improve public transport and clean up energy markets, the very areas in the economy your free market "vested interests" have worked to run down since World War II.

The alternative and I would say sensible idea would be to allow the market to run its course. You say peak oil is the end of a finite product - that it will result in the price rising as the product becomes more of a rarity and I agree. This will result in alternatives becoming more and more attractive. I would suggest $100, $150, $200 etc are all psychological stops. As each price becomes the line of support more and more will leave an overly expensive market. This I believe is much more desirable than the artificial shock treatment (which like all great government ventures in markets will go badly wrong) being bandied about in some circles.

Everything you propose, Paul, recommends that "the market" should run its course, that blood-sucking financial middle-men should rule the roost, skimming their immoral margins from consumers. It's just a damn pity (and a coincidence) I guess, that these self-interested skimmers will deny and fight against the mitigation of climate change, while they milk the last dollar from their existing investments in fossil fuels...

My ideological nonsense as you call it is proven market theory. The only ideological nonsense I hold is that I don't tell any person[s] what they have to do. I merely give an opinion on the probable outcome of their actions. Contrary to popular belief most people are not extreme ideologues. A person with an ideological bent on say population decreases and economic growth destruction would be advocating the leaders of the Rwandan genocide for a Nobel Peace Prize. Most people of course are not so crazy, and naturally this causes them to attempt to view every process in isolation - which is a dumbed down form of ideology. In Rwanda first two outcomes good; final outcome bad, Communism is not the problem; people are the problem etc.

You obviously have some problems Paul, if you claim that "the only ideological nonsense I hold is that I don't tell any person[s] what they have to do". You do, of course, claim that free markets (and by extension, exponential growth and capitalism) hold all the answers for the future, ranting to all and sundry that you are correct, like a political zealot at a fundraiser. This is not ideological? You also seem to have an almost in-bred hatred for socialism and communism, which pervades everything you write. This is not ideological?

The Myths Die Thick And Fast

Craig Rowley: "What's your reaction then, Paul, if the majority of your fellow citizens elect a government giving it a mandate to legislate for increased market regulation? Or a mandate to implement policies addressing Peak Oil, policies for Relocalisation initiatives for example?"

Governments should attempt to fulfill their electoral mandates.

Now, more interestingly, why are Australian banks raising interest rates (and it quiet holiday season)? All claim that they have little to no exposure to sub prime. And why is the Australian Treasurer agreeing with them? A strange one isn't it?

Which allows me to explode a myth that is often repeated around these parts, even links were provided to so-called economists to perpetuate it: The myth that governments have nothing at all to do with interest rates. It is all down to the Fed apparently. Well, the current Australian interest rise has nothing to do with Central Bank monetary policy. It has to do with bank margins - just what are they really factoring in? And I imagine the government would be able to put a halt to such a rise at any time. Doesn't bode well for promises of cheaper energy and produce, does it?

Some Truthful Facts

Stuart McCarthy: “What should governments do about peak oil?”

Governments should do what they are apparently elected to do. Generally speaking in a democratic capitalist western society that is to be the enabler of the smoothest possible conditions consistent with such values. Democratic governments rarely get anything right. That is why it is best they stay away from markets. Market values are not democratic values. In such conditions a democratic government will always eventually be on the losing team (note gas prices).

Another good start would be to stop telling lies. A prime example of such lies was the previous Australian election. A promise to lower gas and produce prices was obviously ludicrous, and it won't be long before that lie to be exposed for the sham it was. The people making such undertakings would have known such a thing was not possible, therefore; it is a lie. Mr Rudd gained support from such groups as Greenpeace (their policy is a complete opposite) throughout that election (even after that lie). They have therefore officially sanctioned people that lie to electors (the previous government was no doubt as bad; possibly worse). Therefore the Greenpeace credibility should also come under the heading of "highly suspicious".

Ideological Dogma Par Excellence

Paul, I’m not sure where you got your very strange idea about the role of government in a parliamentary democracy. The role of the government is to govern the Commonwealth in the best interests of the public, by exercising the legislative, executive and judicial powers vested in it by the Constitution. There is nothing in the Constitution about markets, mandates or other abstractions.

