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This post is in reply to all those contributors to Finster's thread "Is It Peak Oil?".
I express sincere respect for the posters on this thread - who put forward both here and elsewhere extremely subtle and evidently highly educated observations on all topics concerning capital flows.
Evidently economics is the "main course" on the I-Tulip forums, sometimes leaving many laymen readers somewhat adrift as the discussions can often become fairly arcane. We are grateful for the clarity of laymen's terminology and exposition which Mr. Janszen employs to pull us laymen along in the general discourse.
However having read through this entire thread - albeit not with the economist training so many here clearly evidence - I'm struck by an impression that a great deal of subtlety has been expended on a central thesis which to me seems specious - that the phenomenon of rising energy prices cannot be attributable, even for the sake of discussion, to critically dwindling resources in the present, but must "evidently" be primarily a monetary phenomenon.
Given the very high caliber of many of those posting here, I put forward my objection with hesitation, but also with some clarity and conviction - because the issue was couched in the language of analysis, and indeed introduces a lot of brilliant data (the charts not least), but the conclusions are one sided, and therefore not analytical in the full sense of the word. It's also a pretty simple topic, so a major oversight here is quite notable.
I must observe the following as a critique of what truths you have (or have not) uncovered here - This was quite a long thread. The topic of rising energy prices of the past seven years was thoroughly dissected and analysed. Some of the charts and commentary regarding those charts data is very incisive, and very possibly it's only found on these pages.
Yet it appears most of those people posting on this thread find agreement that energy price rises are always and everywhere a monetary phenomenon!
Well, I must observe, if I have not misunderstood this - your collective insights in summary to me appear insular in the extreme - indeed risking the specious despite their sophistication - insofar as not a fleeting mention is made to the fundamental tenet that natural resources are intrinsically finite by definition and that consequently this might be a very rational avenue to include at least for discussion.
Whether inadvertently or not, it seems everyone on this thread has elaborately omitted from this discussion any acknowledgement that plain old, common-or-garden variety "resource depletion" could even theoretically be the real and primary issue which should have been discussed here.
This glaring omission, from such long general analysis on the topic "why did energy prices zoom and why did the peak oil hype begin" seems to me to display therefore a fairly widely subscribed intellectual bias (on this one topic, I hasten to add) which runs counter to this website's core thesis, that all points of view are weighed fully and that I-Tulip contributors "keep both feet planted firmly on the ground" to better home in on the truth.
In the process of honing their very subtle intellectual capabilities, perhaps a goodly number of I-Tulip stalwarts neglected here that sometimes the most obvious and "dumb" explanations are the most probable? That is to say, to put it very bluntly - the price of a thing may even primarily be rising because it is genuinely becoming SCARCER, or that it's production is straining to meet demand?
What then is so hugely controversial about this rather intellectually stodgy idea, that this entire thread of highly educated commentators skirted determinedly around this observation, although it was eminently the candidate for an opposite thesis?
I am considerably respectful of the caliber of all contributors here in many, many other discussions - you all run circles around me in virtually all topics and leave me struggling to keep up. But having said this, I must state here frankly, I find the general conclusions on this one topic of the "monetary causes of energy price inflation" - so intellectually brittle as to seem to me untenable. It's merely "plausible nonsense" to me, because I've read a good number of geologists with 30 years in the field who would ask you to explain in empirical geologic terms, how you came to such conclusions.
These geologists uniformly lament that "economist' analysts are those most frequently talking to them about "demand destruction" resolving the issue, and yet they note these commentators determinedly refuse to study the field data these geologists are only too willing to provide.
To me the monetarist or inflationist conclusions arrived at here regarding the hydrocarbons depletion story seem contortions of what would be the real probing, open minded empirical inquiry. The diametrically opposite conclusion to your shared idea, i.e. you saying that inflation is the primary culprit - can be arrived at much more briefly, and more easily, by robust and extremely straightforward common sense - by looking at what's in the ground and how many years people have been pulling most of it out of the same few holes using ever more aggressive extraction techniques.
Deferring to the geologists rather than the economists for a final arbitration of the issue would seem eminently sensible - to an empiricist that is ..
The topic in discussion is a resource which a very rapidly industrializing world is forcing out of the ground at ever accelerating rates, from deposits that have been running full tilt for 40 - 60 years - yet we do not wish to entertain the idea in these forums which take pride in their questioning of dogma, that it's price increases are tied to anything but an inflating dollar?
Perhaps what's at play here is only a general predilection in the more distinguished commentators to indulge a reflexive skepticism for any "popular theory" or "popular movement" which seems discredited to a more incisive, intellectual elite by it's very popularity?
