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Senior Total executive: "the real problem with peak oil"

by Jerome a Paris Tue Apr 11th, 2006 at 11:10:54 AM EST

In an interview with the Times of London, Christophe de Margerie, who is the head of exploration and production and the likely next CEO of Total, the French oil major (which is the 4th or 5th biggest around, depending on the metrics), say the following:

People are failing to deal with the reality of the price, which has nothing to do with speculators or even any lack of reserves, which are ample. "It is a problem of capacities and of timing," de Margerie says. "This is the real problem of peak oil."

The oil is there, he says, but the amount you can deliver today depends on how many wells you can drill and how fast you can deplete an oilfield, not to mention gaining the co- operation of governments, which guard access to the precious resource jealously. There is no prospect of reaching the lofty peaks that economists at the International Energy Agency, predict will be needed to satisfy world demand for oil.

Promoted by Colman

There are not enough engineers, rigs, pipelines and drillers to increase current world output of 85 million barrels per day to 120 million, he says.

It would be possible only in a world without politics, he says. "If there were no Americans, no Iranians, no English, no French and no Italians. Not a world I know."

So, he is essentially saying that the problem is not with reserves per se, but with the rates of production, and that we will never be able to reach the production levels predicted by the IEA (International Energy Agency) - or by the US Department of Energy, for that matter - simply because it is taking increasing efforts to get the oil out of the ground and that effort cannot be accomplished with today's industrial resources.

He underlines a point that I have been making repeatedly: the oil majors are running out of opportunities where to invest. Their investment budgets are stable or slightly increasing, but in a context of skyrocketing prices for a number of items (rigs, for instance), they are not developing more fields than before. They are constrained by lack of resources, lack of people, and lack of access to the remaining reserves, which are mostly located in countries closed to them, and which do not seem in a hurry to invest themselves.

Whatever the reasons, we have the number two guy of one of the top oil companies saying explicitly that the production hypotheses that everybody uses for long term planning are bunk. will that be enough for people to notice? When are the people at Boeing and Airbus, the car makers, the power companies, the civil works and construction companies, etc... - and the people that finance them over 20-30 years start noticing that the long term hypotheses are more and more absurd?

I finance windfarms, so I figure that it's a safe business to be in the long term. My colleagues down the hall finance new highways and bridges, on the basis of tolls to be paid by drivers, and they usually assume a steadily, if slowly, growing traffic, over periods like 30 years or more. When I ask them, "but who will pay for your tolls in 30 years when oil is scarce and/or incredibly expensive?", they just look at me and say that some substitute will have been found by then....

Well, scientists had better hurry, and it's not the US government who's going to help...

Get it in your head: no sane oilman believes in the rosy production increase scenarios still touted by the authorities. It's time to act on it.


Oil nears $69 as Iran tensions mount

Oil prices shot back towards record levels on Monday amid growing tensions over Iran's nuclear ambitions after weekend press reports claimed that the US government was studying military options for action.


In New York, Nymex West Texas Intermediate rose $1.35 to settle at $68.74 a barrel. IPE Brent for May hit an all-time peak of $68.90, up $1.61, before closing at $68.75, up $1.46.


The increase in global tensions in the oil market helped propel gold higher, with bullion rising to a fresh 25-year high of $598.10 a troy ounce before easing to $592.60/$593.40 by mid-afternoon in New York.


Continued speculation about the imminent launch of an exchange traded fund helped push silver to $12.50 a troy ounce, its highest level since August 1983. The metal eased back to settle at $12.38/$12.41 by late afternoon in New York.

Dealers reported that a fresh wave of buying by funds had pushed base metals prices higher. Copper moved to within a whisker of $6,000 a tonne, rising $215 to a record high of $5,940 a tonne after a further fall in LME inventories, which have fallen to critically low levels globally. Zinc jumped $104 to another record of $2,915 a tonne. Aluminium rose $58 to $2,598 a tonne

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Mon Apr 10th, 2006 at 07:53:52 PM EST
When I ask them, "but who will pay for your tolls in 30 years when oil is scarce and/or incredibly expensive?", they just look at me and say that some substitute will have been found by then....

