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PeakOil is You

PeakOil is You

The Myth of energy and GDP

Discussions about the economic and financial ramifications of PEAK OIL

Unread postby Aaron » Mon 18 Apr 2005, 10:58:25

Wildwell wrote:'And as embarrassing as it is... I do drive an SUV. (6 cylinder 2wd Cherokee)'.

It's all coming out now folks! Hang your head in shame man, think of the young children you are denying meals in the future!
8O :)


I know I know...

I needed a truck at the time, and it's been a great vehicle.

But yes I should trade it in for a more efficient transport.

Then again...

Ever heard of Jevon's Paradox?
The problem is, of course, that not only is economics bankrupt, but it has always been nothing more than politics in disguise... economics is a form of brain damage.

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Unread postby JohnDenver » Mon 18 Apr 2005, 11:03:01

Wildwell wrote:'And as embarrassing as it is... I do drive an SUV. (6 cylinder 2wd Cherokee)'.


Monte drives a sporty little 2001 Mazda Miata. :lol: :lol:

I'm with you Wildwell. I hate cars and don't own one. They're bad for the environment. :P
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Unread postby JohnDenver » Mon 18 Apr 2005, 11:08:13

Aaron wrote:But yes I should trade it in for a more efficient transport.

Then again...

Ever heard of Jevon's Paradox?


Wow, let's all pray the alcoholics don't get wind of this new denial tactic. "Can't quit, man. If I don't down this 5th of scotch, the Chinese will. Glug glug." 8O :lol:
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Unread postby Aaron » Mon 18 Apr 2005, 11:40:44

100 years of empirical data showing that technology and conservation actually stimulate energy (oil) use isn't good enough for John.

The nanomegabiohydrogenfusionsolargeohybrids will save us right?

You do raise interesting topics though...

And I firmly disagree with you, and will fight to my death to preserve your right to be wrong.

:)
The problem is, of course, that not only is economics bankrupt, but it has always been nothing more than politics in disguise... economics is a form of brain damage.

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Unread postby JohnDenver » Mon 18 Apr 2005, 11:47:53

Aaron wrote:100 years of empirical data showing that technology and conservation actually stimulate energy (oil) use isn't good enough for John.


It's good enough for me, Aaron. I just don't think it gets you off the hook for polluting the atmosphere. :x
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Unread postby julianj » Mon 18 Apr 2005, 12:10:04

Aaron's Bumper sticker:



I drive an SUV for Jevons


That'll get you some funny looks in Houston, I bet.

ROFL
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Unread postby Wildwell » Mon 18 Apr 2005, 12:58:57

That’s what it is, fear of those pesky Chinese getting their hands on SUVs. Lead by example that’s what I say!

I have heard of Jevon’s paradox, but it is an illogical paradox. I’ve bought high efficiency cars in the past and driven more miles, not because of Jevon’s paradox or for any particular economic reason but because I enjoy driving. Since then I have seen the light though and don’t drive at all, it was a drug I had to kick.

Jevon’s paradox is not a natural law it is a psychological tendency when energy gets cheaper. As energy is going to get more expensive then it may not apply. Moreover, William Stanley Jevons, who died in 1882, was paranoid about coal. At this time in Britain (and to an extent Europe and the Commonwealth) it was the period of ‘Railway mania’ and high industrialization in some areas. Everything ran off steam engines and the railway was fast replacing horse drawn traffic and the canals. In 1865 his book called ‘The coal question’ was published, it debated efficiency and consumption.

But did efficiency really increase, leading to increased consumption? While it’s true that new designs allowed factory owners and railway companies to save money, the reality was railway traffic was expanding at an alarming rate (in some people’s eyes) with its pinnacle around the First world war and just after the second world war. It has to be noted (and it often forgotten) that the railway companies were building locomotives to travel faster and faster, principally to complete with each other. For example, in the 1870s the Great Northern railway and North Eastern railway were regularly running at 70mph on the East coast main line, in order to compete with the London and North western and Caledonian railway on the West coast main line. There are numerous example of this, with towns having several rail stations in close proximity in the name of competition. The demand being fueled by people wishing travel further than their own birth place, which was a new thing and moving goods to towns rather than making/growing and consuming products locally.