Your argument that governments should “stay away from markets” in all circumstances epitomizes precisely the ideological dogma which I was referring to. A blanket assertion like this one, typical of neo-liberal ideologues, is usually absent of any accompanying rational or objective argument, hence it is nothing but a hollow slogan. The full extent of its absurdity is merely reinforced in the context of this particular argument: 

  1. Perverse government intervention is already part of the problem, i.e. approximately $7.5 billion in annual oil subsidies that are exacerbating our dependence on oil while marginalizing the alternatives.
  2. Some of the most successful examples of market intervention to reduce fossil fuel dependence come from conservative governments, for example Margaret Thatcher’s fuel tax escalator, which provided one of the key ‘market signals’ for the UK’s freight rail and public transport systems.
  3. Neo-classical economic theory argues that governments should intervene in markets in the event of 'market failure'. In his seminal report to UK Treasury, economist Nicholas Stern described climate change as “the greatest and widest-ranging market failure ever seen.
  4. Neo-classical economics, from which the “governments should never intervene in markets” drivel comes from, does not accommodate the fact that the world’s resources are finite. The problem is that the world’s resources are finite. Within the confines of its own logic, neo-classical economics would therefore have to treat peak oil as another ‘market failure’, i.e. another situation requiring government intervention.

So, now that we have dealt with yet another attempt to bog down the debate in ideological nonsense, perhaps you could address even one of my policy recommendations with an objective, reasoned, substantive argument. Is that too much to ask?

Considered Opinions?

"Governments should do what they are apparently elected to do."

What's your reaction then, Paul, if the majority of your fellow citizens elect a government giving it a mandate to legislate for increased market regulation? Or a mandate to implement policies addressing Peak Oil, policies for Relocalisation initiatives for example?

Lets Get To The Quick

Stuart McCarthy: "So basically, Paul Morrella, after all of your noise, ideological ravings and unrepentant misrepresentation of other peoples' work you have absolutely nothing relevant or constructive to say on the subject of peak oil?"

Well I don't know about "ideological ravings". For the most part I think I have tried to show a level of consistency. I could opt for the common way of doing things and try and frame every economic issue in isolation from one another - thus creating the perfect scenario at all levels. Unfortunately this would neither be truthful nor realistic.

The link from your recommendations post http://www.isf.uts.edu.au/whatwedo/ISFsubsidiesreport2007.pdf

Firstly it rates the energy and transport sectors as doing 70% of climate change damage. Fair point perhaps. However, I am constantly told climate change and peak oil isn't the same thing. And of course it is not. That is why groups such as Greenpeace constantly point to the forced changes in the Cuban energy system as being a good thing.

Ultimately this particular paper deals with ways to make energy more expensive in the hope, I believe, to destroy the current energy set up - this is why your and some other people's questions are so difficult to answer. The simple fact is I am not sure if you would like me to tell you how the present situation should be preserved (hopefully improved) or the best way to destroy in the quickest possible time frame. I can without to much trouble answer either of those questions.

So I would suggest rather than tell me about what you didn't write it might be better for you to write clearly what you actually mean and what you actually want. Otherwise I will no doubt continually be running about in circles wasting both my time and your own.

Historical Revisionism?

Eliot, China ratified the Kyoto Protocol in August 2002.

Peak stupidity

Fiona Reynolds asks:

"What could Rupert - and certain Webdiarists - be thinking now?"

 That we were stupid to sign Kyoto when China didn't?

Nature To Discover

Eliot Ramsey: "How can you be certain that it didn't? Using the sort of defining criteria Paul employs, one might say the movements of human populations from out of Arfica and into the rest of the world constituted a type of globalisation."

Yes, that is how I see it. Humankind has been on a globalized trek since the beginning. "Great eras of globalization" are an entirely separate issue.

They said it would never happen ...