Even if we did throw money at the problem, it's not certain we could fix it. One of the strangest portents of the end of progress is the recent discovery that humans are losing their ability to come up with new ideas.

Jonathan Huebner is an amiable, very polite and very correct physicist who works at the Pentagon's Naval Air Warfare Center in China Lake, California. He took the job in 1985, when he was 26. An older scientist told him how lucky he was. In the course of his career, he could expect to see huge scientific and technological advances. But by 1990, Huebner had begun to suspect the old man was wrong. "The number of advances wasn't increasing exponentially, I hadn't seen as many as I had expected -- not in any particular area, just generally."

Puzzled, he undertook some research of his own. He began to study the rate of significant innovations as catalogued in a standard work entitled The History of Science and Technology. After some elaborate mathematics, he came to a conclusion that raised serious questions about our continued ability to sustain progress. What he found was that the rate of innovation peaked in 1873 and has been declining ever since. In fact, our current rate of innovation -- which Huebner puts at seven important technological developments per billion people per year -- is about the same as it was in 1600. By 2024 it will have slumped to the same level as it was in the Dark Ages, the period between the end of the Roman empire and the start of the Middle Ages.

The calculations are based on innovations per person, so if we could keep growing the human population we could, in theory, keep up the absolute rate of innovation. But in practice, to do that, we'd have to swamp the world with billions more people almost at once. That being neither possible nor desirable, it seems we'll just have to accept that progress, at least on the scientific and technological front, is slowing very rapidly indeed.
Huebner has so far successfully responded to all these criticisms. Moreover, he is supported by the work of Ben Jones, a management professor at Northwestern University in Illinois. Jones has found that we are currently in a quandary comparable to that of the Red Queen in Through the Looking Glass: we have to run faster and faster just to stay in the same place. Basically, two centuries of economic growth in the industrialised world has been driven by scientific and technological innovation. We don't get richer unaided or simply by working harder: we get richer because smart people invent steam engines, antibiotics and the internet. What Jones has discovered is that we have to work harder and harder to sustain growth through innovation. More and more money has to be poured into research and development and we have to deploy more people in these areas just to keep up. "The result is," says Jones, "that the average individual innovator is having a smaller and smaller impact."

Like Huebner, he has two theories about why this is happening. The first is the "low-hanging fruit" theory: early innovators plucked the easiest-to-reach ideas, so later ones have to struggle to crack the harder problems. Or it may be that the massive accumulation of knowledge means that innovators have to stay in education longer to learn enough to invent something new and, as a result, less of their active life is spent innovating. "I've noticed that Nobel-prize winners are getting older," he says. "That's a sure sign it's taking longer to innovate." The other alternative is to specialise -- but that would mean innovators would simply be tweaking the latest edition of Windows rather than inventing the light bulb. The effect of their innovations would be marginal, a process of making what we already have work slightly better. This may make us think we're progressing, but it will be an illusion.

This is, I think, a relevant factor to consider at a time when many of us (not me, since I'm a pessimist in the high-tech casino and am betting on the House, that is, on Entropy) are pinning our hopes on "major scientific breakthroughs" to get us out of the oily corner we've painted ourselves into.

as Appleyard points out

Of course, the end of the world has been promised by Jews, Christians, Muslims and assorted crazies with sandwich boards for as long as there has been a human world to end. But those doomsdays were the product of faith; reason always used to say the world will continue. The point about the new apocalypse is that this situation has reversed. Now faith tells us we will be able to solve our problems; reason says we have no answers now and none are likely in the future. Perhaps we can't cure cancer because the problem is simply beyond our intellects. Perhaps we haven't flown to the stars because our biology and God's physics mean we never can. Perhaps we are close to the limit and the time of plenty is over.

Waiting for the Lights to Go Out Brian Appleyard, Times Online.

His point is haunting:  as of today, it is a faith-based position that we can invent and innovate our way out of our present fix.  A reason based position taking into account the present evidence of collapse already underway, diminishing returns in just about every sector, and an utterly helpless reliance on a dwindling finite energy source (petroleum), would be gloomier.

