We cannot drill our way out of this oil crisis. Since 2000, oil companies working in the U.S. have doubled the number of wells drilled per year.
Although increased drilling has added new oil to the nation's supply, it has not done so fast enough to offset the terminal decline of existing fields.
We are going to have to import more of our oil. Period.
Posted: Tue Jun 20, 2006 10:49 pm Post subject: Re: Jevon's Paradox Explained
nth wrote:
So, I don't get how you can say increases it's consumption.
What happens when you put something on sale? _________________ A Saudi saying, "My father rode a camel. I drive a car. My son flies a jet-plane. His son will ride a camel."
Live in Arizona? Check out: http://sustainablearizona.org and read my blog.
Joined: Dec 16, 2004 Posts: 702 Location: Santa Monica, CA
Posted: Tue Jun 20, 2006 11:44 pm Post subject: Re: Jevon's Paradox Explained
nth wrote:
Well, after PO, reducing availability of energy will force us to consume less aka conserve.
The point that Jevon's paradox tells us is that our purpose toward energy efficiency should not be conservation-- making depleting energy last longer. We should enact efficiency in order to decrease dependance and the subsequent vulnerability it brings.
Quote:
Now, the question becomes can we be efficient enough to keep the economy moving.
Not all forms of "efficiency" are created equal. A new miracle fleet of high MPG cars would be more efficient per VMT, but it would simply keep the ultimately unsustainable motoring system going longer while draining more resources along the way. Yes, we will get a few more jolly-miles out of them and yes we could keep the economy of the car biz and sprawl biz going. But then as the non renewable energy base depletes, we would be stuck with a bigger fall without the resources spent on keeping the current game going under the regime of efficiency.
In the case of some systems, such as many we call the "economy" today, any efficiency retooling will make the future of depleting resources worse then if the old clunkers were left to die, taking that system down with them. It would be far better if the US car fleet does not improve in MPG and having that fleet die with the American motoring way of life. We need some forms of inefficiency to force more worthwhile systemic energy efficiency.
Posted: Wed Jun 21, 2006 11:10 am Post subject: Re: Jevon's Paradox Explained
MonteQuest wrote:
What happens when you put something on sale?
Are we having miscommunication or am I not understanding it?
How can you discount something if you don't have any to sell?
Are you going to discount the price of a product you already got a buyer?
Let me repeat my scenario.
You produced 100 gallons. Now, produce 80 gallons.
The user improves their efficiency to be able to complete same amount of work with 80 gallons through efficiency.
How do you increase consumption?
We are not talking relatively lower price. I stated that I got your point.
Posted: Wed Jun 21, 2006 11:43 am Post subject: Re: Jevon's Paradox Explained
dub_scratch wrote:
The point that Jevon's paradox tells us is that our purpose toward energy efficiency should not be conservation-- making depleting energy last longer.
Jevon's paradox is about coal- British coal specifically.
He is an economist who advocated resource limitation on coal would lead to many crisis with England losing its steel industry, which is true. He observed that increase efficiencies in utilizing coal leads to more coal consumption rather than decreasing. He argued against substitution of coal.
Here is where today's experts use his papers to counter PO.
Oil replaced coal. Oil was already being advocated as a replacement of coal, but simply, back then, oil was scarce and more expensive than coal. Jevon did not think there is enough oil and is too expensive. If enough oil was found, it would just push the inevitable to a future date.
To me this brings us to now or in our life time. Finding another source of energy will just push the date out. Even solar and wind will run out of resources to build solar panels and wind turbines in some future date. So, pushing it out to a future date is a good solution?
Well, this is where Jevon's conclusions are misstated by you. He advocates long term mediocrity rather than short term boost in material luxury. He phrased it:
"But the maintenance of such a position is physically impossible. We have to make the momentous choice between brief greatness and longer continued mediocrity."
Quote:
It would be far better if the US car fleet does not improve in MPG and having that fleet die with the American motoring way of life. We need some forms of inefficiency to force more worthwhile systemic energy efficiency.
So you want PO to hit sooner, so we change sooner.
You are assuming any change will be change for the better. I don't agree with that. Change maybe for the worse. More people will die of hunger and maybe even war. It is a judgement call.
Posted: Wed Jun 21, 2006 12:27 pm Post subject: Re: Jevon's Paradox Explained
nth wrote:
MonteQuest wrote:
What happens when you put something on sale?
Are we having miscommunication or am I not understanding it?
It's a straight forward question. Don't add to it, answer it. _________________ A Saudi saying, "My father rode a camel. I drive a car. My son flies a jet-plane. His son will ride a camel."
Live in Arizona? Check out: http://sustainablearizona.org and read my blog.
Posted: Wed Jun 21, 2006 12:28 pm Post subject: Re: Jevon's Paradox Explained
nth wrote:
Jevon's paradox is about coal- British coal specifically.
No, it is about any commodity people desire. _________________ A Saudi saying, "My father rode a camel. I drive a car. My son flies a jet-plane. His son will ride a camel."
Live in Arizona? Check out: http://sustainablearizona.org and read my blog.