The central thesis on this thread appears to have been that when expressed in the price of gold, energy prices have not been rising. Indeed that's so. What's not mentioned is that an innately rising cost of energy, due to supply/demand disequilibrium, which causes general price rises, can quite logically cause the rise in the price of gold, which merely mirrors rising general price levels. To me, this would appear self-evident, but one almost loses one's trust in one's own common sense when faced with some of the dazzling forays into analysis on these pages.
Enlightened by this rudimentary reasoning, using the price of gold to measure the price of energy and so invalidate energy price rises as "fake" because gold rose too - is a highly imperfect or even potentially misleading presentation of the issue. What it does do, is serve the "Peak Oil is Bunk" hypothesis.
By my own untutored reasoning, given that the price of energy in an industrial world governs the cost of running that society, if the concept of intrinsically diminishing resources were to be admitted even as a theorem, the consequent rise in the price of gold to match that rising general cost merely confirms that an inflation in costs has occurred. It does not confirm in any way what is causing energy prices to rise.
Bear with me, I am employing the common man's horse sense here, so it may appear pedestrian to some of you.
Gold provides an early warning signal of inflation in costs - it in no way points exclusively to fiat currency as the primary agent - rising gold in this case, as it was discussed in this thread, merely confirms rising energy prices, it does not unmask a "phantom event" in the rising cost of pulling scarce oil out of the ground.
Having uncovered this one rather large "partial" or "partisan" explanation of surging energy prices, which are probably the largest single theme of our young new century, amongst some highly educated commentators on these pages, I will be on my guard to not accept as gospel other pronuncations on matters with which I am as yet less familiar.
What it seems has been a casualty of this thread's preoccupation with "debunking" peak oil is that that overwhelmingly urgent issue, if it exists, is not squarely addressed. Arguably, a severe shrinkage of the industrial world's available energy is a far more harmful event than even very high levels of monetary fiat currency inflation. I suggest the monetary inflation may have started for other reasons - but it will find it's trap squarely in what will happen in the energy markets in the next brief ten years.
I-Tulip does not seem to confer much weight to this idea, as "Peak Oil" carries a droll connotation on these pages more often than not among it's more frequent commentators. Peak Oil will be anything but droll.
I express sincere respect for the posters on this thread - who put forward both here and elsewhere extremely subtle and evidently highly educated observations on all topics concerning capital flows.
Evidently economics is the "main course" on the I-Tulip forums, sometimes leaving many laymen readers somewhat adrift as the discussions can often become fairly arcane. We are grateful for the clarity of laymen's terminology and exposition which Mr. Janszen employs to pull us laymen along in the general discourse.
However having read through this entire thread - albeit not with the economist training so many here clearly evidence - I'm struck by an impression that a great deal of subtlety has been expended on a central thesis which to me seems specious - that the phenomenon of rising energy prices cannot be attributable, even for the sake of discussion, to critically dwindling resources in the present, but must "evidently" be primarily a monetary phenomenon.
Given the very high caliber of many of those posting here, I put forward my objection with hesitation, but also with some clarity and conviction - because the issue was couched in the language of analysis, and indeed introduces a lot of brilliant data (the charts not least), but the conclusions are one sided, and therefore not analytical in the full sense of the word. It's also a pretty simple topic, so a major oversight here is quite notable.
I must observe the following as a critique of what truths you have (or have not) uncovered here - This was quite a long thread. The topic of rising energy prices of the past seven years was thoroughly dissected and analysed. Some of the charts and commentary regarding those charts data is very incisive, and very possibly it's only found on these pages.
Yet it appears most of those people posting on this thread find agreement that energy price rises are always and everywhere a monetary phenomenon!
Well, I must observe, if I have not misunderstood this - your collective insights in summary to me appear insular in the extreme - indeed risking the specious despite their sophistication - insofar as not a fleeting mention is made to the fundamental tenet that natural resources are intrinsically finite by definition and that consequently this might be a very rational avenue to include at least for discussion.
Whether inadvertently or not, it seems everyone on this thread has elaborately omitted from this discussion any acknowledgement that plain old, common-or-garden variety "resource depletion" could even theoretically be the real and primary issue which should have been discussed here.
This glaring omission, from such long general analysis on the topic "why did energy prices zoom and why did the peak oil hype begin" seems to me to display therefore a fairly widely subscribed intellectual bias (on this one topic, I hasten to add) which runs counter to this website's core thesis, that all points of view are weighed fully and that I-Tulip contributors "keep both feet planted firmly on the ground" to better home in on the truth.
