[peakoilcritic]

An article I posted on my blog a while back.


If peak oil is going to shatter the economy into a million pieces, then we can expect that businesses will be preparing. They are not, they are continuing to invest, they are continuing about their daily business without worrying about any impending doom. A response might be that businesses aren't interested in the long term but are only worried about short term profits. Well we should all know in an instant that this is not true. Many businesses go for years without making a dollar of profit, many businesses invest in technologies that will not benefit them for decades to come. Businesses are always looking towards the long term, and it is business that knows the economy best. So why are people believing what we hear about peak oil and its economic catastrophes from environmentalists rather then economists and business people? Why are people learning from the people who know the least about this subject? I don't know either, but it sure brings to light that these so called peak oil "experts" are nothing of the sort.

Link to Article:
http://www.freewebs.com/peakoilcritic/blog.htm

[cipi604]

Economic collapse does not occur because the energy required to fuel economic growth will always be available.

Our technology, all over the planet, is using different types of energy. Our technology requires from those types of energy to have strict properties. Almost all our technology requires a 'low mass high density easy to be stored' type.
Now, you have a problem, that alternative energy is not yet a 'low mass high density easy to be stored' type.

[peakoilcritic]

Economic collapse does not occur because the energy required to fuel economic growth will always be available.

Our technology, all over the planet, is using different types of energy. Our technology requires from those types of energy to have strict properties. Almost all our technology requires a 'low mass high density easy to be stored' type.
Now, you have a problem, that alternative energy is not yet a 'low mass high density easy to be stored' type.

My point is, why are no businesses or economists worrying about this?

Since it is only environmentalists who are predicting economic collapse, why should we believe them over the experts?

[gandolf]

Just one question

How many of these so called economic experts predicted the current financial collapse?

Yea not many aye

And if the so called business people are such experts then how come GM, Ford and a lot of others got it so wrong

[pup55]

they are continuing about their daily business without worrying about any impending doom.

Here's the problem: The people that have gotten themselves into the decision making capacities in these places are so conditioned to preserve the status quo that they cannot conceptually understand a set of conditions that is so radically different from the immediate past.

I have been around some of the big companies in the chemical and automotive supply chain, and it is quite true that a lot of the people in planning type positions got there by being yes-men. They got were they are by agreeing with the boss, not taking any chances, and by solving problems, not anticipating them.

Usually in the business planning process, they use for budgeting and planning purposes the oil prices as anticipated by the EIA for the upcoming year, plus or minus some "plausible" range.... I have not been around this for awhile, but for awhile this was maybe plus or minus 10% for the oil price, and they would plan for economic growth of plus or minus 1-2% because those are within the realm of what had been predicted by the EIA and the Bureau of Economic Analysis for government planning purposes. Needless to say those numbers are politically derived....

So for one of the business planners in these places to go in to the boss and say 'I predict the very fabric and life blood of our business will be in increasingly short supply forever" "I predict a repeat of 1929" naturally there will be some skepticism.....The tendency will be to dismiss these people....because the boss cannot envision that kind of scenario because it is too radical of a departure from the recent past.

Also in any business, and in any group of people, it is much easier to kill an idea than it is to advance one, if it involves change. These people sit around in meetings, and change is considered more risky than staying the same.... particularly if there is some investment needed... so naturally, all someone has to do is suggest that the change is not needed, everything will be fine if we do nothing, and all is well.... That is exactly why 2 of the 3 US automotive companies have gone broke.

A third problem is, that there is not consensus on if and when PO will arrive, and even if you do manage to get some consideration of this in the long term planning process, where do you put it in the plan? In 2025? anything past 10 years is considered beyond the career of most people, and an event like this that is too far out is beyond the plan in a lot of these cases.

So, until there get to be enough people at the high levels in these businesses that are PO believers, the situation will continue. Silly isn't it? It's bordering on malfeasance, actually, and the argument can be made by the stockholders that if the officers of the company allow a disaster like this to happen, they should be held accountable.... but you already know how that is going as it applies to some of these big companies....

[peakoilcritic]

Just one question

How many of these so called economic experts predicted the current financial collapse?

Yea not many aye

And if the so called business people are such experts then how come GM, Ford and a lot of others got it so wrong

That is a good question, but there are some issues with your reasoning.

Firstly, I'd like to say that no one has yet provided an argument as to why environmentalists are better trusted at economic issues.

1. Environmentalists didn't predict the financial collapse either.

2. The financial collapse is very different to peak oil. A financial collapse cannot be predicted as no one knows what decisions will be made by banks and finance companies in the future, and this is what triggered it.

