[ehv_nl]

A link to a nice article (Via James H. Kunstler):

http://www.livejournal.com/users/dpodbori/3005.html

$this->bbcode_second_pass_quote('', 'E')xhibit A is the argument I have seen being used all the time, starting from the Vice President Dick Cheney in televized interviews, to TV personalities characterized by Nassim Taleb as "financial entertainers of the excessively commentating variety" on the CNN's The Money Line with Lou Dobbs. This same argument is utilized explicitly and implicitly in a range of documents from pronouncements by Chief Economists to publications by IEA.

The argument goes like this (I generalize it from all these multiple sources):

<i>Because our economy requires a lot less oil circa 2005 for each dollar of GDP that it generates than circa 1973, therefore it (the economy) is much less vulnerable to oil supply disruptions and oil price spikes than it was 30 years ago.</i>

It is just incredible to me to hear this argument again and again in our enlightened age from such a diverse group of seemingly intelligent people (although I suspect that, say, Dick Cheney may have much more insight into the nature of our energy predicament than he is letting on). If our economy, for the sake of the argument, doubled in terms of dollars of GDP since 1973 (let's measure everything in constant dollars, adjusting for inflation), and (again, for the sake of the argument) our annual oil consumption did not change from back then, we have twice as many dollars of GDP riding on the same barrel of oil we consume, do we not? Doesn't it make the economy <b>twice as vulnerable</b> (as expressed in the monetary impact) to the same amount of oil shortage (as expressed in barrels), instead of less vulnerable?

[Cynus]

I found that insight eye-opening and funny as well. I like it when you can see two completely opposite interpretations of the same data. I don't know which one is right, but it is interesting and thought provoking.

[Daryl]

I believe what Cheney is referring to is the fact that the US has become much more of a service based economy in the last 30 years. IOW, higher oil energy prices have less of an impact on Microsoft than they would on a manufacturing company. That would mean probably less unemployment.

Of course, while this may be true it just means the nature of the problem has changed, not necessarily its severity. I can think of two or three things off the top of my head. For example, I would bet the consumer spending as a percentage of GNP is a heck of alot higher than in 1973 also. Guess who is going to less money to spend with higher energy costs?

[gnm]

Yeah but that is such a crude observation anyways (pun intended)

How are all those microserfs going to get to thier fancy ass "campus" from Seattle? I'll tell you how - a whole lot of 1 person cars. Oh but of course they are driving the uber trendy prius's (prii?) so it doesn't matter and they can all pat themselves on the back for being so green. How about shipping of said product. How about the trees/logging for all that paper. Do they make the CD's out of recycled plastic? nope... How about the power 24/7 for that place? Or does Billy run the place off magic pixe dust?

-G

[Cynus]

He uses magic pixie dust. But it needs a patch in order to work.

[Daryl]

Good point about China using the oil that we used to manufature in the 70's. Outsourced oil consumption. Certainly won't help on the inflation front, but there is one benefit for everybody that the manufacturing is in China. There should be substantially less unemployment in the US due to energy costs vis-a-vis 1973 in relative terms. This will be exported to China. China will be hedged somewhat by the fact that US consumer spending will not be as adversely impacted as it would have been with higher US unemployment.

[abbcampbell]

Isn't this the classic half empty/half full question? Let's apply a simple model.

Suppose, in 1973, 100 truffula trees produced 100 thneeds, and in 2005, 200 truffula trees produces 400 thneeds. In 2005, we hit peak truffula, and in 2006, we have only 150 thneeds, and can produce only 300 thneeds.

Now a thneed, as you know, is something everyone needs. So how do you spin your thneed deficit?

You can say, we're less vulnerable because we still have 50 more thneeds than we had in 1973.

You can say we're more vulnerable, because we have 75% of the supply of thneeds that the market is demanding and in 1973, we had 100% supply.

You can say we're less vulnerable because had peak truffula hit in 1973, and we'd have declined 25%, we'd have only had 75 thneeds, wheras we now have 150.

You can say we're more vulnerable because we now have a 50 thneed shortfall instead of a 25 thneed shortfall, as Mr. Kuntzler seems to be saying.

My own thought is that your vulnerability has less to do with the number of thneeds and more to do with how badly people need those thneeds. Were we better able to cope with not having enough thneeds in 1973, or 2006?

Of course that argument can also be made both ways.

Unfortunately it really doesn't matter...in fact, it's rather a form of intellectual masturbation, isn't it? It is not 1973, and comparing now to 1973 may be fun, but isn't particularly productive.