.. but the price of crude has reached $US100 a barrel.

What could Rupert - and certain Webdiarists - be thinking now?

Just wondering.

Ask Away

Stuart McCarthy, If you post your recommendations I will comment on them along with any other questions (preferrably minus your abuse).

They're Already Here, Paul

They're already posted below in this same thread Paul.

The fisrt daughter

Hey, talking about the Prime Minister, his daughter Jessica seems to have settled into Kirribilli House nicely. Apparently, she's become quite the chatelaine of the posh, Victorian-era mansion, with mum's energy efficient Prius seen coming and going regularly, too.

Such gossips, the Kirribilli set.

Well really, Eliot Ramsey

That Ruddybunny's daughter should be coming and going at Kirribilli House should surely be to her credit. If I were the new occupant, given certain of my predecessors' reputed habits, I'd be trucking in bleach and other cleansers for the next week. That the gel is prepared to help Mum and Dad out with the shopping is only to her credit.

The only question I really have is (assuming she's going to the supermarket at Neutral Bay): "Where does she put the bananas in her shopping trolley?"

Coppers and sticks, stoneage and iron/steel age. Cappuccinos

Now Malcolm, you should know the history of the world for women is defined by what manner the washing is done ... is it the stone age, where it is beaten by the river by a stone (probably therapeutic for marriage tension too) or the next being the copper age our grandmas endured yea verily with the stick (marriage tension finding an even better solution occasionally, until the stick was tethered to the copper) and then the steel age (known as Hoover and Simpson and the blessings for the homely wifey but very messy as a marriage release) all chewing up that electricity stuff. Now most of us are in the cappuccino age where one goes to work to pay someone else to do it, (marriage tension - who needs a husband, they say?).Huge on green house stuff but far more civilised, alas, ying and yang.

Thus indeed M. Duncan, the civilisation of mankind has been defined by the washing age and age of the washer.

Vive L'age de la Cappucinna.

(Well, to be honest Grandma had servants, then the war came and somehow servants seemed to disappear from the middle class homes ... interesting social phenomenon).

I bet those servants didn’t have two weeks holidays over Xmas in those days.....six loads of washing today, yick and now time for a quick relax.  Needed a few short blacks, or long whites would do in case anyone thought that had slave connotations, must be pc, mamelukes eat my socks!

Cheers

PS Malcolm, the fruit order gets delivered, and I hear there is no cat food.

Life as she is actually livied

Hey, Angela Ryan. I was trying to be a bit conciliatory, but if you want....

I am allergic to washing powder so all my clothes have to be washed twice. This is a difficult concept for most of the women who have been in my life. I do my own washing and ironing. I do a lot of ironing. I always pay for the washing machines.

I am allergic to starch - that caused considerable problems when I was in the Army - but I coped. Ye humps yer billy etc.

Where did I learn these fantastic skills? Where did I learn the copper, the ringer and the stove? Where did I learn the Christmas pudding, where did I learn the ice to rove? Well, we always used to get the block of ice from Redfern on Christmas morning (we used to drive over to get it) but, otherwise, I learnt the rest at my grandmother's patience and my mother's skill (and I've still got the Singer sewing machine I was taught to sew on and the bobbins and ... and ... and - and I can darn a mean sock).

And, apart from the mad Spanish cleaner who managed to bleach the parquet floor, I don't think there was ever a servant in the house.

Women eh?

Not as such. We are people. You are my people and I am your people. The hard part is integrating them.

Claude tells me he sends his regards and I'll be right back when the ankle-bite has stopped bleeding.

Happy 2008.

SCRUBBADUBDUB

Lizzie (mewling enviously?) Apparently, she's become quite the chatelaine of the posh, Victorian-era mansion

We don't envy her. Imagine the caked-on bullshit ten feet deep in there. You'd need an autogyro just to whiz around the rooms. And take the bill over to Wollstonecraft.

