demand

Well, if CERA says There Will Be Oil, We Can Just Stop Worrying, Right?

sastyk — Mon, 19 Sep 2011 08:18:05 +0000

Well, if CERA says There Will Be Oil, We Can Just Stop Worrying, Right?

Daniel Yergin in the Wall Street Journal:

Since the beginning of the 21st century, a fear has come to pervade the prospects for oil, fueling anxieties about the stability of global energy supplies. It has been stoked by rising prices and growing demand, especially as the people of China and other emerging economies have taken to the road.

This specter goes by the name of "peak oil."

Its advocates argue that the world is fast approaching (or has already reached) a point of maximum oil output. They warn that "an unprecedented crisis is just over the horizon." The result, it is said, will be "chaos," to say nothing of "war, starvation, economic recession, possibly even the extinction of homo sapiens."

The date of the predicted peak has moved over the years. It was once supposed to arrive by Thanksgiving 2005. Then the "unbridgeable supply demand gap" was expected "after 2007." Then it was to arrive in 2011. Now "there is a significant risk of a peak before 2020."

But there is another way to visualize the future availability of oil: as a "plateau."

In this view, the world has decades of further growth in production before flattening out into a plateau--perhaps sometime around midcentury--at which time a more gradual decline will begin. And that decline may well come not from a scarcity of resources but from greater efficiency, which will slacken global demand.

There's something very anti-climactic about "This specter goes by the name of peak oil." One gets the sense that Yergin was trying to sound impressive, and didn't quite pull it off.

This is the usual nonsense from CERA. Oh, yeah, peak oil was supposed to arrive in Thanksgiving 2005. Right, except, of course, that was one person's guess - Kenneth Deffeyes, not the analysis of every geologist. And as Jeffrey Brown rightly points out, well, we did hit a plateau in 2005. The only way you can argue otherwise is to change the terms of the discussion from oil to "oil" or "liquids" - when you mix in biofuels and a whole bunch of other things that aren't crude oil, you can disguise said plateau. It works rather like my saying "Wow, we're nearly halfway out of beer" and someone else saying "Yes, but that's no problem, look at all the Prune Juice!" It is true that both are edible liquids, but it is also true that there are some noticeable differences between beer and prune juice, and between Crude oil and "oil."

Jeffrey Brown also rightly points out that Daniel Yergin and CERA don't exactly have a stellar record of predicting oil prices, and that despite their cheerful (and historically baseless) statement that efficiency fairies will magically make us consume less oil (Jevon's Paradox unfortunately has held true - as we use less oil in different segments of the economy, we use more oil overall). Indeed, the demand-side story is radically different than Yergin portrays it:

However, the real story is Global Net Oil Exports (GNE), which have shown a measurable multimillion barrel per day decline since 2005, and which are measured in terms of total petroleum liquids, with 21 of the top 33 net oil exporters showing lower net oil exports in 2010, versus 2005. An additional metric is Available Net Exports (ANE), which we define as GNE less Chindia's (China + India's) combined net oil imports. ANE have fallen at an average volumetric rate of about one mbpd per year from 2005 to 2010, from about 40 mbpd in 2005 to about 35 mbpd in 2010 (BP + Minor EIA data, total petroleum liquids).

At the current rate of increase in the ratio of Chindia's net imports to GNE, Chindia would consume 100% of GNE in about 20 years. Contrary to Mr. Yergin's sunny pronouncements, what the data show is that developed countries like the US are being forced to take a declining share of a falling volume of GNE. In fact, our work suggests that the US is well on its way to "freedom" from its reliance on foreign sources of oil, just not in the way that most people hoped.

Our replacement of Oil with "oil" has had considerable consequences. Some of them are ecological, upping the rate of climate disturbance, rendering water toxic and destroying whole ecosystems. Others have been the reinvention of world-scale hunger as biofuels tie food and energy prices together in ways that make the world's most vulnerable more subject to market vagaries. Yergin not only has a long history of erroneous predictions, he suffers from an acute inability to describe even the extant present. There is a hallucinatory quality to the world Yergin describes, in which a bright energy and economic future stands just over the horizon - always just a little out of reach.