Steam traction became large, faster and in most cases consumed more fuel as the competition between the railways increased. Companies, such as the Midland railway, who had small engine policies lost out with traffic. In some cases loads stalled the smaller engines on heavily graded lines, such as the Settle and Carlisle culminating in accidents.

By the 1930s road traffic, especially bus traffic and new lorry traffic fueled by oil was eventually biting into rail traffic. Although electric traction had been tried in Tyneside and the South, steam traffic using bigger and faster locomotives was common place until after the war and the 1955 modernisation plan.

Churchill and Macmillan were suitably impressed by the German Autobahns they had seen in the 1930s and later the US road schemes of the 1940s. Government policy was changed in favour of motorways and trunk roads, which gave road transport an enormous advantage in terms of speed and increased capacity compared to what went before with the UK road network. The first motorway to be opened in Britain was the Preston bypass in the early 1950s and in the late 1950s the first trunk motorway was opened (the M1) between just north of London and just east of Rugby.

Naturally the railways only response was to increase speed, hence fuel consumption. Although rail is an efficient transport in any case you cannot get around the laws of physics and steam locomotives were considered obsolete. Hence the later move away from coal and more use of electricity and oil, which is more efficient, which has meant less fuel consumption overall. Moreover, diesel and electric locomotive were cheaper to maintain, easier to start up and required less manning.

Large super sized coal fired power stations were erected in the 1960s and 1970s, thus in order to centralize power production and move away from localised generation from around 1900 onwards in response to the 1930s ‘Weir report’. However, it was technological advances in railway traffic, power generation and home heating – the latter being natural gas from 1967 – which meant coal was on its way out as a fuel source.

Successive governments have built more roads as traffic has increased and the influx of cheap mass produced cars coupled with a rise in deposable income thanks to the increase in credit and second incomes in homes from around the 1960s onwards has meant they have become an aspiration. In 1963 the Beeching report was released, which some said had political overtones in order to pay back the striking railwaymen and miners in the past and a deliberate move away from rail traffic and coal consumption. The result was by 1970 Britain had lost half its rail network and the only choice in many places to move around was by car.

Since then, it has become an aspiration to own these vehicles which are both wasteful for energy in their use and by virtue of their convenience has allowed even more travel compared to the railway pre-war, although not necessarily to any advantage. For example 25% of journeys are less than 2 miles and in most cases car journeys are the result of laziness and urban planning, which has meant out of town shopping and commerce because of pressures of the pricing of town centre property. This is turn has generated more car traffic as people have found the only way get to places is by car or they have been accustomed to the convenience of this mode of transport.

Likewise industry has moved away from coal to electricity in order to comply with the clean air acts of the 1950s. London and many larger cities were suffering from terrible smogs at the time because of air particles resultant of coal burning.

Privitisation of the electricity industry in the 1990s resulted in a ‘dash for gas’. The gas fired power stations being cheaper by virtue of maintenance and fuel delivery and well as government guidelines to reduce Co2 emissions.

While road traffic has continued to rise thanks to policy, geography, credit and income, rail traffic is now the highest since the time of the opening of the M1 – road congestion and the railway’s speed being factors in this. However since the 1930s 2 million railway workers lost their jobs as the need for efficiency took hold. New signalling schemes, traction, track maintenance and station manning arrangements have been implemented in order to get back to profit, which, as a network was last seen in 1955 at the dawn of road transport.

The rise of air traffic in the 1960s has meant the death of the British seaside town, the increase in gloabalisation thanks to speed. However, fuel consumption has risen as people have demanded to go even further from their home and the demand for foreign food, foreign to Britain before the 1960s has increased. In addition a rapid increase in immigration has taken place - in part due to a shortfall in labour post war thanks to the war itself. This in turn has meant more demand, less land spaces and higher prices.