Dr Woodforde, OAM, keep the old tenants' bond and send them to the cleaners

Evidence

Are you prepared to name - or even link - a source for your allegation about the "fisrt [sic] daughter", Eliot? Or are you whiling away the summer afternoon with a bit of web-spinning, waiting to subject any flies to your "remorseless ridicule"?

Immigration and its impact on megafauna

Craig Rowley asks:

"So you're crystal clear that globalisation started 10,000 years ago?"

How can you be certain that it didn't? Using the sort of defining criteria Paul employs, one might say the movements of human populations from out of Arfica and into the rest of the world constituted a type of globalisation.

Who knows? Might there not be lessons for us in that experience? When do you date the commencement of 'globalisation', Craig?

Yes That Paragraph

Craig Rowley

http://www.ereader.com/product/book/excerpt/18946

Globalization had gone to a whole new level. If you put The Lexus and the Olive Tree and this book together, the broad historical argument you end up with is that that there have been three great eras of globalization. The first lasted from 1492—when Columbus set sail, opening trade between the Old World and the New World—until around 1800. I would call this era Globalization 1.0.

Now the quote "Globalization had gone to a whole new level" would strongely infer that globalization pre existed this first "great era", wouldn't it? Perhaps the reason you left that part out?

I'm interested to see your proof that 1492, which is when Friedman said "Globalization 1.0" started, was thousands of years ago.

It is not a question that is relevent to anything I have written. "Globalization 1.0" is a word used by Thomas Friedman. What I have written is that globalization started "about ten thousand years ago". It seems not only do you feel the need to selectively quote paragraphs of Mr Friedman for whatever reason - it also appears you feel a need to frame globalization around his book. I consider your argument bankrupted.

Globalization had gone to a whole new level.

Paul, Friedman is referring to level 3.0 when he says: "Globalization had gone to a whole new level."

The Scarecrow

Stuart McCarthy

1. “… you claim (current civilization) is about to come to an end in the not too distant future.”

Nowhere have I ever made such a claim. This is a gross misrepresentation. What I have consistently argued is that the future changes in modern civilization will be very different to most people’s expectations of basically a more high-tech version of today. See my comments further below.

Not a strawman. You have consistantly made reference to the world changing in drastic ways. If what you say takes place it will indeed be the end of the civilization we currently have.

2. “… what can, and did at times take place in isolated communities …”

Once more for the record (at risk of sounding like a broken record) – relocalisation does not necessitate that communities be isolated. On the contrary, most of the material on relocalisation emphasizes the need for greater engagement with the wider community, including governments at every level.

Not a strawman. I pointed out what can, and in fact what did, take place in some isolated communities. I am not under any obligation to share your view of what the world may look like.

3. “… (your) presumption that WalMart will be overly affected by higher energy costs in comparison to the competition.”

No, I did not make any such presumption. The argument that I made was that “without cheap oil, the big, centralized, just-in-time, road transport based distribution systems of companies like WalMart are highly vulnerable“, i.e. all similar companies will be affected, whether or not they are replaced by a competitor.

Not a strawman. Ludicrously, you repeat the same argument I pointed out I thought was wrong.

4. “The contradiction is a simple one: If cheap energy as you claim is the catalyst for globalization how can current government arrangements remain without that catalyst? The next question is obviously what will be the alternative and how will that alternative be made possible?”

I have never claimed that cheap energy is or was the catalyst for globalization. I do not see globalization and relocalisation as mutually exclusive phenomenon. ‘Current government arrangements’ are not dependent on either phenomenon. There is no ‘contradiction’ that a ‘casual observer’ could ‘drive a proverbial

Half strawman argument. You never did write "cheap energy was a catalyst for globalization". The rest of what I have written is valid.

I suggest that if you want to be taken at all seriously in this forum you need to refrain from this sort of school-boy drivel. To get things back on track I will provide a concise summary of my argument, answer the questions in your last reply then make some suggestions for the manner in which you may wish to contribute to the debate in a constructive way.

This is known as framing. Amateur it may well be; however, attempted framing none the less.