I suggest that one reason for the decline of innovation is the ever-intensifying secrecy and vindictiveness of the intellectual property enforcers.  The patent frenzy creates, not a free market in information, but a highly obfuscated, controlled, and licensed realm where there is often more profit to be made in suppressing an innovation, or in the litigation surrounding the control or suppression of an innovation, than in promoting and encouraging innovation.  Our leading-edge  agritech [I say this somewhat sarcastically] as represented by Monsanto, is far more concerned with engineering scarcity with patent restriction and Terminator seeds, more keen on destroying abundance than on creating abundance.  The example of Bolivia comes to mind, where after the privatisation of muni water systems, the water corp attempted to make it illegal to gather and store rain water, again attempting to engineer scarcity in order to jack up prices, rather than to provide abundance.  The same Enclosure/control-based strategy in the "marketplace of ideas" can only strangle innovation.

Tokyo households have become so skilled at conserving water that municipal authorities are preparing to "punish" them by raising rates. The trend towards careful water husbandry is enabled by appliance manufacturers, such as Toto, Matsushita and Sharp, which produce washing machines, toilets and dishwashers that use a fraction of the water of their forebears five years ago. As a result, over those five years average water consumption in Japanese homes has fallen 10%, and water bills have tumbled, since most water use is metered. Consequently, Tokyo and Yokohama residents now face possible water-price hikes of 20%. (11 Apr 06 Economist Tokyo Briefing)
 [hat tip PeeDee over at MoA]

PeeDee further comments:

I didn't intend to be cryptic. I just thought it interesting to note that Japanese fresh water use is declining not because of a decline in well-being, but through an increase in efficiency, probably created both via both technological advancements and a societal willingness to emphasise the virtue of and invest in conservation. Secondly, the reaction of the economic actors which have invested considerable resources in a consumption model (more water is better) that may now be obsolete is to try and recover their capital investment via higher pricing, which in turn merely accelerates the societal change to using less water and possibly developing alternative sources (like rainwater). The illogical outcome of this cycle is to legislate to force consumption to keep the economy going.

We all know how precious fresh water will become. I think there are also implications here for energy consumption, and more.

The mistaken conflation of increased consumption with increased quality of life (when the opposite is probably closer to the truth, if there is one) is something that has to be remedied before we destroy our environment; but the impact on economics as we know it is not well understood. What if minimal investment combined with a cultural change meant that we could live (more) happily on 1/30th (the world average) of what we consume now? In our current paradigm GDP drops by 96%. What happens to the Dow?

[italics mine]

Most -- or a startling amount -- of our innovation and energy at present is dedicated to engineering scarcity.   The US spends a staggering amount of its "health budget" employing millions whose job it is to selectively deny health care to other millions.  It's not unknown for corporations to realise significant returns on litigation over abstract symbols (brand name lawsuits) instead of on producing actual goods or delivering services.

In a by-no-means atypical scenario:  small innovative company A comes up with a hot new product or method.  Large wealthy company B buys company A.  Hooray, we say, this means that Company B-for-Big will be able, with its hefty manufacturing and marketing apparatus, to get that improved technology out to millions of consumers at a lower cost, thus enhancing quality of life and advancing the state of the art.  But Company B may well find that it "makes more sense" to acquire the patents to A's product, shut down the working group that produced it, and prevent it from ever reaching the consumer -- because it would have competed with an existing Company B product which requires only minimal maintenance/cosmetic upgrades and is now a cash cow, whereas the newer/better A-gizmo would have taken real labour to get ready for mass market.  Company B has just prevented innovation from reaching end users, by suppressing competition and protecting their existing investment in the inferior product.

Duplicate this process over and over again in every field and you may have a credible explanation for the decline in innovation:  artificially limiting the number of brains that can work on a problem -- by hiding the source code, enforcing "industrial secrets," and demanding ridiculous extensions of patent protective periods -- automatically cripples the work of problem-solving.

When, oh when, will we hear the attack-opeditors of the financial rags sneering "protectionist neanderthals!" at the RIAA, MPAA, the patent-lawyer nexus, the gene pirates, and the rest who try to make a living from engineered scarcity and authoritarian control of the "free" market in information?