Posted: Wed Jun 21, 2006 12:33 pm Post subject: Re: Jevon's Paradox Explained
nth wrote:
Let me repeat my scenario.
You produced 100 gallons. Now, produce 80 gallons.
The user improves their efficiency to be able to complete same amount of work with 80 gallons through efficiency.
How do you increase consumption?
Because you lower the price through efficiency relative to what it might have been.
I think that reality will continue to elude you as Aaron noted. _________________ A Saudi saying, "My father rode a camel. I drive a car. My son flies a jet-plane. His son will ride a camel."
Live in Arizona? Check out: http://sustainablearizona.org and read my blog.
Posted: Wed Jun 21, 2006 9:06 pm Post subject: Re: Jevon's Paradox Explained
Efficiency to me means all gain, no pain. I get the same service on less energy, hence less money spent, more for me and mine. I don't know if I am supposed to suffer silently instead of getting appliances that are more efficient, cars that get more mpg and solar hot water systems. All of these have allowed us to keep our bills relatively flat. They will keep us afloat financially. Does that mean we're consuming more? We are using less. We're paying more for it. There isn't any increase in the amount of oil or gas we are using. Maybe our efficiency frees up some oil or gas for somebody else to use in a wasteful way, but I doubt it. Everyone else is too busy cutting back in response to higher prices. The difference is that they do it by suffering, or conservation, while we do it through efficiency and switching to renewables.
Posted: Wed Jun 21, 2006 10:07 pm Post subject: Re: Jevon's Paradox Explained
Revi wrote:
There isn't any increase in the amount of oil or gas we are using. Maybe our efficiency frees up some oil or gas for somebody else to use in a wasteful way, but I doubt it.
So, where does it go then, down some black hole? And why does it have to be wasteful? Besides, energy doesn't care if it gets wasted or not. Afterall, all wasteful uses are paid for up front aren't they? Who gets free energy to waste? Doesn't waste drive GDP growth just like any other thing? How many people make a living from this waste?
My point is this: conservation and capitalism are like oil and water, they do not mix. _________________ A Saudi saying, "My father rode a camel. I drive a car. My son flies a jet-plane. His son will ride a camel."
Live in Arizona? Check out: http://sustainablearizona.org and read my blog.
Posted: Thu Jun 22, 2006 8:20 am Post subject: Re: Jevon's Paradox Explained
Aaron wrote:
Not to be flippant with you, but I hope everyone here recognizes that it's the relative price changes which are the whole point of Jevon's argument.
That's why this idea of "price stabilization" is without merit.
All Jevon says is that "to the extent you make any useful commodity more affordable, you encourage it's consumption by that same margin."
Another way to put this is by looking at the difference between what any given commodity costs today, and what it would have cost absent the additional supplies which conservation & efficiency have provided.
And unless you plan on invading China, India, South America & Africa and force them to comply with your conservation plans, the net effect will be generating energy subsidies for these emerging energy consumers in the form of lower energy commodity prices.
This is why all efforts at conservation & efficiency are actually counterproductive, and lead us even further into the quagmire of Hubbert's Peak.
It is indeed this sobering analysis, coupled with the notion that so many believe otherwise, which makes me the doomer I am today.
I have said so many times here, but it bears repeating...
Be aware of peak oil.
Be afraid of how your neighbors will react to it.
I know this is an older thread, but going back through it, I have to respectfully disagree that conservation & efficiency are counterproductive, and I look at it through the lens of sustainable competitive advantage and re-investment of excess returns versus Jevon's Paradox.
Roughly speaking we have per unit of energy of input per unit of output. Economic efficiency. Turning inputs into outputs. Revenue minus costs equals profits. Energy is not the only input we are concerned about, but it is the topic at hand, so for argument's sake we'll keep all else the same.
Although, it is true that at the production frontier marginal supply equals marginal demand at any price, so that any drop in demand results in a drop in price and therefore stimulates extra demand, and any increase in supply decreases price and therefore increases demand. This holds true in a post peak oil world as less supply will increase price and decrease demand so that at any given time supply equals demand at the new higher price.
Therefore, it would appear completely counterproductive to reduce demand, but it is not.
Energy demand is a cost of production. Lowering your costs of production is half of the formula for revenues minus costs equals profits. So lower costs equals higher profits if revenues stay the same. And that is part of a sustainable competitive advantage and the starting point to re-investing excess returns.
Now let us assume that the following holds roughly true in terms of energy inputs to economic output (and I think it does): Base 100.
Japan 67%
Germany 85%
USA 100%
China 400%
Who's costs rise the quickest is energy prices rise per marginal unit of output? China's. They may compensate by using more labor than energy, but that is not the point. All else being equal they use more energy per unit of output, so they are hit the hardest by either scarcity or higher prices. Even if they acheive their lofty goal of boosting output and at the same time improving efficiency to 200% from 400%.
Japan is still benefiting not only if energy price rise, but even if they stay the same or go down. They use less energy which is a cost of production. It is not the only cost of production, but assuming that China, USA, Germany and Japan all compete with one another, as they do, then they must all possess comparative advantages that help them remain competitive in at least some markets relative to one another. So again we can safely look at only their energy use in isolation.