...and falls victim to its own irrelevance

So basically, Paul Morrella, after all of your noise, ideological ravings and unrepentant misrepresentation of other peoples' work you have absolutely nothing relevant or constructive to say on the subject of peak oil? What a complete and utter waste of time.

Into The Deep End

I recall the tenor of these debates in WD in 2004. The protagonists (myself included) could find no middle ground. The really good thing is that we are debating (and hopefully informing) ourselves.

There are some facts that are unassailable, such as, the world will run out of oil. Is it worth squabbling about when? Apparently so. However, it is worth noting that some very substantial progress is being made particularly in the field of solar energy with almost zero fanfare.

Germany, for example, has decided to steal a substantial break on the rest of the world by commiting to a nation wide infrastructure for solar energy. Even the 'good ole' US of A has some fairly hefty solar generating capacity in place already.

Here in the sunburnt country there is something else going on. We have coal coming out our wazoo and no Ozzy guvnmint is going to do anything but mouth platitudes and volunteer token gestures until we are forced to (probably at the point of a gun) do something else.

I cannot provide an internet link because I could not find one on their website but there is a verrrrrry interesting article in the latest issue of New Scientist. The good burghers of NS land have come up with a plan that will have the US completely oil-free by 2100 using solar energy and hydrogen for the total cost of $420 billion. Now all we need is to work out how to tow Israel out of the Middle East and into the Indian Ocean and all our troubles will be over, Red Rover.

 

Can You Help Yourself?

Craig Rowley: "Paul Morrella: 'So why selectively quote Thomas Friedman?' I didn't." 

Yes you did. See your comment on December 31: "According to Tom, it 'lasted from 1492 when Columbus set sail to 1800.'"

"Borrowed" from this paragraph:

THOMAS FRIEDMAN: Well you know the way I would locate this book, Nayan, is that I would argue that there have been three great eras of globalization. One I would call, for shorthand, Globalization 1.0. That was from about 1492 till 1800 when we saw the beginning of global arbitrage . . . Columbus discovers America, so basically that era shrunk the world from a size large to a size medium. The dynamic element in globalization in that era, was countries globalizing, for imperial reasons, for resources.

You also said: "And he says Globalisation 1.0 didn't happen thousands of years ago."

He never said this, did he?

If you must stoop to this level your argument is bankrupt.

That paragraph

That paragraph you've quoted, Paul, is from an interview; not Friedman's book.

I'm interested to see your proof that 1492, which is when Friedman said "Globalization 1.0" started, was thousands of years ago.

Srawman Burning

Craig Rowley: "Guess that means that thousands of years ago, when Ancient Egyptians had no market in South America, or Australia, or Japan, or .... we'll let's just say anywhere much beyond the immediate region, didn't quite cut it as a "great era of Globalisation", eh?"

My views on the history of globalization are crystal clear - and don't need to be repeated. Your view was previously made clear (or at least "suggested") so why selectively quote Thomas Friedman?

Once more: When did Globalisation begin?

Paul Morrella: "My views on the history of globalization are crystal clear - and don't need to be repeated."

So you're crystal clear that globalisation started 10,000 years ago?

No, you later revised that to 5,000 years ago when Egyptians had connected with people all that way past Kush ... all the way to Somalia!

So you're crystal clear that Friedman believes there were not "great eras of globalisation" before the first "great era of globalisation", which according to Friedman started in the 1490s when connections between Old World and New World? 

How so? 

And you're crystal clear that before the first "great era of globalisation" it was a stretch to call the trading situation "global" because the various contintents on the globe weren't connected by trade routes?

No, you've got to drop the "global" part of "globalisation" to keep pretending that it began thousands of years ago.

Paul Morrella: "So why selectively quote Thomas Friedman?"

I didn't. 

Anyway, check out this article from the European Review of Economic History and tell us what you make of it.

Happy New Year.

Clutching At The Strawman

Craig Rowley, well I thought 1.0 through 3.0 was in reference to what he calls the three great eras of globalization - not the history of globalization. My "comprehension" may be askew - though probably not.

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