In conclusion none of this is due to energy depletion and Jevon’s paradox, merely transport competition, government policy and technological changes.
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Unread postby Aaron » Mon 18 Apr 2005, 13:10:50

Now that was a well reasoned post WW.

I'm cracking up though...

After many paragraphs of history which clearly and eloquently demonstrate Jevon's paradox, you close with...

In conclusion none of this is due to energy depletion and Jevon’s paradox, merely transport competition, government policy and technological changes.


What do you think Jevon was talking about?

The bottom line is do we think lower prices for a given commodity encourage or discourage it's consumption?

You see, every example you cite of companies competing for a market, and using more energy to do so, is Jevon in action. It also pretty much puts the question of how energy affects economic heath to rest wouldn't you say?
The problem is, of course, that not only is economics bankrupt, but it has always been nothing more than politics in disguise... economics is a form of brain damage.

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Unread postby Wildwell » Mon 18 Apr 2005, 13:37:44

Nothing to do with it - He was describing efficient use of a commodity holds the price down, this creating more use.

This is true if there is an input of demand.

However, the main demand is NOT cheap energy - that creates waste. The driver is the human desire to travel, labour problems, technology and government policy. The energy use is a result of this, not the cause, although an input of energy allows you to do it. And as people get richer they 'waste' energy and not save it, hence the adoption of very wasteful and energy inefficient methods of transport. These do NOT necessarily grow the economy; they are a RESULT of an expanding economy.

When energy/money gets tight people cut back on use of waste and energy. Most wasteful journeys are eliminated. And in production the most wasteful means of production fall first, thus leading to an increase in productivity, and in theory GDP.

Some transport does generate GDP, but it is a myth that all energy/transport generates growth. For example, if the car hadn’t been invented, it is debatable just how much less GDP would be created as an efficient form of transport was already in place. Cars meant more waste, more sprawl and a user of energy which was not necessarily an input of GDP in ALL cases. The pay back time was large because of the loss of jobs in the rail industry, hence less GDP. Indeed road congestion costs Brittan £20bn a year, much of this can be saved by less unnecessary journeys and better use of transport capacity.
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Unread postby khebab » Mon 18 Apr 2005, 14:07:41

Wildwell wrote:Some transport does generate GDP, but it is a myth that all energy/transport generates growth. For example, if the car hadn’t been invented, it is debatable just how much less GDP would be created as an efficient form of transport was already in place. Cars meant more waste, more sprawl and a user of energy which was not necessarily an input of GDP in ALL cases.

This is questionable, the use of a car implies many economic exchanges within the car lifecycle such as insurance, car maintenance, spare parts, etc. .
Also, In the car industry, many subcontractants work for an assembly factory and the car manufacturer is just the tip of the iceberg.

The car industry can only survive if a car is a product of mass production and mass consumption and Mass consumption implies chap energy.

Dirt cheap energy has allowed many households to acquire 2 or 3 cars and was the driver of our car addiction.
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Unread postby Wildwell » Mon 18 Apr 2005, 14:27:28

khebab wrote:
Wildwell wrote:Some transport does generate GDP, but it is a myth that all energy/transport generates growth. For example, if the car hadn’t been invented, it is debatable just how much less GDP would be created as an efficient form of transport was already in place. Cars meant more waste, more sprawl and a user of energy which was not necessarily an input of GDP in ALL cases.

This is questionable, the use of a car implies many economic exchanges within the car lifecycle such as insurance, car maintenance, spare parts, etc. .
Also, In the car industry, many subcontractants work for an assembly factory and the car manufacturer is just the tip of the iceberg.

The car industry can only survive if a car is a product of mass production and mass consumption and Mass consumption implies chap energy.

