Deinonychus antirrhopus

Isn't what he suggests a mathematical impossibility?

Let us first assume that by "supply" he means "capacity to produce".

"Demand" here appears to be measured by the quantity demanded, i.e., the amount sold.

The "amount sold" cannot mathematically and permanently outstrip the "capacity to produce". Inventories are not infinitely lived.

This serves to illustrate why we teach students that there is a difference between "quantity demanded" and "demand" in Econ 101. Otherwise they start using sloppy terminology which makes nonsense seem intelligent.

Gasoline demand being inelastic means not that demand doesn't drop with price, but that it drops with huge amounts of screaming for political remedies.

Victor,

The only way I can see a permenant excess demand is for the government to step in and set up a stupid policy permenantly. Since that is unlikely (at least on a permanent basis) you are pretty much right.

Well, yeah, I suppose they could release the strategic oil reserve (although maybe that should count as production) or institute an effective price ceiling.

But even then, the measure he has for "demand" appears to be the quantity consumed ... who knows. My point was mainly that he is inproperly using the terminology. I think this fact is responsible for his inability to catch your point here, which is that there are obvious market responses.

I have to stop reading Drum. His posts are like crack-cocaine, however, I am always interested to see his latest misunderstanding.

I never started reading Drum, thank heavens, because his postings would probably give me a stroke. Y'all are tougher men than I.

I think an important point is that the world's energy problems can be solved by nuclear power at relatively small costs (compared with, oh let's say invading a country with large oil reserves for nation-building, which didn't apparently help increase oil supply) the fuel is plentiful - mined and recycled fuel for centuries, separated from the ocean for millenia.

the only resistance to this is political because gov't must inherently get involved, but once the 'greens' realize this is the only technologically reasonable solution to pollution-free energy, I predict a rapid embrace of nuclear energy

The boy who cried wolf didn't ensure a wolf would never come along, just that if a wolf came along, and the word was called out by the boy, he wouldn't be believed.

Just as when knowledgeable people on terrorism said for decades that we were vulnerable to attacks, but it didn't happen (until it did), didn't mean their theory was wrong, so much as their time line was off.

So, if the limits of growth Jeremiads were wrong at the time, decades ago, that doesn't mean they're wrong now. Perhaps they were just premature, and their past track record of confident predictions of dire shortages made decades ago, with decades passing without them coming true, makes those particular authors suspect if they themselves recycle the same claims, simply updated as to years predicted, not to reveal how wrong they'd been.

But mankind has exhausted resources before. The fall of civilizations can be closely tied to the exhaustion of top soil, forests, and other resources. We no longer have American bison as a significant food or skin source, and other formerly significant industrial sources have been taken so close to extinction as to eliminate their industrial significance. Not only have we substantially fished out the Great Banks, but the yield of food from the sea over the entire globe peaked years ago ('80s? '70s?), despite ever growing needs to feed more people and increasing application of 'extraction' technologies and capital resources to the task.

As to how you could get demand for oil (temporarily) higher than pumpable and refinable supplies, the answer in brief is... China (and its near double digit GDP growth rate, with an accompanying increased appetite for petroleum products).

If your point is that demand would push prices high enough to make further extraction and refining capital investments worthwhile, increasing pumped amounts and refined products, even as the increasing price tended to dampen demand, make alternatives more cost-competitive and get people to switch to them, etc., sure, that's likely true.

But arguably, somewhat irrelevant to the point. If demand gets the price consistently over $50 a barrel, and let's say double that, to an average price of $100, the kind of economic dislocation and readjustment required are not exactly not enough supply for the demand, agreed. But such a significant alteration of the price regime, to a very expensive oil and other energy costs situation, would be a very new situation. The last time energy costs took a significant hike, with the trebling or quadrupling of barrel prices on the spot market, the result was cutting the economic growth rates of the industrialized west by half, and creating a stagflation that had not only not been foreseen, but which had been thought very unlikely on theoretical grounds, as it violated the historical Phillips curve relationship between inflation and unemployment.

But mankind has exhausted resources before. The fall of civilizations can be closely tied to the exhaustion of top soil, forests, and other resources. We no longer have American bison as a significant food or skin source, and other formerly significant industrial sources have been taken so close to extinction as to eliminate their industrial significance.

Good point Sofla, we should all be cognizant of the fall of the United States of America.

Not only have we substantially fished out the Great Banks, but the yield of food from the sea over the entire globe peaked years ago ('80s? '70s?), despite ever growing needs to feed more people and increasing application of 'extraction' technologies and capital resources to the task.

And soylent green is people. Long live the Population Bomb!

But arguably, somewhat irrelevant to the point. If demand gets the price consistently over $50 a barrel, and let's say double that, to an average price of $100, the kind of economic dislocation and readjustment required are not exactly not enough supply for the demand, agreed.

Exactly! Like the last time we had crude oil prices averaging $100 a barrel!

Do you really believe this bilge Sofla?

What's that song? "All we need is love."

And of course, this guy, along with love, can live on sunshine. Who needs food, or soylent greeen?

Simple economics. Beyond Drum. Beyond Sofla.

Unbelievable.

Sofla stated, "creating a stagflation that had not only not been foreseen, but which had been thought very unlikely on theoretical grounds, as it violated the historical Phillips curve relationship between inflation and unemployment."

Uhh, Milton Freidman.

Roy that isn't fair. That is just downright mean to point out that Milton Friedman was arguing, with evidence no less, that the Philips curve was wrong.

Ok, not foreseen by the dominant neo-Keynesianism consensus of the day.

Or are you trying to tell me Milton Friedman was not a dissident from the orthodoxy of the day, and instead doing a survey piece, explaining what everyone else knew and believed as well, in a kind of an historical explication of what everybody else already thought?

Odd, in that case, that he'd have to argue anything. So, when then-President Nixon announced 'we're all Keynesians now,' he actually meant by that term 'monetarists of the Chicago school'? And his administration's economic team was populated with Milton's students?

And it was the dominance of monetarists in the Nixon economic team that resulted in his imposition of price and wage controls to control inflation?

(Caution: objects in the rear view mirror of history appear distorted, based on more recent developments' influencing memories.)

Should have added to:

And it was the dominance of monetarists in the Nixon economic team that resulted in his imposition of price and wage controls to control inflation?

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..., while he had a compliant Fed Chair Arthur Burns massively increasing the aggregate monetary measures?

sofla,

While is was a bit before my time, I think you may be downplaying Friedman's influence a little. Still, the clarification helps me better understand the underlying point you were trying to make. Not saying I agree of course, but I understand better. : )

And on a side note, I'm pretty sure it was Milton Friedman who said "we're all Keynesians now." If memory serves me, it was said in response to what Nixon actually said, which was something alon the lines of "I too am now a Keynesain."

Is this technical nitpicking. Given historical growth rates we can expect US petroleum consumption to grow to 30 or more million barrels per day. But depletion working through the price mechanism could limit US consumption to 20 million barrels per day or less. One can wonder if and when this might happen and what if anything it could mean for our economy. I doubt if anyone expects consumption to be 20 and 30 mbd at the same time.

Reviewing some historical treatments of macroeconomics, I found Friedman saying he was misinterpreted when he said he was a Keynesian himself, as indeed, his key points were in opposition to the Keynesian doctrines that the fine-tuning of the economy was available to policy makers by manipulating where we were on the Phillips curve.

Several texts stated directly that when Friedman suggested the Phillips curve relationship would prove unstable and would not obtain in the future, once we'd had a longer period of low unemployment and inflationary expectations were widespread, it took some years for his prediction to prove true, during which time the Keynesians continued in charge of federal fiscal policies.