In the process of honing their very subtle intellectual capabilities, perhaps a goodly number of I-Tulip stalwarts neglected here that sometimes the most obvious and "dumb" explanations are the most probable? That is to say, to put it very bluntly - the price of a thing may even primarily be rising because it is genuinely becoming SCARCER, or that it's production is straining to meet demand?
What then is so hugely controversial about this rather intellectually stodgy idea, that this entire thread of highly educated commentators skirted determinedly around this observation, although it was eminently the candidate for an opposite thesis?
I am considerably respectful of the caliber of all contributors here in many, many other discussions - you all run circles around me in virtually all topics and leave me struggling to keep up. But having said this, I must state here frankly, I find the general conclusions on this one topic of the "monetary causes of energy price inflation" - so intellectually brittle as to seem to me untenable. It's merely "plausible nonsense" to me, because I've read a good number of geologists with 30 years in the field who would ask you to explain in empirical geologic terms, how you came to such conclusions.
These geologists uniformly lament that "economist' analysts are those most frequently talking to them about "demand destruction" resolving the issue, and yet they note these commentators determinedly refuse to study the field data these geologists are only too willing to provide.
To me the monetarist or inflationist conclusions arrived at here regarding the hydrocarbons depletion story seem contortions of what would be the real probing, open minded empirical inquiry. The diametrically opposite conclusion to your shared idea, i.e. you saying that inflation is the primary culprit - can be arrived at much more briefly, and more easily, by robust and extremely straightforward common sense - by looking at what's in the ground and how many years people have been pulling most of it out of the same few holes using ever more aggressive extraction techniques.
Deferring to the geologists rather than the economists for a final arbitration of the issue would seem eminently sensible - to an empiricist that is ..
The topic in discussion is a resource which a very rapidly industrializing world is forcing out of the ground at ever accelerating rates, from deposits that have been running full tilt for 40 - 60 years - yet we do not wish to entertain the idea in these forums which take pride in their questioning of dogma, that it's price increases are tied to anything but an inflating dollar?
Perhaps what's at play here is only a general predilection in the more distinguished commentators to indulge a reflexive skepticism for any "popular theory" or "popular movement" which seems discredited to a more incisive, intellectual elite by it's very popularity?
The central thesis on this thread appears to have been that when expressed in the price of gold, energy prices have not been rising. Indeed that's so. What's not mentioned is that an innately rising cost of energy, due to supply/demand disequilibrium, which causes general price rises, can quite logically cause the rise in the price of gold, which merely mirrors rising general price levels. To me, this would appear self-evident, but one almost loses one's trust in one's own common sense when faced with some of the dazzling forays into analysis on these pages.
Enlightened by this rudimentary reasoning, using the price of gold to measure the price of energy and so invalidate energy price rises as "fake" because gold rose too - is a highly imperfect or even potentially misleading presentation of the issue. What it does do, is serve the "Peak Oil is Bunk" hypothesis.
By my own untutored reasoning, given that the price of energy in an industrial world governs the cost of running that society, if the concept of intrinsically diminishing resources were to be admitted even as a theorem, the consequent rise in the price of gold to match that rising general cost merely confirms that an inflation in costs has occurred. It does not confirm in any way what is causing energy prices to rise.
Bear with me, I am employing the common man's horse sense here, so it may appear pedestrian to some of you.
Gold provides an early warning signal of inflation in costs - it in no way points exclusively to fiat currency as the primary agent - rising gold in this case, as it was discussed in this thread, merely confirms rising energy prices, it does not unmask a "phantom event" in the rising cost of pulling scarce oil out of the ground.
Having uncovered this one rather large "partial" or "partisan" explanation of surging energy prices, which are probably the largest single theme of our young new century, amongst some highly educated commentators on these pages, I will be on my guard to not accept as gospel other pronuncations on matters with which I am as yet less familiar.
What it seems has been a casualty of this thread's preoccupation with "debunking" peak oil is that that overwhelmingly urgent issue, if it exists, is not squarely addressed. Arguably, a severe shrinkage of the industrial world's available energy is a far more harmful event than even very high levels of monetary fiat currency inflation. I suggest the monetary inflation may have started for other reasons - but it will find it's trap squarely in what will happen in the energy markets in the next brief ten years.
I-Tulip does not seem to confer much weight to this idea, as "Peak Oil" carries a droll connotation on these pages more often than not among it's more frequent commentators. Peak Oil will be anything but droll.
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