The difference between theory and practise in practise ...

by DeAnander (de_at_daclarke_dot_org) on Mon Apr 10th, 2006 at 09:01:16 PM EST
I'd add another strand to this (although I can't seem to dig out figures right now) which is more recent, but speaks to our ability to produce life-changing innovations.

There's been an increasing effort to shift "research money[]" from the public to the private sector. This is having enormous effects on the kind of research undertaken and indeed the way it is undertaken.

As a result, people who really understand innovation[+] theorise that the number of really important innovations is bound to decrease as ever more money is focused on (to quote from your quote) :

The other alternative is to specialise -- but that would mean innovators would simply be tweaking the latest edition of Windows rather than inventing the light bulb. The effect of their innovations would be marginal, a process of making what we already have work slightly better. This may make us think we're progressing, but it will be an illusion.

[] I say "research money" because the ways and forms this is occuring through are very diverse: Ranging from shifting out of directly paying for research towards "tax credits for industry," pressurising universities to commercialise their research at an every earlier stage and even fundamental shifts in the culture of large corporations like AT&T (c.f. Bell Labs.)

[+] Who really understands innovation? That's a topic for a complex diary, but as ever, I'd ask everyone to be suspicious of economists who invoke "innovation" as a black box that can neatly be incentivised by their usual means.

by Metatone (metatone [a|t] gmail (dot) com) on Tue Apr 11th, 2006 at 06:52:51 AM EST
[ Parent ]
Oops, word to the wise, don't use the star as marker, else you get oddly bolded bits of text.
by Metatone (metatone [a|t] gmail (dot) com) on Tue Apr 11th, 2006 at 06:53:38 AM EST
[ Parent ]
I have friends who has worked with life-time-shortening engineering. That is to shorten the life span of a product so that the company can sell more products. The reverse of engineering for a better world. Wish it were not so.

Colman found me not so cheerful on The Future and this is the reason. Engineering is not working in some space free from the powers that be, free to work wonders in making processes less wasteful and more efficinet. And ideas are owned.

Another future is possible but one of the conditions is that the whole notion of intellectual property is stuffed in a wastebasket. And I working for such an outcome. I am after all a member of the Pirate Party. If someone missed it you are very welcome to  donate. We have just finished the ballots and all money raised to the end of this week will go to printing ballots (they are paper and we will need lots of them), 3 euro gives about 1000 ballots. There are no rules preventing international donations.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Tue Apr 11th, 2006 at 07:36:33 AM EST
[ Parent ]
The Work Less Party of BC salutes you, Pirate Party!

As our name suggests, we're for reducing working time. At the beginning of the 20th century, economists and humane employers discovered that reducing the hours of work led to productivity gains and was thus, in itself, a technological improvement. That's why I give workshops that I call the Work Less Institute of Technology.

But work-less technology is "BAD!" technology because the workers get to keep most of the gains from it. It's awfully hard for a corporation to erect a fence around it and install a turnstile. If left to itself, this "bad" technology would drive out "good" technology, such as scarcity engineering and life-time-shortening engineering.  So the economics establishment has waged a relentless propaganda war against reduced working time policies under the banner of the lump-of-labor fallacy. Funny coincidence -- all the neoliberal think-tank hacks know the lump-of-labor claim by heart.


by Sandwichman on Tue Apr 11th, 2006 at 11:08:54 PM EST
[ Parent ]
Good points. I think there is a general trend here. The elites in government and the private sector have more power and inertia today than they have ever had to the point where the public can no longer cut the waste and decay from the system when it becomes extremely harmful to the public. We can't storm the castle and behead the king anymore. This causes a couple of problems when it comes to innovation:

  1. As modern governments become more rigid over time, innovation and creativity increasingly becomes a dangerous action in the "mind" of the government as it shifts from representing the public interest toward forcing the public to serve government interests. Increasingly certain innovations will be criminalized or rendered socially unacceptable. The same goes for people with creative personalities.

  2. Increasing complexity for each new generation of tech means higher development costs that can only be borne by ever larger corporations. The bigger the corporation the more risk adverse it will be, meaning over time fewer concepts will reach prototype stage with even fewer reaching production.

Suppression of new tech and the ability to force innovation energies into preserving obsolete business models based on scarcity come out of the above problems.

