Oh dear Maddy, oh dear

You\’ve really not grasped the point about markets, rising prices and speculation, have you?

The fear is that panicky markets can cause enormous damage – panic-buying that prompts fights over resources, which in turn could lead to power cuts in some places and other such mayhem. But so far in facing this huge challenge, our political/economic system seems unable to cope with reality. We are forced to carry on living in an illusion that we have so much time to adapt to post-oil that we don\’t even need to be talking or thinking much about what a world without plentiful oil would look like. Reality has become too dangerous.

If we really are about to run out of oil (not that I agree with the Peak Oilists, but let\’s assume, arguendo) then what we actually desire is panic buying now and a soaring price. For it won\’t lead to fights over resources: it will lead to conservation of that very resource.

Think it through: the price is going to rise dramatically in the future. Right, so what would we like to happen? For us to go on guzzling, relying upon, right until the day the price soars thus fucking us all?

No, we wouldn\’t. What we would like is the price to rise now. This will mean a number of things: we\’ll use less of it now for example. The incentives to use alternatives will be higher, the incentives to develop alternatives will be higher as will those to try and find more oil.

So, if the price rises now, not later, whatever the shortfall in oil will be in the future will be smaller than if we all sail along regardless and then get hit with the shortage/price rise.

This is what futures markets do: they move prices intertemporarily. They bring forward the high prices indicating shortage in time, thus making the shortage itself both smaller and less painful.

The idea that \”the authorities\” are keeping things quiet in order to stop this beneficial process happening is simply ridiculous. Yes, I know, there are a lot of idiot politicians out there, but they\’re not that damn stupid.

3 comments on “Oh dear Maddy, oh dear

  1. “The idea that “the authorities” are keeping things quiet in order to stop this beneficial process happening is simply ridiculous. Yes, I know, there are a lot of idiot politicians out there, but they’re not that damn stupid.”

    They’re also not nearly powerful enough. Besides, whenever the politicians have indeed to tried to buck prices in such a manner it has turned out very badly indeed for such politicians.

    Anyone remember our exit from ERM?

  2. It is certainly not in the national interest of the US to sleepwalk into the post peak era.

    But it was in the electoral interest of the GOP to defer the reckoning. And that would go a ways to explain why the IEA’s oil production forecasts for the last 6 years have been consistently over-optimistic. When you constantly err in one direction, that indicates something systemic.

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