Friday, May 05, 2006

Glenn Reynolds vs. Sean Carroll

Special welcome for the readers who have visited us from the white, colorless, generic, argument-free, obnoxious, and silly blog called the "Deltoid".

Glenn Reynolds has suggested a solution of oil problems that should not be unexpected from an instant right-wing pundit:

  • Of course, if we seized the Saudi and Iranian oil fields and ran the pumps full speed, oil prices would plummet, dictators would be broke, and poor nations would benefit from cheap energy. But we'd be called imperialist oppressors, then.
Sean Carroll disagrees. He thinks that Reynolds has squeezed five units of wrongness into four statements. Sean predicts that Reynolds' blog will collapse into a black hole.

I happen to think that Sean's prediction is a flawed prediction and Reynolds is closer to the truth than Carroll. Let's analyze the statements one by one.

Prices would plummet

Sean thinks that they won't plummet because the oil fields are essentially running at full capacity. Sean has a naive idea about the driving forces behind these prices. In 2002, the oil price was $18 instead of $70. Does it mean that the oil fields were running at a much-higher-than-full capacity?

The oil price is a very volatile quantity that sensitively responds to many different factors. The consumers are ready to pay higher prices because they feel that oil is something valuable that can cease to be available tomorrow. OPEC's statements have a dramatic impact on the price. If there were real competition, the prices could drop. Of course, the conflicts started by September 2001 did not really move the oil industry in this right direction.

Dictators would be broke

Sean thinks that dictators are rich even without oil. In principle, dictators can be rich even without natural resources, but it is naive to claim that oil does not make them richer. In Reynolds's article, many figures are listed that show how the regimes of oil-rich countries financially benefit from the higher prices.

Poor nations would benefit

Sean argues that oil price is more important for rich countries because they consume most of oil. That's completely unrealistic, much like the previous points: Sean completely fails to understand basic concepts of economics such as marginal utility. Surely, he is not the only one: various Deltoids (as well as virtually all readers of Cosmic Variance and Deltoid) should be listed at this point if the text were to be complete. All of them are ignorant about rudimentary economics.

Rich nations and people may consume more oil, but oil is still a smaller percentage of the money that they must spend and a change of the price has smaller consequences. Poor countries are affected by higher prices more than the rich ones because an increased price can really mean that they can't afford oil at all. This is why many officials have proposed an IMF-backed fund to help the poor countries hit by oil price volatility. See, for example, BBC or Sinha's calls.

We would be called imperialist oppressors

I think it is obvious that even if a fuller control by U.S. capitalism led to a smaller influence of dictators, lower prices, and stronger growth of the economies, especially the poor ones, the U.S. would be blamed as an imperialist oppressor. Even Sean Carroll agrees that it is the case. But he disagrees that it would be inappropriate to blame the U.S. for such changes. Well, if the governments and political systems impose things such as affirmative action, stifling political correctness, nationalization of corporations, huge redistribution plans, far left-wing blogs offer their support. If someone thinks about government plans that would actually make things better, not worse, and cheaper, not more expensive, far left-wing bloggers complain about imperialist oppression.

The far left-wing approach is counterproductive for everyone who actually wants to live in a better world.

And that's the memo.


  1. Lubos:

    I thought you will never discuss peak oil?

    It's naive to think that once we go and seize Saudi and Iran, we would be able to pump the oil at full speed. We already occupied Iraq. So are we pumping Iraq oil at full speed? Actually Iraqis oil is hardly flowing now. Iraq now needs to IMPORT gasolines from neighboring countries so that the Iraqis can drive their cars.

    You can say it's the sabotages of insurgences. Let's presume there is no insurgency problem and the politics is stable, once we seize Saudi and Iran. Can you then "pump at full speed"?

    No, you still can't. The fact of the matter is OPEC as well as most other oil producing countries are ALREADY pump at the maximum speed possible.

    There is a physical limit how fast you can pump the oil out. The oil is sticky and it takes time for the oil far away from the oil wells to gradually migrate to near the oil well and be extracted out. If you pump too fast, you are just emptying the nearby close to the oil well, forming a big hole. And the geological structure then collapse, trapping the bulk of un-produced oil underground, and ruin the oil fields permanently and irrevesibly.

    This and other oil production related issues are discussed in detail in Matthew Simmons's famous book "Twilight In The Desert", which describes the coming collapse of Saudi oil production. I would advise every one purchase a copy of that book from Amazon. Only $14 for some ivaluable knowledge.

    Peak Oil, as well as the looming collapse of US dollars and world economy due to the oil crisis, is REAL and the crisis already started. It is going to be much worse than the Great Depression. Majority of people will NOT be able to survive this. I am now in a full survival mode and has been doing some very good things to guarantee the survival of myself and my family.

  2. Most people fail to realize the scope and the seriousness of this imminent crisis. We are not just facing an ENERGY crisis. We are actually facing a wide spread NATURAL RESOURCE CRISIS, of many of the critical none-renewable natural minerals and resources we rely on. Among which are:

    Helium: Without helium a lot of science research can NOT be done. We are depleting Helium at an alarming speed and within about 15 years it will be all gone. The universe is quite abundant in Helium. Unfortunately without helium on the earth, we can't even launch a space ship to go some where to fetch some helium back.

    Copper: We have probably passed the Peak Coppper already. Only half of copper mine reserves remaining. If the remaining copper reserves are completely mined at 100% efficiency, it's only enough to provide 75 kilogram to each person of the earth population.

    Zinc, Nickel, Silver, Gold, Paladium, Platinum. All the same story. Just look at Bloomberg and see how much the price of these materials go up in just this past one or tw years.

    1.5 years ago copper was only $0.75 a pound. At beginning of this year it was $2 a pound. Now it's $3.5. By the end of this year it will be $5. That's growing much faster than oil price!!!

    If you collect some US pennies, and pick out those made before 1982, you can make some money because one penny coin contains two cents worth of copper now. Just get $10000.00 worth of pennies from a bank, sell them to the copper manufacturer for $20000.00, and you make a $10000.00 profit :-)