As far as the fossil fuel crisis, technical "solutions" will only accelerate our demise if they are aimed at preserving the current economic and social system. The changes required are mostly social. Very minimal economic growth, if any, radically reduced energy consumption, and probably a reduction in human population. Current innovation needs to be centered entirely around energy - either in creating it with renewable sources or finding ways to use less of it when making the products we will still have to obtain in the future - food, shelter, transport, communication, etc.

you are the media you consume.

by MillMan (millguy at gmail) on Wed Apr 12th, 2006 at 01:35:35 AM EST
[ Parent ]

Jerome, are you investing yourself on the belief of an expensive oil ? do you have any investment advices ?

do you think that buying options or warrants on 2010 brent can be a good idea ?

innercity real estate ? (that is much more my field ;-) )

solar-panel companies/suppliers ?


by fredouil (fredouil@gmailgmailgmail.com) on Tue Apr 11th, 2006 at 12:04:47 AM EST
I've bought EDF shares. An easy, safe bet on expensive energy.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Tue Apr 11th, 2006 at 07:29:43 AM EST
[ Parent ]
Is there good data on global investment in new refinery capacity?

Investment in exploration and drilling gives no clear indication of corporate expectations regarding the quantities and costs of recovered oil, in part because price expectations affect the attractiveness of developing marginal fields.

Investment in refinery capacity, in contrast, would seem to provide a clear signal regarding expectations of future production rates, as measured in physical, price-independent terms. I suppose that other forces may be at work, but in a rational world, expectations of flat or declining production would lead to zero investment in capacity expansion.

Words and ideas I offer here may be used freely and without attribution.

by technopolitical on Tue Apr 11th, 2006 at 02:39:00 AM EST
  1. Oil production will increase if the price goes high enough. Even if things like oil rigs get more expensive. If they can produce a meaningful return on investment they will be built. The question is what is "high enough"?

  2. As the chart shows there has been a totally inadequate degree of funding for fusion research. I've written about this many times before. Fusion research needs to be ramped up from about $3 billion to about $300 billion worldwide and made a real priority. This is not a lot of money. The US has already spent more than that destroying Iraq.

  3. There is no evidence for a decline in creativity. One can expect that with a growing population the number of smart people will increase and thus the number of new discoveries will rise as well. We are seeing a lull these days because of the decline in support for basic research, especially in the US. There are only two big research labs left in the US, for example: IBM and Bell Labs. Both have shifted from mostly basic research to applied engineering. The rest of the world hasn't picked up the slack either.

  4. Intellectual property restrictions are, currently, excessive, but this is probably a short-term problem. There are already steps underway to eliminate junk patents and there is a revolt against copyright abuse. Furthermore once ideas are known they can't be unlearned. So, for example, there is a story today about the Shanghai auto company taking the knowledge it gained from a joint venture with GM and starting a subsidiary to make independently designed cars. Knowledge will be licensed, stolen or modified, and this can't be stopped - only slowed down.

Policies not Politics
---- Daily Landscape
by rdf (robert.feinman@gmail.com) on Tue Apr 11th, 2006 at 09:41:59 AM EST
"There is no evidence for a decline in creativity."

i love this idea but in the same time, we havent seen lot of real innovation since 30years, cars,plane, rockets,nukes,computers,antibiotic,lcd,plastics are all old stuffs

only the biothech is quite new IMO.

but we probalby need this end of oil to move on with something better.

by fredouil (fredouil@gmailgmailgmail.com) on Tue Apr 11th, 2006 at 09:52:53 AM EST
[ Parent ]
You know there's a problem when the pinnacle of innovation in recent years is the Segway.
by ThatBritGuy (thatbritguy (at) googlemail.com) on Tue Apr 11th, 2006 at 10:21:52 AM EST
[ Parent ]
This is a great diary today, and I have to say I'm with the "pessimists" on this one.  There are some things you just can't reason your way out of.  Oil energy is one of those things.  Le pétrole a des raisons que la raison ne connaît pas, as they say.    