Sharon

sastyk Mon, 09/19/2011 - 04:18

Monkeynomics - monopolies, markets and exchange rates in wild monkeys

edyong — Tue, 30 Jun 2009 05:30:11 +0000

Monkeynomics - monopolies, markets and exchange rates in wild monkeys

In a classic episode of the Simpsons, Homer's brain explains to him that "money can be exchanged for goods and services". That's obviously true for humans (even cartoon ones) but monkeys use an altogether different form of payment - grooming. It's as close to a currency as monkeys have and it can be redeemed against a wide range of goods and services including more grooming, a free pass from aggression, permission to handle babies, back-up in fights and even sex.

The purposes of these exchanges go well beyond cleaning. Grooming, it seems, is also an enjoyable activity that releases brain signalling chemicals involved in pleasure and rewarding feelings. It's a social bonding activity, the monkey equivalent of a human hug. Grooming does have costs though, despite its appearance as a leisurely activity. For a wild monkey, time spent cleaning a peer is time that's not spent foraging yourself or watching out for predators. So it pays an individual to groom only as much as it needs to.

Cecile Fruteau from the University of Tilburg has been studying the exchange of grooming among wild vervet monkeys in South Africa's Loskop Dam Nature Reserve. Through her experiments, she has shown that vervet grooming works like a biological market, governed by the laws of supply and demand. The amount that any individual is willing to give in exchange for a service depends on how rare or abundant it is.

After seven months of initial observations, Fruteau's team created an artificial market for two groups of vervets with the aid of mechanical food containers. Each housed five pieces of apple that were unreachable, but could be seen through a plastic mesh. The team trained one low-ranking female in each group to open the containers by touching the lid (when they did, one of the researchers triggered it with a remote control).

At first, the subordinate monkey spent much more time grooming others than being groomed herself. This inequity stems from the fact that grooming is the only currency that subordinates have to trade with, while dominant females can offer other resources like support or even tolerance. But suddenly, the subordinate monkey became leadership material, gaining the power to bestow a small banquet upon her group. When this happened, she suddenly transformed from groomer to groomee with the rest of the troop combing through her fur far more than she combed through theirs.

Things changed in the next phase, when the team introduced a second food container that opened in a different way and trained a second low-ranking female to 'open' it. Now, the five-apple bonanza was sliced into smaller pieces and divided between the two containers.

The monopoly of the first female had suddenly become a duopoly and her unique selling point was no longer unique. As a result, the amount of grooming she received fell to somewhere between its level before the containers and her later heights of power. Meanwhile, the second trained monkey started receiving more grooming and the two box-openers ended up meeting in the middle.

These are exactly the sorts of pattern that market theory would predict. The value of the first female's container-opening ability fell by half when the second female was trained and the grooming she received followed suit. The second female's stock rose, but only to half the extent that that of the first female initially did - the fact that two of them could provide a service meant that it became less valuable than when one monkey operated without competition.

Fruteau confirmed that these social shifts weren't down to radically different behaviour among a few individuals, but due to broad changes among the various relationships of the troop. These changes happened very quickly, which suggests that this sort of strategic behaviour is all part and parcel of a vervet's life.

In these natural markets, exchange rates could be set in two different ways - the individuals who provided the apples could be groomed more or they themselves could groom others less. Individuals can end a bout of grooming at any time and check their partner's reaction - signs of dissatisfaction would mean more coming from someone that controls goods, be it through rank or through knowledge (such as the location of food).

In this way, bouts of grooming at like a continuous negotiation, where the monkeys set the price of their exchanges in a dynamic way. It allows them to fine-tune their monkey business without the need for bankers, contracts or consultants.

Reference: PNAS 10.1073/pnas.0812280106

More monkeying around:

edyong Tue, 06/30/2009 - 01:30