Market Failure:
Global Warming
And Peak Oil
By Bill Henderson
23 February, 2005
Al-Jazeerah
"'A crisis
is a problem that was ignored'. All great crises were ignored until
it was too late.
"Most serious scientists worry that the world oil supplies will
peak (and then decline). While the optimist/pessimist debate (economists
vs scientists) rages on, the jury has decided the optimists have lost.
Too much real data now proves their total thesis was wrong.
"Does this prove the pessimists were right? The pessimists might
also be wrong, they might also be too optimistic.
"Peaking of oil cannot be predicted accurately, but the event will
occur. Peaking turns out to only be clear through a "rear-view
mirror". By then, an alternative or solution is too late."
Oil industry
expert/ Bush Admin consultant Matthew Simmons
A
new study of the effects of global warming on oceans by researchers
at the Scripps Institution of Oceanography at the University of California,
San Diego contains the first clear scientific evidence that the indisputable
rise in global mean temperatures called global warming can only be the
result of greenhouse gas emissions from the burning of fossil fuels.
Skeptics - including
the Bush Administration which has always maintained that global warming
science is uncertain - have up until now insisted that evidence of warming
could not be connected only to greenhouse gas emissions because climate
change is 'natural', i.e. not human caused so nothing economic has to
change. Given the complexity of climate cycles, they argued that climate
change science confused the effects of volcanism, celestial positioning
or variable solar activity.
Skeptics have always
been a very small minority of scientists studying climate change and
most skeptics have been funded by fossil fuel business organizations,
but their minority opinion has been used to confuse the public and paralyze
efforts to reduce greenhouse gas production.
The evidence derived
by American scientists using powerful computer models to study data
from the US National Oceanic and Atmospheric Administration may be able
to squash the skeptics:
The debate about whether there is a global warming signal now
is over, at least for rational people, said Tim Barnett, lead
scientist on the Scripps team. The models got it right. If a politician
stands up and says the uncertainty is too great to believe these models,
that is no longer tenable.
There is a wider
lesson from our evolving understanding of global warming that is particularity
relevant to that other emerging global-scale problem threatening global
society collapse: peak oil.
Markets have never
quantified and accounted for the greenhouse gas costs of burning fossil
fuels. The costs of production and demand by users have always been
the market variables setting the price of coal and oil. This historic
inability to take into account the effects of greenhouse gas emissions
is a stake in the heart of ideologues who would reduce government and
other attempts at rational-comprehensive planning and depend entirely
upon markets.
These same ideologues
dismiss the threat of peak oil. They believe that we cannot consume
our finite supply of oil - we will find more. Severe depletion will
not occur without the development of sufficient alternative energy sources
and therefor we needn't worry about severe economic dislocation and
possible societal collapse.
Their position is
an unqualified optimism that markets will allocate the production and
use of oil, improve efficiency, and develop new, always sufficient,
energy sources.
Markets have always
just accounted for costs of oil production and user demand. There has
never been any market accounting for alternative fossil fuel use, for
inter-generational equitable use of a once-only, finite resource, for
example.
Information about
potential recoverable reserves and estimated future demand for oil has
never been quantified with an accuracy that would allow markets to work
properly. The recent write down of oil reserves by Shell and the current
debate about Saudi future production capacity are examples of this lack
of reliable market information.
Has the market mechanism
developed optimal efficiencies in our use of fossil fuels? Only a Luddite
ideologue or state socialist (if there are any left) would deny the
enormous efficiency gains over the history of fossil fuel use due in
large part to market mechanisms. But the development of the SUV due
in large part to loopholes in truck tariffs with Japan, or of the burgeoning
luxury travel industry, suburbia, Caesar salads from Mexico, grapes
from Chile, hundreds of pro sport teams jetting across America daily,
etc. etc. etc. all suggest that the interaction of producers with consumers
in markets does not have anything like full cost accounting from which
optimal efficiency could result.
Peak oil pessimists
are reasonable and informative in their critique of possible development
of alternative, non-fossil fuel energy in time to sustain our economies
present demands.
They point out that
we have wasted decades of needed lead time where investment in solar,
wind, tidal and other possible sources of energy has stagnated at a
very small percentage of investments in oil. Non-fossil fuel energy
production is still less than 1% of production from fossil fuels. And
path dependency is diverting investment to within existing fossil fuel
derived patterns, i.e. hydrogen or biofuels for continuing 'car economies'.
With peak oil now
predicted within the immediate decade these pessimists have a pretty
strong argument that market failure has already occurred. They also
point out that it will take energy from much more expensive oil in the
future to make the transition to alternative energies and that possible
resource wars or severe economic dislocation caused by high oil prices
could make the transition very much more difficult.
There is no question
that markets have proven invaluable in helping achieve our present bountiful
economy and wonderfully complex global society. But given these obvious
examples of market failure, blind faith in markets is dubious ideology.
Markets provided with full information might have lead us to a post-fossil
fuel economy decades ago.
Even worse, like
the global warming skeptics, it is obvious that those who remain optimistic
that there will be no peak oil problem - no economic and societal collapse
because the market mechanism will always provide needed energy - do
not want to recognize the existence of these global-scale problems because
they are completely committed, completely invested in business as usual.
Completely preoccupied with their own short term economic self-interest.
There are potential
rational-comprehensive frameworks for organizing our societies survival
given these global-scale problems. Accurate knowledge of the dangers
from and possible solutions to both global warming and peak oil are
possible. Businesses operating in markets within these frameworks would
be a big part of possible solutions.
But if the history
of denial and greenwashing of global warming is any indication, and
the peak oil pessimists are right, it is probably too late for even
a wartime economy government to do anything but try and keep order and
save memes needed for the birth of a future society.
www.pacificfringe.net