The overall economic question posed becomes a philosophical question too, that of "progress" and "reason."  With oil and our intellects, we have to start thinking of how to "grow down" our economies, have smaller populations, have sustainability, and, hopefully, some comfort for the majority of people.  Clearly we cannot go on stealing oil for cheap, and clearly we cannot go on as if nothing were awry.

I don't have much to add to this, unfortunately.  I do run my car on veggie oil, though.  

by andrethegiant on Tue Apr 11th, 2006 at 10:22:39 AM EST
Oil is really all about transportation. We can use other things for heat, power and industry, and to a very high degree we already do.

So it really boils down to building trams, TGV's and electric cars (and then some windmills and nuclear reactors to generate the required power).

The current rapid technology development of batteries is making me quite an optimist.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Tue Apr 11th, 2006 at 11:04:53 AM EST
I have yet to see a well-founded argument on why peak oil, or even running lower on oil supplies in general, is a problem.  (Geopolitical aspects aside, of course.)

The market will ensure that we move on to other energy sources as we have to.

If would of course be prudent and smart to invest more in alternative energy sources research now - but we don't strictly have to, it's not terribly urgent.  It's just going to be cost a bit more when we get around to it.

And if the oil prices are sustained, production resource availability as spoken about in this thread will increase, due to the profits attainable in that area.  E.g. more rigs will be produced and their price will go down.

Now regarding the "innovation crisis" arguments put forth in this thread - I don't see their direct relevance to energy production at all.  Barring a revolutionary new, yet unplanned for energy source (that would truly be a new innovation), energy production development is all about engineering.  Yes that's right - incremental improvements of technology and methodology.

And generally speaking, the largest part of our wealth increase is generated by vast amounts of small incremental improvements.  For instance, the laser was invented in the 50s (?), but all the applications of it that have been "invented" since then have mostly been a question of engineering.  (It appears to me the authors of some posts here do not consider novel engineering as "inventions".  One might beg to differ.)


Ideals are the ultimate motivators. But also the greatest causes of destruction.

A tip: Don't get too high on your ideals.

by cge on Tue Apr 11th, 2006 at 02:10:21 PM EST
Well, the market might be a sufficient mechanism. But that's rather like saying that if there isn't enough food the market will correct the situation by having people starve until there is enough food. It's not very smart.
by Colman (colman at eurotrib.com) on Tue Apr 11th, 2006 at 02:15:47 PM EST
[ Parent ]
Or to put it another way: the market will do nothing to ensure a smooth transition if oil prices rise rapidly.
by Colman (colman at eurotrib.com) on Tue Apr 11th, 2006 at 02:16:25 PM EST
[ Parent ]
That is true.  But if the oil market continues to be free, the transition will be fairly smooth.

Again, this leaves geopolitics aside.  Which one really can't in an oil discussion.  Consider: All instabilities or artificial highs in the oil price have been due one of only two causes:

  • Market dysfunction (near-monopoly on oil supply in the US 100 years ago; OPEC creating artificial market shortage in the 70s)

  • Geopolitical instability in oil producing or distributing regions

Ideals are the ultimate motivators. But also the greatest causes of destruction.

A tip: Don't get too high on your ideals.

by cge on Tue Apr 11th, 2006 at 06:15:12 PM EST
[ Parent ]
Ah - so you want a market without wrinkles or power plays?

Best of luck finding one of those in any segment as central as energy distribution.

'The market' will not smooth a transition to anything, because markets don't exist, except - arguably - as convenient aggregate book-keeping idealisations.

No sane person will trust an idealisation to put a roof over his head or food in his stomach. Similarly, it's going to take more than idealism to deal with a looming energy shortfall.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Tue Apr 11th, 2006 at 07:26:55 PM EST
[ Parent ]
The oil market is currently working quite well, since OPEC has lost its majority in the international oil supply, and since we currently don't have any major geopolicital disturbances affecting oil supply.

The risk judgement here - about a non-stable transition from oil to alternative energy, i.e. an oil crisis - is about geopolitical risk.  In that context, it makes a lot of sense to wean oneself off of absolute oil dependency sooner rather than later.

But still, looking at the evolution of the oil market, it's maturing well and the prospects of a fairly smooth transition look pretty good.  Let's just hope the middle east doesn't go nuclear...