Dirt cheap energy has allowed many households to acquire 2 or 3 cars and was the driver of our car addiction.


Yep, but most of the sources of cars and oil are now abroad. Then you have to take external costs into account. It might be that climate changes and deaths on roads have caused or will cause huge costs in lost GDP and production. Resource wars to source oil have huge costs and are an economic drain.

It is illogical to say cheap energy is the cause of demand.

On that basis if I find oil in my back garden (which I might do as I live in an oil area!) I should just set fire to oil because it’s cheap and helps the economy. The cheap energy does not spur invention - that is human ingenuity. It may be that we had never found ways of using it.

No, the driver is the technology and the demand for that technology. The more energy you have the more likely it is you waste, hence less productivity, not more – that would be illogical and contrary to basic economic theory.
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Unread postby Aaron » Mon 18 Apr 2005, 14:37:58

So you're going to stick with "price has no influence on consumption" eh?

Sounds pretty unreasonable to me.
The problem is, of course, that not only is economics bankrupt, but it has always been nothing more than politics in disguise... economics is a form of brain damage.

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Unread postby smiley » Mon 18 Apr 2005, 15:28:26

Slightly off topic.

Aaron, I traveled extensively in Cuba last year and speak Spanish well, so I can say that I am quite familiar with the Cuban situation. I think your statements are too harsh. Am I correct to assume that you have spend most of the time around the touristic places? Because the touristic places have their own specific problems which are not representative for Cuba as a whole.

You have to account for the complex financial system in Cuba. You as a tourist are officially obliged to pay in Peso convertibles or dollars. Cubans receive their wage in Moneda Nacional, and they pay in that currency.

There is a huge difference between those two. If you want to buy a pizza it will cost you about 1 dollar while locals pay 2 dollar cents for the same pizza. As a result the local wages seem to be absurdly low if you convert them to dollars. But you have to look at what they can buy for that amount not what you could buy for it. Further you have to account for the fact that they don't pay for their house, daily food (!), healthcare and education.

This discrepancy between the two monetary system has had a few bad side effects. Begging at tourist resorts is immensely profitable. If you can get a tourist to offer you one dollar he has covered your expenses for one week. A lot of people put on their shabbiest clothes and head to the tourist resorts in their spare time to go begging. But don't mistake these people for poor. They usually have a house, a job, and a normal income.

Prostitution is indeed a problem around the tourist resorts, but can you name one country in which it isn't. besides I haven't come across a single Hooters bar in Cuba :-D

back on topic.

When you're talking about Jevon's paradox, you're mainly talking about human behavior. Jevons paradox does not dismisses the fact that conservation via increasing efficiency is technically possible.

The main problem in conservation is the human behavior. It states that as we make a process twice as efficient we'll most likely end up consuming twice the amount of the product. However it is important to understand that this is not a physical limitation but a human one.

If the eastern islanders had found a process to use half the amount of wood to create their statues they would probably end up building twice the amount of statues before perishing. However if they would have made a more prudent choice, namely that survival is more important than worshiping some god, they still could be a thriving society today.

The biggest problem is how to overcome the human attitude which is blocking conservation.
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Unread postby Wildwell » Mon 18 Apr 2005, 15:33:12

Aaron: No, price does have an effect on consumption hence the patterns of transport, geography and business we see today.

However it's many government's policies to reduce consumption, waste and road traffic for the reasons I've stated above. By your reasoning they would be sending nations into recession doing it. Of course the only government that does have a policy of consumption is the United States. (President George Bush 2002). Matt Simmons, Monte, you and him obviously read the same economic text books.
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Unread postby Aaron » Mon 18 Apr 2005, 16:11:02

Ok fine...

Cuba is a paradise of prosperity (except for the tourist places you think I frequent), price has no effect on consumption, and everybody who thinks modern economies are built on oil is a moron.

That about cover it, or did I miss something?

So let's party people!

Why the long faces... energy means nothing, and we will all live in a Cuban paradise soon!

