Surely economists should not care about Peak Oil?

linlithgowoil

Why do economists, on the whole, dismiss Peak Oil and say it will never happen?

Why dont they say that it will happen (based on the evidence of all now declining oil producing countries)?

Surely, if they have faith in the 'market', when oil depletes and is too expensive, 'something' else will simply step in to fill the void - problem solved by the mighty invisible hand.

So - why do so many economists vehemently deny that Peak Oil will happen and expect oil production to go on forever? Is it because they know that oil (energy) is the pre-requisite for all other economic activity? If so - then they must know, deep down, that oil is NOT just another commodity - it is the pre-requisite for most other commodities in the modern world. If they think this, then their classical economic theories must obviously be wrong.

Its strange, because economists and market specialists etc. always advise people to 'spread their risk' in investments, and yet they feel quite safe in placing all our future 'energy eggs'... Smile

in one basket...

Such · Posted: Tue Mar 08, 2005 11:39 am Post subject:

two words:

status quo

slick50 · Tar Sands Joined: May 05, 2004 Posts: 85

I think that people are scared, deep down inside. A retired friend of mine who plays the stock market and is quite knowledgable about economics admitted to me the other week that Peak Oil intimidates him. He knows it spells the end of an economy based on growth.

mmm · Tar Sands Joined: Jul 05, 2004 Posts: 37

I don't think classical economic theory is not flawed. It states that substitutions will occur for oil as its price increases -- no one on this board would disagree with that.

The problem is that good substitutes do not exist. Every way you slice it, as oil runs out, there will be terrible hardship. The substitutes will cost such a terrible amount more than what we are used to.

Trab · Posted: Tue Mar 08, 2005 12:42 pm Post subject:

People in positions of power don't like to admit they are confronted with a problem they cannot solve. It usually means their replacement by someone else who has a solution, realistic or not.

The first time I hear Bush, or any other leader for that fact, state unequivocally "We're screwed," you know that TSHTF for real. Cool

Rincewind · Posted: Tue Mar 08, 2005 9:15 pm Post subject:

Ah the logic of economics (or lack there of)

From a basic understanding of economic theory we wonder why economists (mostly pundits who wanna be economists) are concerned about Peak Oil and the Peak Oil movement. As they repeatedly state as relative prices change substitutes will become cost effective. No problem.

However, what they don't state is that economic theory and market mechanisms don't give a fig about equity, continuity of insitutions, or the quality of service that results from the new substitutes. Economics is about efficiently allocating scarce resources. Nothing more. All other things being equal (cetris paribis) the efficient allocation of resources may result in economic growth, but it is not a certainty. Economics is particularly weak on explaining what make economies grow.

So with a major change in market conditions there will be (relative) winners and losers and no one including the pundits knows if they are going to be a winner or loser. They certainly don't know whether even if they are a winner if they will be better or worse off than they are now.

Which brings me to my pet theory as to why the pundits so strongly condemn the 'Peak oil conspiracy' despite the fact we are not having an affect on people's behaviour. I believe that they want to delay any change (either proactive or reactive) as long as possible, as any change may result them losing their current status.

Therefore, I never expect to hear President Bush say we are screwed. I will know we are screwed when I hear him say that the people of America (and by implication the rest us as well) must make sacrifices in the face of the current but 'short term' oil shortage.

Cheers Rincewind