Ideals are the ultimate motivators. But also the greatest causes of destruction.

A tip: Don't get too high on your ideals.

by cge on Wed Apr 12th, 2006 at 03:17:41 AM EST
[ Parent ]

we currently don't have any major geopolicital disturbances affecting oil supply.

I wish I could share your confidence. How do you call the widespread violence in Nigeria (4-500,000 b/d lost), the disputed in Venezuela over taxes, the war in Iraq (net loss of production 0.5-1 mb/d), the drum beats over Iran, the Yukos/Rosneft/Gazprom saga in Russia?

Markets for commodities whose demand is pretty uneleastic require massive price spikes to destroy demand when the supply-demand balance cannot be adjusted from the supply side. "Destroy" says it all - prices are used to discourage demand, and for a vital good like all, this requires very high prices.

Just look at electricity price graphs.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Wed Apr 12th, 2006 at 03:55:20 AM EST
[ Parent ]
And generally speaking, the largest part of our wealth increase is generated by vast amounts of small incremental improvements.  For instance, the laser was invented in the 50s (?), but all the applications of it that have been "invented" since then have mostly been a question of engineering.  (It appears to me the authors of some posts here do not consider novel engineering as "inventions".  One might beg to differ.)

But of course, if we'd failed to invent the laser, then there wouldn't be anything to incrementally engineer the later advances with. And that is the concern about the current trends in research.

There's plenty of room for discussion whether there is a long standing trend (since 1870's as some suggest) but there's plenty of evidence that we've failed to fund basic research in the last 10-20 years the way we did before then. That suggests something for policy development.

The other key issue of course is that wealth is not the only issue. Wealth is theoretically unlimited, energy might be also, but we're in danger of hitting some limits, at least temporarily.

by Metatone (metatone [a|t] gmail (dot) com) on Tue Apr 11th, 2006 at 03:37:23 PM EST
[ Parent ]
I wish there was a more rigorous way to look at some of these issues. It seems to me there's a hierarchy of innovation which starts with:

  1. Revolutionary pure theory - e.g. Maxwell's equations, quantum theory, information and communications theory

  2. More practical but still quite abstract realisations of pure theory - e.g. semiconductor physics and materials science

  3. Revolutionary engineering based on the above - e.g. lasers, quantum dots

  4. Practical applications - optical networks, CD players

  5. Incremental adjustments - faster networks, DVD instead of CD

  6. Marketing bullshit - our new car is 25% better than last year, even though we've left out a lot of really cool stuff we could have included, because if we put it in, our car would last forever and you'd never buy anything from us again.  

Revolutions in pure theory happen very rarely, and I'm not sure if they can be hot-housed or not.

Level 2+3 innovation is inherently sporadic, but can be nurtured. I'm not sure it can hot-housed.

Level 4 innovation is a mixture of pure and applied. There is some real innovation involved in inventing a CD player, but it's still a solution to a well-known problem using ideas that are already round, but have the potential to be combined in interesting ways. It's not a major shift in thinking - just better and cheaper than what's gone before. This can be hot-housed quite easily, but only as long as there are ideas further up the chain to feed off.

Level 5 is just filling in the dots with a biro. Some assembly is required, but it's incremental, not innovative.

Level 6 is despicable. But a lot of marketing types seem to think that this is what innovation looks like.

With that as a rough guide, what proportion of innovation is happening at each level now compared to - say - the period from 1950 to 2000?

by ThatBritGuy (thatbritguy (at) googlemail.com) on Tue Apr 11th, 2006 at 07:47:50 PM EST
[ Parent ]
Another problem with revolutions in pure theory is that it's not always so easy to find out about them until they are validated and make it into the popular literature. How many people knew about information theory in the 1960s? How many people knew about quantum mechanics in 1950? How many people knew about special relativity in 1930? How many people knew about thermodynamics in 1880?
by asdf on Tue Apr 11th, 2006 at 08:34:04 PM EST
[ Parent ]
how many people know about complex systems theory and chaos theory in 2000?

