[JohnDenver]

A lot of people here are making this argument: "People pick the low hanging fruit first, therefore the costs of harvesting resources must increase over the the long term." Let's call this the Low Hanging Fruit hypothesis.

People here are calling the Low Hanging Fruit hypothesis the "Law of Diminishing Returns" (LDR), but I have found no evidence to back up this usage of the term. Here are some definitions of the LDR, as it is found in economics:

"in economics, law stating that if one factor of production is increased while the others remain constant, the overall returns will relatively decrease after a certain point." http://www.bartleby.com/65/di/diminish.html

"When increasing amounts of one factor of production are employed in production along with a fixed amount of some other production factor, after some point, the resulting increases in output of product become smaller and smaller." http://www.auburn.edu/~johnspm/gloss/di ... rns_law_of

The LDR describes a short-term phenomenon, and does not apply when all the factors of production are increased, or when there are significant changes in technology. My impression is that economists are making a distinct point of not subscribing to the Low Hanging Fruit hypothesis because it isn't true.

Here's one example: According to Low Hanging Fruit, it was easier to catch tuna in the year 1550 than it is now, using sonar and massive nets.

Here's another:
If the extraction of commodities becomes harder and harder by the year, then why do they keep getting cheaper and cheaper?


Here's another from Gillett's nanotech paper (thanks Lorenzo!):
"The extraordinary decrease in the cost of computing over the last few decades has already had a significant effect: the cost of domestic [oil] production since 1984 has dropped from $14 to $4/bbl, largely through information technologies (Paul, 2001)." http://www.foresight.org/impact/GillettWhitePaper.txt

This is backed up by the data. Over the long-term, oil has gotten cheaper to find:
http://www.eia.doe.gov/emeu/25opec/img010.gif
http://www.eia.doe.gov/emeu/25opec/sld010.htm

And to lift:
http://www.eia.doe.gov/emeu/finance/hig ... img008.gif
http://www.eia.doe.gov/emeu/finance/hig ... sld008.htm

So let's cut through the crap here. Those of you claiming that the Low Hanging Fruit hypothesis is valid need to provide some studies/citations to support it. It is not the Law of Diminishing Returns which economists adhere to.

[rerere]

$this->bbcode_second_pass_quote('JohnDenver', '
')So let's cut through the crap here.

[UIUCstudent01]

Just to chime in here...
I thought the low-hanging-fruit hypothesis refers to oil drilling and the fact that oil will be more expensive to drill (by buying more technology). And that will be passed on to the consumers.. I think I heard it on a Canadian oil sands/shale thread.

Yeah. Diminishing returns as an economic definition, probably doesn't apply. But, the general idea of diminishing returns seems to work because..
A. It is harder/more complicated to get the oil.
B. It usually costs more. Note that there is a hidden cost if you go back in time and use examples of the past to examples of the present. That hidden cost is having the supporting civilization and framework to work with... example: You can't build a skyscraper without first having steel mills and the fact that you need to have a source of a ton of energy usually coming from fossil fuels which requires more infrastructure and manufactured need to have it there to operate.
C. The technology required to get the more efficient technology had to take alot of energy and be built up by a need to have it there.

Why do commodities get cheaper? Because we do not need them as much. WE DON'T NEED STUFF AS MUCH. Plus, the infrastructure is already in place to do stuff for cheap because of cheap energy already used. Economics has some kind of rule (which I think is part-nonsense) or something that goes something like this: If you had 20 dollars in your pocket, and you were planning to go out for a movie, then if you lost the 20, then you would still go to the movie because you were willing to pay that price with whatever money you still had.

There's alot things that charts and graphs miss with this "Low-hanging fruit" hypothesis. Here's another example: Coal. At first, coal was relatively easy to extract. Nowadays, we have to blow entire hills and stuff. That dynamite never existed before and was made because energy was cheap. The industrial revolution would never have happened if cheap (easy to get) energy was where it is now.

People like to call it progress. I think its a grand simplification purely based on the exploitation of fossil fuels.

With that said, I like playing computer games and computers in general. But the necessary infrastructure and research that went into them 'cost' alot in terms of energy used.

[JohnDenver]

$this->bbcode_second_pass_quote('UIUCstudent01', 'J')ust to chime in here...
I thought the low-hanging-fruit hypothesis refers to oil drilling and the fact that oil will be more expensive to drill (by buying more technology). And that will be passed on to the consumers.. I think I heard it on a Canadian oil sands/shale thread.