Japan has a sustainable competitive advantage which increases their excess return from production. Their costs are lower (in energy terms), so their profits are higher, at every level of revenue relative to its competitors.
Profits are always good if you want to stay in business. They are even better if they are re-invested in order to prolongue or extend your competitive advance which is why it is called sustainable.
Now if we take energy and divide it into non-renewable and renewable as well as priorize which is likely to run out first: oil, gas, coal, hydro-electric, biofuels, geothermal, wind, solar, etc. then it makes sense from a competitive point of view to wean yourself off the source of energy which is likely to be depleted first.
So natural gas and coal might eventually run out as well, but as far as competitive advantage goes it makes sense to re-invest your excess returns into the next best alternative that is likely to last longer and therefore prolongue your competitive advantage further along the curve. Even if eventually the world runs out of all forms of fuel, in terms of harvesting economic rents, you want to be the last to run out.
Therefore, Jevon's Paradox makes it clear that one country's savings will end up as another country's use at a cheaper price and therefore cancel out any net gain, a country can still gain an advantage by reducing costs first, and using those extra profits to invest in alternative fuels that will last longer.
In this sense, it also makes sense to import energy rather than use your own limited resources, if it is cheaper, and if you feel you will need them later in any case. I just read a headline that Germany plans to import more coal to run its power stations. I can remember when Germany was paying subsidies to keep coal mining jobs in Germany. How silly when you can import coal cheaper. Whatever coal is under Germany will not go away and it can be reclaimed later when price or the needed technology justisfies it. An untapped resource is a savings account for the future, but of course with an opportunity cost attached to it.
So the USA would be better off to conserve energy and find alternatives, if only to compete with Japan and Germany, even if this somewhat lowers China's costs because in the long-run China will suffer more than Japan, Germany and the USA from higher prices and scarcity of energy. And likewise, through cost savings, those excess returns can be invested in the next best alternative and in alternatives that are likely to outlast crude oil. Prolonging your competitive advantage even by a generation is not a bad thing in the seearch for alternatives. _________________ The organized state is a wonderful invention whereby everyone can live at someone else's expense.
Posted: Thu Jun 22, 2006 12:25 pm Post subject: Re: Jevon's Paradox Explained
Pops wrote:
nth
Back on page 10, Aaron wrote
"Geez folks...
We are simply saying that C & E won't act to delay PO.
Not unless we can FORCE all consumers to comply.
Fine - If we can't produce more oil then Jevon is irrelevant."
Now considering that A's real last name is Jevon...
Pops,
I am utterly confused.
What is my stance that you guys find that is incorrect?
What you wrote is what I thought was what I wrote on Mar 2nd, thursday.
Quote:
Jevons Paradox is irrelevant.
It does not apply to shrinking resources.
If you have 100 gallons of oil today and every day after that you will get 10% less gallons of oil, it will force you to conserve.
Now, the question is with diminishing oil, will you be able to maintain or increase your productivity?
If supplies remain the same, then Jevons Paradox applies as it states that one person saving it will lead to another using it.
This last statement will not be the case when PO hits.
Another words, conserving now is useless as far as preventing PO. Conserve only after PO to maintain or increase economic growth.
Posted: Thu Jun 22, 2006 12:54 pm Post subject: Re: Jevon's Paradox Explained
MonteQuest wrote:
Because you lower the price through efficiency relative to what it might have been.
I think that reality will continue to elude you as Aaron noted.
I think I finally figure out what the issue is.
I am saying Jevon's Paradox does not apply due to the fact that efficiency will increase without using more resources due to depletion of resources available. Even Jevon himself attests to this, he advocates for living in mediocrity in order to prolong our resources.
You and Aaron and others think Jevon's Paradox is about conserving and efficiency will lead to higher consumption compare to no conserving or efficiency, and if resources are limited, then you compare based on hypothetical demand if resources are not limited.
Am I right so far?
If that is correct, then it is not about understanding Jevon's Paradox, but about what you want to do with Jevon's Paradox. If you just want to point out that demand will increase when conservation and efficiencies are applied, then this is a perfect way to prove that. If you want to use it, to show that conservation and efficiencies are bad for economy after resource limitation, then Jevon's Paradox does not apply.
Joined: Aug 18, 2004 Posts: 694 Location: SF Bay Area, Calif
Posted: Thu Jun 22, 2006 1:18 pm Post subject: Re: Jevon's Paradox Explained
One problem with discussing Jevons Paradox is that we seem to want black & white answers. Either it is an eternal law or utterly incorrect.
According the the academic reports I've read and cited elsewhere, there have been few empirical studies of the Rebound Effect (the formal name for the Jevons Paradox). In those that have been published, the figures are variable (e.g. 20-70%) and the conclusions hedged with cautions.
The truth is that it is one tendency among many. Mr. Bill's economic analysis gives an interesting spin I hadn't thought of.
I agree with MQ's point that "conservation and capitalism are like oil and water, they do not mix," though I think I'd specify "uncontrolled capitalism built on rampant consumerism". I would guess the real answer will involve a combination of government control, culture change and markets.
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