The difference between theory and practise in practise ...
by DeAnander (de_at_daclarke_dot_org) on Wed Apr 12th, 2006 at 12:19:17 AM EST
[ Parent ]
If you consider something like the U.S. space program to put a man on the moon, or the Manhattan project to build the A-bomb, don't you have hot-house examples of level 2/3?

In the past, revolutions at level one have typically come out of Universities, but these days the Universities aren't keen to let these people study whatever they want.  A University typically wants the professors to support themselves by raising their own research funds - this means lots of time wasted writing grant proposals and so forth.  In the end I am not sure that the notion of academic freedom exists in any form any longer - if you cannot get funded to study something, then effectively you cannot work on it.

In the field I was trained in (solid state physics), there was increasing emphasis on practical 'devices' of one sort or another.  Given that much of the funding was military, that meant that the funding agencies wanted things that could be used to improve weapons systems in some way or another.  Initially we would try and bluff our way through - you could study some effect somewhere or another, and wave your hands and talk about 'possible applications', and for a while, that was sufficient to keep the funding agencies happy.  As time went on, that wasn't good enough.  

At the lab where I was working, if you couldn't keep up your own funding, you didn't get laid off - you got reassigned to a 'black' project of some sort.  I never really knew what these were about - they were there in the background, and if I had stayed a this place, I might have ended up having to work on one myself.

Those days for me are long gone - I became quite disillusioned and left to work in commercial software instead.  I cannot claim to inovate anything, but I don't have to work on military stuff either.

The people that I know who still work in the field are highly frustrated.  Lots of time spent writing grant proposals, or writing up reviews with the results of their work.

by ericy on Wed Apr 12th, 2006 at 08:25:31 AM EST
[ Parent ]
Rising Commodity Prices Impede Further Oil Exploration
PARIS - Soaring commodity and raw material prices are increasing the cost of oil and gas projects by up to three times, Organization of Petroleum Exporting Countries ministers said Friday.

Although current high oil prices may be helping to drive much-needed crude investment, the rising cost of construction projects could curtail new energy production development, they warn.

Addressing delegates at Petrostrategies annual oil summit in Paris, Qatari Oil Minister Abdullah al Attiyah said: "Our costs have tripled from two years ago, due to high (commodity) prices. And its not just that, it is also contractors who have tripled their prices."

where I live, city planners are still allowed to use 1980's commodity and energy prices for project budgets.  is it any surprise that they always come out with monstrous overruns?  but if they admitted what their grandiose projects cost in real today-dollars, they'd never get funded.

proposals to "build our way out" of energy shortages tend, in general, to assume that commodity and transport costs remain flat.  in fact, raw materials costs are skyrocketing (due partly to Asian demand and partly to elimination of "low hanging fruit" sources).  I say again, small-scale, retrofit, micro-engineering solutions are far more likely to be affordable in any real sense.  [maybe if we were smart people we'd be working very hard on mining our own junkyards and retooling anything that can be salvaged from the petro-orgy...]

I have a bad feeling that the age of the megaproject is now over whether we know it or not.  maybe the Big Dig will be the last?  at some point it is possible that the landscape may be sparsely dotted with unfinished megahighways and giganto-dams and skeletal skyscrapers, projects commenced during one price regime and unable to remain viable as the price and energy regime changed steeply while they were in progress.  the tragedy of this would be that each of those megaprojects would have wasted enough money to ameliorate the conditions of life for millions -- by smaller, less flashy, less grandiose (and less embezzle-able) improvements at the farm, village, and township level.

devolution I begin to think is the key to survival not only of democracy, but of a decent living standard.

The difference between theory and practise in practise ...

by DeAnander (de_at_daclarke_dot_org) on Wed Apr 12th, 2006 at 05:28:05 PM EST
I saw an overgrown halfway built building in white concrete (I think it was going to be appartements) in Estonia. It was sort of triangular in shape and built by prefabricated blocks, but not enough blocks to finish it. I suppose it was halted by the fall of the Soviet union, and probably some legal figth over the land. Around it life and building went on but it appeared frozen in time, a ten year old building site.

Anyway, that is what I see when you write about unfinished megaprojects.

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by A swedish kind of death on Wed Apr 12th, 2006 at 08:18:11 PM EST
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