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Monday, August 22, 2005

contradicting oneself

Over at Freakonomics, Steven Levitt notes the contradiction in a recent story about "peak oil" in the New York Times. The author, Peter Maass writes:
The consequences of an actual shortfall of supply would be immense. If consumption begins to exceed production by even a small amount, the price of a barrel of oil could soar to triple-digit levels. This, in turn, could bring on a global recession, a result of exorbitant prices for transport fuels and for products that rely on petrochemicals -- which is to say, almost every product on the market.
Scary, eh? But then he writes:
So after a brief windfall for producers, oil prices would slide as recession sets in and once-voracious economies slow down, using less oil. Prices have collapsed before, and not so long ago: in 1998, oil fell to $10 a barrel after an untimely increase in OPEC production and a reduction in demand from Asia, which was suffering through a financial crash.
$10 a barrel oil doesn't sound so traumatic, does it? Does Maass even read what he writes? As Levitt points out:
Oops, there goes the whole peak oil argument. When the price rises, demand falls, and oil prices slide. What happened to the "end of the world as we know it?" Now we are back to $10 a barrel oil. Without realizing it, the author just invoked basic economics to invalidate the entire premise of the article!
Be sure and read the comments to Levitt's post as well. It's full of the usual doom and gloom that can only be averted by massive intervention by the State, or so we've been told.


Blogger Prof. Goose said...

This time it really is different. I hope you'll come over to The Oil Drum or go somewhere and read up on the facts of the matter.

We cover peak oil from an academic perspective...drilling, politics, and the many other issues involved with peak oil!

10:42 PM  
Anonymous Anonymous said...

I agree you should be cautious with any pundit who views a physical question (oil reserves) through the filter of his politics. I'm sure there are people who love government programs, and see this as a wonderful excuse for such action.

Unfortunately, even though I am one of those who distrusts governement programs, I see a worrying response from "my side" as well.

Too many people dismiss the problem along with the government perscriptions. ;-)

What if "peak oil" is real enough that market players (you, me, our neighbors) should respond? What if it is just the time for personal action and responsibilitiy ... but all we read in blogs is "the market will solve it?"

Well ... I thought we were the market!

10:54 PM  

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