3. Whether peak oil will cause economic effects or not CAN be predicted. Quantities of production and discoveries of oil can be calculated and predicted. So can the economic ramifications of lesser supplies of oil. This is different to the financial collapse where you can't calculate or predict how much a bank will lend in a months time or how it will rate its debtors on its balance sheet.

The example sounds compelling on first glance but fails miserably when lined up with what we are talking about.

[pup55]

A further question: You are the CEO, and you are a PO believer, in one of these big businesses. A lot of your activity centers around going to your stockholders, and promising growth. In fact, the value of your business in the stock market is tied directly to the analysts' perception of how much your business will grow in the immediate future.

How do you go to the stockholders and say "I predict our business will contract by 25% over the next three years, and that is only with a lot of investment on your part"....

Naturally, the stockholders, the main ones of which are now the managers of some of these big mutual funds, will want to fire you. The value of their stock is tied to your ability to make the company grow, not shrink slower than your competition.... the value of any investment in plant or equipment is the value of additional sales brought in... there is no way to account for it if you "lose less than your competitors".....

So at the CEO level, there can, by definition, be no acceptance of the possiblity of business shrinkage, because your very job is tied to a growing company with increasing sales and profits.....

You can see how much of a problem that is during the current recession period.... a lot of these CEO's (like Bob Nardelli) managed to get themselves where they are because they were leaders of the fastest growing divisions in the company.... they can't fathom a contracting economy and managing business shrinkage.....

So until the stock market starts to put a premium on more stable companies with lower growth but smarter managers that can manage during a time of great change, we will continue to get the CEO's that are growth-driven, and everyone on down the line at the VP level and below will follow it, because of the yes-man thing.

[Auntie_Cipation]

pup got it right, methinks.

I would summarize it as two things:

first, people are stuck in their paradigm and either don't know how to look outside it or find it too frightening to do so.

second, people think that economists can't be wrong. economists say "don't worry it'll all sort itself out" about peak oil. this can sound comforting until one learns enough about economics to understand that the the logical basis for what the economists are saying doesn't hold up anymore.

Read up on neoclassical economics (essentially growth capitalism) and understand the basic assumptions that underlay it as a worldview. Then look around and you'll see that those assumptions are no longer valid.

now, if you ask why more economists aren't coming out and acknowledging that their worldview doesn't work anymore, I don't understand that either. Maybe it's the paradigm thing again. There is an economics that works (as far as I know) but it's hardly getting any attention. It's called True-Cost Economics. The only folks I've seen talking about it are Adbusters, the Canadian anti-corporate folks.

I suspect it really does come down to short-term profits ruling all -- only in this case it's on a broader scale -- yes, businesses can invest in things that don't give them a return for a few years or even a few decades, in some cases. But they don't know how to think about something that requires a whole different approach to the idea of being a business -- so they just keep believing it'll all be ok.

[Caffeine]

From what I've read on PO.com, I get the impression that at least some businesses are preparing with the expectation of not very good, perhaps "Great Depression"-like market conditions.

Some businesses may also be having to deal with problems related to the JIT system and/or physical supply issues (for example, reduced crop yields).

[cipi604]

Since it is only environmentalists who are predicting economic collapse, why should we believe them over the experts?

I'm an engineer, so it is not only the environmentalists who predict economic collapse. There is not such a thing as an expert on 'what to do when we peak in oil extraction'. Never happened.
As long as this economy is based on oil, it will collapse.

[Grautr]

An article I posted on my blog a while back.


If peak oil is going to shatter the economy into a million pieces, then we can expect that businesses will be preparing. They are not, they are continuing to invest, they are continuing about their daily business without worrying about any impending doom. A response might be that businesses aren't interested in the long term but are only worried about short term profits. Well we should all know in an instant that this is not true. Many businesses go for years without making a dollar of profit, many businesses invest in technologies that will not benefit them for decades to come. Businesses are always looking towards the long term, and it is business that knows the economy best. So why are people believing what we hear about peak oil and its economic catastrophes from environmentalists rather then economists and business people? Why are people learning from the people who know the least about this subject? I don't know either, but it sure brings to light that these so called peak oil "experts" are nothing of the sort.

Link to Article:
http://www.freewebs.com/peakoilcritic/blog.htm

4 of the 5 previous resessions were caused by price increases in oil (dot.com bust not included). Concidering last year we had a price rise up to almost 150$ per barrel then what are the chances the cost of oil had nothing to do with our current resession?

If you then accept that oil price was a factor in our current economic woes than businesses are preparing by making cutbacks and scaling down although they are not doing so because of a direct knowledge of peak oil.

Why dont they know about peak oil? Well it doesnt get mentioned in the MSM much and when it did last year it was often fudged over with missinformation by those people discussing it.