Thank goodness you disabused me of the wacky notions of these fringe eco-morons.

I was momentarily sucked in by provocative titles like PHD & Geologist & Nobel Prize, from this crazy group of wingnuts.

But since the economy isn't affected by energy prices... who cares?

Man are these guys going to feel silly when I tell em about this...

"I'm sorry Mr. Simmons, but your 30+ years in the business means nothing, you are a moron. A poster told me so."

I hope he doesn't cry... I hate it when they cry.

----------------------------------------------------------------

Although I bet we would be less cavalier in cutting down trees if they cried when we did it... unless of course they cried all the time for no reason.
The problem is, of course, that not only is economics bankrupt, but it has always been nothing more than politics in disguise... economics is a form of brain damage.

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Unread postby Wildwell » Mon 18 Apr 2005, 16:37:57

Well it is curious why he came out with the things he did. But I did see him on 'End of suburbia' quite clearly state 'We cannot grow our economy without growing electricity'. I just think he's doing the sensible thing, trying to get someone to invest in a new form of it – He’s a smart investment banker after all. I'm not going to read into it any more than that.

Nevertheless, it is clear that economies can grow using the same or less energy, at least from some of the evidence we have seem. Time will tell.

You should vist Cuba and Europe, you might like it! LOL
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Unread postby smiley » Mon 18 Apr 2005, 16:40:51

Ok fine...

Cuba is a paradise of prosperity (except for the tourist places you think I frequent), price has no effect on consumption, and everybody who thinks modern economies are built on oil is a moron.

That about cover it, or did I miss something?


That I didn't say. I would never trade my more than comfortable life here with that of a Cuban. But I think some moderation is required.

If you go to Cuba next time, go to the poorest sleaziest, dirtiest neighborhood you can find. Compare that to a the slums in Brazil, Guatemala or Mexico. Or to their neighbors in Jamaica. Compare it even to the worst neighborhoods in the USA and Europe. Because even we have people that get their daily dinner out of a trash can, something which would be unheard of there.

If you make a honest comparison you'll respect the things that Cuba has accomplished with so little means.
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Unread postby Aaron » Mon 18 Apr 2005, 17:02:19

If you make a honest comparison you'll respect the things that Cuba has accomplished with so little means.


Never meant to imply otherwise.

And I have visited with a friend from Mexico, a small settlement in Cuba where he has friends. These are really wonderful generous people in my experience and as I mentioned earlier.

Extremely poor, versatile people who have endured much.

And I have seen to slums of Jamaica & Mexico City and they are much worse.

But to hold out Cuba as a magical oil-less society in prosperity is a stretch.

-------------------------------------------------------------

Nevertheless, it is clear that economies can grow using the same or less energy, at least from some of the evidence we have seem. Time will tell.

You should vist Cuba and Europe, you might like it! LOL


Enjoy Cuba very much... England was ok...

But who cares!

Economies will soar to new heights of prosperity even with no energy.

Everywhere will be paradise!

In fact, I now plan to jet around the globe forever. I'll stop in Havana to pick daises and sip rum provided by a host of well trained monkey butlers from the nearby forest, then fly off to Europe for a quick pint, then back home to Texas for a big juicy steak dinner. No matter what it costs!
The problem is, of course, that not only is economics bankrupt, but it has always been nothing more than politics in disguise... economics is a form of brain damage.

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Unread postby Wildwell » Mon 18 Apr 2005, 17:50:39

Ho hum, never said *no* energy or energy was unimportant. And I get accused of not reading!
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Unread postby Ludi » Mon 18 Apr 2005, 17:59:36

Wildwell wrote:The more energy you have the more likely it is you waste, hence less productivity, not more – that would be illogical and contrary to basic economic theory.


I'm sorry, I'm easily confused by economics. Are you saying that a society which has less energy available to it is more productive than one with more energy available to it? How is that productivity measured?
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