Tuesday, August 23, 2005

The rhetoric of disingenuity

I'm not sure what was in my breakfast this morning, but my keyboard is going to beg me never to have it again. I've been pounding away on this almost non-stop for the past four hours.

Here's the next installment with illogic, and conflation exposed.

John Tierney, columnist for the New York Times, is mixing and matching to make his point in today's Times.

He's talking about a bet he made with a guy who wrote a book about how oil prices are going to triple over the next 5 years. Apparently, this guy--Matthew Simmons--is willing to bet $5,000 that oil is going up to $200 a barrel. People have reason to believe him because he's an energy investment banker, or something like that.

Tierney takes the position that nearly without fail, human ingenuity and creativity will reduce commodity prices over time. He uses the bet between Paul Ehrlich, "The End of Affluence" and Julian Simon as his base. Simon offered the bet of $1,000 that any three comodities chosen would be cheaper at any date the challenger picked in the future. Ehrlich took up the bet, and lost it, with prices about 50% of their 1980 prices in 1990.

Tierney writes, "I realize this isn't a sure thing, because the price of oil has risen before - it quintupled in the 1970's. But then it dropped, thanks to new discoveries and technologies, validating the Cornucopians' optimism."

He closes the column with the following paragraph:
"So I figure the long-term odds are with me. And while I'm at it, I'll extend Julian's challenge and consider bets from anyone else convinced that our way of life is "unsustainable." If you think the price of oil or some other natural resource is going to soar, show me the money."

The problem I have with his argument is that the "technological innovation" that happened to bring oil prices down from their 1970s pinacle only occurred because of government intervention and imposition of CAFE standards on vehicle emissions. That and the gradual shift of consumers toward less fuel-consumptive vehicles.

Government insistence on controls like CAFE standards have waned even as US dependence on foreign oil has increased. This means our domestic consumption of oil is soaring. Flat out. SOARING.

Next problem with his oil-argument. Oil prices were at rock-bottom prices in the early 1990s for a few reasons, not the least of them being an ultra-stable, and very pro-US OPEC cartel as a result of US intervention to keep Kuwait a "free" kingdom. The U.S. doesn't have such positive relations around the world today, and part of that shows in OPEC.

There is one other significant factor why oil prices were so low in the early 1990s, and several why they are high today and likely to stay there. The Soviet Union collapsed in 1991. It had been tetering for a while, but demand for oil from many former Soviet countries collapsed for a couple years while they got their governments and economies sorted out. The only other US-competative economy in the world simply disappeared. This meant oil desperately needed to find markets--but they didn't exist, so a barrel of oil became really cheap.

Fast forward 12 years and the situation is different. The CIS countries are getting back on their feet, as are countries of Eastern Europe. This means an increase in oil demand from the "same old players" as I like to think of them. But these economies really aren't a big deal in the scheme of world oil prices. But I can think of two that are: China and India.

China has 1.2 billion people. That's 4 times the population of the US, in roughly the same amount of space. You'd think this means that public transportation in China is phenomenal and that no one has a car (or space to put it). You'd be right, but only on the first and last parts. Public transit in China is great, and there is just about no room for more cars. BUT the government decided about a decade ago that China was going to become a car-ownership societey, like the U.S. This means cars. Lots of cars. And lots of cars mean lots of oil. That's to say nothing of China's growing electricity consumption as people buy things like refridgerators, microwaves, air conditioners and computers for the first time.

Then there's India. A country with a larger middle-class than the U.S. population. A country where becoming an engineer is not a ticket to some pocket-protector nerd-utopia, but a real mechanism for improving your life. And it's paying off in places like Bangalore, where US companies are outsourcing back-office work, and computer programming to. This means more wealth, and more wealth leads to higher energy demands. Higher energy demands mean higher oil prices, and higher oil prices mean, well...

...higher oil prices. Just what Tierney isn't going to happen, and what he's claiming will be overcome by ingenuity.

Sure it will. Any time there is a big enough sticking point, there comes to be a lot of money to be made to solve it, work around it, or blow through it. That's why we have a steam engine, telegraph, and electricity. But how long did it take for any one of these to become widely used? How much did implementing the new infrastructure cost?

In the case of cars and oil consumption: how many years will it take car manufactorers to produce cars that are either A. fuel-efficient, or B. run on something more renewable than oil? What is the lag-time between invention and outcome? What happens to oil prices in the mean time?

And then there's the issue of whether or not our "way of life is sustainable." None of the arguments in Tierney's piece even attempt to address that issue, and bringing it up at the tail end of the article is disingenuous. There is room for an intelligent debate about whether our society is following a sustainable path--whether our accounting and economic models accurately reflect the cost of finite resources, whether we invest sufficiently in the next generation, whether we should place greater emphasis in social accounting on equity.

Simply putting on written-word strut making a backhanded assertion that our way of life is sustainable, and challengnig anyone who disagrees to "Bring it on." Adds nothing, and is beneath the tenor of a NY Times columnist.

1 comment:

Red said...

Good stuff... If Simon was still alive today, he'd fall into the Extropian/Transhumanist camp (http://www.extropy.org/) and what a scary place it is...

From an article that appeared in WIRED magazine (http://www.wired.com/wired/archive/2.10/extropians.html), "They haven't convinced me that I'll be resurrected a thousand years from now - not that it matters" said Julian Simon, a University of Maryland economist who has written for Extropy. "But they sure are right about rejecting unimaginative and counterproductive notions of closed systems. Resources aren't 'finite' in any significant sense." Hmmmm....