[peripato]

Economic collapse does not occur because the energy required to fuel economic growth will always be available.

Our technology, all over the planet, is using different types of energy. Our technology requires from those types of energy to have strict properties. Almost all our technology requires a 'low mass high density easy to be stored' type.
Now, you have a problem, that alternative energy is not yet a 'low mass high density easy to be stored' type.

My point is, why are no businesses or economists worrying about this?

Since it is only environmentalists who are predicting economic collapse, why should we believe them over the experts?

Your point should read; Why are most businesses or economists not worrying about this? Since clearly there are some of both who are. Therein lies your answer...

[Cloud9]

I have a friend who owns a carpet cleaning franchise. He covers 3 counties. After the 04 hurricane season, he made a fortune. He trippled the size of his operation. He bought a ten thousand square feet building and a half a million dollar motor home.

He has cut his staff to his wife in the office and himself and one of his sons on one truck. Was he stupid? No, he just did not see the bottom falling out of the housing market.

If you are about to lose your home, you are not getting your carpets cleaned.

[peakoilcritic]

Economic data and market conditions come from governments, economists, companies, educational institutions, everywhere.

If peak oil were to occur we would see these institutions make forecasts and make models of oil depletion rates and its effects. However, NONE OF THEM are playing the doomsday card. Are you going to tell us that they are all in on one big conspiracy togethor? Of course not.

Furthermore, some people writing above seem to think that because economists have been wrong in the past, they are flawed in knowledge in general. To this:
Firstly, economic predictions are never perfect but predictions on the world's oil supply and its effects are so significant and obvious that you can't just have ALL of them accidentally not see the doomsday coming.
Secondly, even if they were flawed in economic predictions, what makes you more qualified than them?


Businesses are not stupid. If their profit is going to crash and burn in a decades time, they WILL want to know about it as they want to keeping earning profits. To say that businesses want to keep it quiet to keep their shareholders happy is ridiculous. If this was the case, they would be doing everything in their power to preserve profits in the long-term. Shareholders will be convinced on the economics and reasoning of their decision.

How do you go to the stockholders and say "I predict our business will contract by 25% over the next three years, and that is only with a lot of investment on your part"....

The reason shareholders don't like the idea isn't because the shareholders are stupid, it's because the idea is stupid!

Shareholders know best when it comes to profit. If they see that it's going to go down, they will demand action!

[peripato]

Economic data and market conditions come from governments, economists, companies, educational institutions, everywhere.

If peak oil were to occur we would see these institutions make forecasts and make models of oil depletion rates and its effects. However, NONE OF THEM are playing the doomsday card. Are you going to tell us that they are all in on one big conspiracy togethor? Of course not.

Furthermore, some people writing above seem to think that because economists have been wrong in the past, they are flawed in knowledge in general. To this:
Firstly, economic predictions are never perfect but predictions on the world's oil supply and its effects are so significant and obvious that you can't just have ALL of them accidentally not see the doomsday coming.
Secondly, even if they were flawed in economic predictions, what makes you more qualified than them?


Businesses are not stupid. If their profit is going to crash and burn in a decades time, they WILL want to know about it as they want to keeping earning profits. To say that businesses want to keep it quiet to keep their shareholders happy is ridiculous. If this was the case, they would be doing everything in their power to preserve profits in the long-term. Shareholders will be convinced on the economics and reasoning of their decision.

How do you go to the stockholders and say "I predict our business will contract by 25% over the next three years, and that is only with a lot of investment on your part"....

The reason shareholders don't like the idea isn't because the shareholders are stupid, it's because the idea is stupid!

Shareholders know best when it comes to profit. If they see that it's going to go down, they will demand action!

What action would that be exactly?

[hillsidedigger]

Businesses aren't preparing for they believe that somebody, somewhere will come up with a solution to continue the orgy of wanton consumption.

[patience]

pup55 hit right on the head. CEO's surround themselves with yes men to rubber stamp whatever ideas they generate. MBA school did not teach anything about PO, therefore it does not exist for most CEO's. Only a very few manage to learn a new way of thinking.

Far too many CEO's come from a financial background, where all activity is reduced to money decisions, and since money has a time value, this begets very short term thinking-make a profit THIS quarter at any cost. Worry about next quarter when it comes along. As an engineer, I saw required project payback times shrink from decades to years to months when financial types took over. From there, it is only a matter of time before the company goes broke. When it does, the Manager moves on to another company to work his instant ROI magic. Lather, rinse, repeat.

Enter then, the era of the Wall Street financial wizards, and we find the junk bond craze, followed by other forms of financial engineering up to the present derivative-laden era. The effect of this was to put CEO's quick-buck attitude on steroids. I expect the remains of companies affected by them to litter the roadsides.

PO will not fit into their little square heads. The plentiful energy paradigm is an unquestioned given, with only cost variances considered in their decisions.

[rangerone314]

Just one question

How many of these so called economic experts predicted the current financial collapse?

Yea not many aye

And if the so called business people are such experts then how come GM, Ford and a lot of others got it so wrong

That is a good question, but there are some issues with your reasoning.

Firstly, I'd like to say that no one has yet provided an argument as to why environmentalists are better trusted at economic issues.

1. Environmentalists didn't predict the financial collapse either.

2. The financial collapse is very different to peak oil. A financial collapse cannot be predicted as no one knows what decisions will be made by banks and finance companies in the future, and this is what triggered it.

3. Whether peak oil will cause economic effects or not CAN be predicted. Quantities of production and discoveries of oil can be calculated and predicted. So can the economic ramifications of lesser supplies of oil. This is different to the financial collapse where you can't calculate or predict how much a bank will lend in a months time or how it will rate its debtors on its balance sheet.

The example sounds compelling on first glance but fails miserably when lined up with what we are talking about.

There were plenty of people who predicted financial collapse... Bill Fleckenstein on MSN Money, Saajit Daas (derivatives expert)... and I agreed with them which is why I was kept my 401K money out of stocks (I think it was Jan 2008 or earlier) until it was time to cash a large chunk of it out in exchange for downpayment on a bank-owned house.

I saw this $h1t coming since 2005 which is when I offically laid my plans to get a house to rest until after the $h1t hit the fan.

[rangerone314]

My point is, why are no businesses or economists worrying about this?

Since it is only environmentalists who are predicting economic collapse, why should we believe them over the experts?

Oil industry experts have incentive to lie to avoid a panic and mass exodus away from their stocks.

Big oil like Exxon has been buying back stock (essentially putting them on a path of non-existence in the future) to boost stock prices and because they have no plans for expansion since expansion is not possible. So even some oil people are changing their behavior.

Economics is barely anything that could be called a science, anymore than phrenology, astrology or alchemy. In fact, one of the few fields related to economics that I respect - behavioral economics - has whacked a major foundation underpinning most economic theory, namely that people are rational actors in a marketplace.

Economists tend to have their heads up their butts with regards to issues not in their range of experience and academics and even disagree with each other and different schools of thought. I have yet to see one particular school beat all the others in the truth game, like the Bohr model of the atom displacing earlier theories.

[The Lorax]

Hi. I have a B.S. in Bioprocess Chemical Engineering from Penn State University, and am currently employed at an international corporation that manufactures specialty metals. Thus, I feel like I’m qualified to offer a good perspective on the issue of why businesses and economists are not worried about the effect of dwindling natural resources, and do not plan accordingly.
The worldview of the vast majority of today’s government and business leaders (not to mention common folks) is undeniably shaped by their formal and informal education/conditioning in the workings of neoclassical economic theory.
The problem is that this economic theory, pervading all aspects of our consumerism-based global economy, (which treats the environment as an externality that will always provide the needed input) is in direct disagreement with the proven physical laws of the universe. Without elaborating on the second law of thermodynamics, entropy, and its relation to fossil fuels and energy in general, I will instead focus on why ignorance of this physical law and others is the reason for lack of resource depletion protocol.
Very few people, and absolutely no policy makers, seem to have made the connection between entropy, energy, and economy- probably due to a myriad of reasons ranging from a lack of education and understanding to the psychology of denial. In the United States, I’m sure the vast majority of people (government and business leaders included) have a basic understanding that a return to economic growth is absolutely vital to them keeping their jobs, paying off their debt, and maintaining a resource-gobbling lifestyle. I’m also sure that far fewer have studied physical chemistry, biochemistry, AND economics enough to compare and contrast the underlying philosophy of the subjects. I’m also sure that even fewer have strict enough morals to agree and act on the concept that making do with less today for the benefit of future generations is a good idea.
In my own company, I have watched as the upper management has dealt with the recession by cutting jobs and shortening the work week. All the while, the message has been: “We must wait this out until the recession ends and growth returns. If we cannot keep above water until growth returns, then we go out of business. That’s that.”
The reaction of government and business leaders always seems to be confined to working within the neoclassical economic model – never outside of it. Our leaders have decided that it is better to burn out than to fade away. A true response to the predicament of energy depletion would be extremely difficult and unpopular, requiring the coercion of millions and millions of people to change their lifestyles willingly. Those in power would evidently rather try to maintain the status quo, their power, and their own personal luxurious lifestyles than to acknowledge that our naïve civilization’s belief in human immortality through infinite material wealth is finally colliding with the physical laws of the universe.