[Andy]

$this->bbcode_second_pass_quote('JohnDenver', '"')Better yet, recent improvements in mining and extraction techniques have cut heavy oil production costs nearly in half since the 1980s, to about $10 per barrel, with more innovation on the way."

[Wildwell]

The Law of diminishing returns is based around catch up. It supposes that the more you have the less incentive there is to work for more, so productivity drops. So on theory, the less you have (say decreasing oil supply) the more productivity improves – if productivity improves supposedly you are holding the price down because you get better at doing something. This is one of the reasons economists argue peak oil theory does not apply, although it depends whether one regards oil in the ground as capital in the normal sense, as the crux of the problem relates to natural production rates rather that a capital/work ratio.

Likewise, with low hanging fruit productivity would be less initially and steadily increasing – which is normally regarded as good, although some economists argue not so.

Applying this whole theory to the earth’s natural resources as well renewable sources of energy is complex because of mix, use, efficiency and so on. Is there an every increasing supply of energy? Well you cannot create energy from nothing, but you can put in systems that give you ‘payback’ after a certain amount of time: Solar, wind, hydro and so on. So in that sense we can create a energy overhead over the set finite resources. So logically, the point of the end of ‘low hanging fruit’ would change depending on renewable input and efficiency of the use of finite resources. Depending on technology, deployment and efficiency you may never get to the end of ‘low hanging fruit’.

To make matters more complex, in terms of economy it depends what the resource is being used for. An oil tankers sinking is a complete waste. A gallon of oil to power the lights of a hospital, where the life of a person that becomes a brilliant scientist, who the goes on to invent a new energy source is an extremely good use.

In conclusion it’s inconclusive that low hanging fruit applies or would ever be reached by luck or judgement.

[nero]

I think this thread might be a response to a discussion John and I were having in another thread. I initially used the term "diminishing returns" when refering to the low hanging fruit phenomena and John assumed I was meaning the Law of Diminishing Returns which is not a Law that I had ever heard of before though it is common sense as is the "law" of low hanging fruit.

The problem I have with John's examples is that he equates monetary cost with difficulty. As others have pointed out, comparing costs in different time periods ignores the improvements in technology and efficiency that have allowed us to get the more "difficult fruit" more cheaply. We still picked the low hanging fruit first but with advances in technology the cost of picking the more difficult fruit that are left has decreased over the long term.

The idea that we can always trust technology to counteract our resource depletion is very common. And for very good reason, our civilization has just lived through a couple of centuries where this has generally been true. However just because it has been true for a very long time does not mean it will always be true. Resource depletion is believed to have caused the collapse of several civilizations (eg. Mayan, Easter Island) Why didn't their technology save them? Yes our technology is alot better than theirs, but that just means the fall would be that much more catastrophic if our technology fails us. It is our hubris that lets us assume that our technology will always be up to the task.

[0mar]

All 10 oil majors have lost money exploring in the last couple years.

http://www.peakoil.net/WoodMackenzie.html

[JohnDenver]

$this->bbcode_second_pass_quote('nero', 'T')he problem I have with John's examples is that he equates monetary cost with difficulty.

[JohnDenver]

$this->bbcode_second_pass_quote('Andy', 'J')ohn, don't you realize that that $10 figure will not remain $10 when the overall subsidy from Light, sweet crude starts to diminish.

[JohnDenver]

$this->bbcode_second_pass_quote('0mar', 'A')ll 10 oil majors have lost money exploring in the last couple years.

[Wildwell]

The other thing is peak oil supposes the end of cheap oil. It may be, although yet unproven, that new technology spurned when oil reaches a certain price means massive increases in other energy source. Eg Through better solar or hydro technology. This is the central crux of peak oil, will it, or won’t it?

One other thing I’d like to point out with regard to energy use is that in Britain and Europe, because of increased disposable income and the growth of private motoring it has meant far more energy use. In turn this has created road congestion, which means less productivity and a loss in time of people doing useful money making tasks. Therefore too much energy can create a counter effect too.

[JohnDenver]

$this->bbcode_second_pass_quote('Wildwell', 'I')t may be, although yet unproven, that new technology spurned when oil reaches a certain price means massive increases in other energy source. Eg Through better solar or hydro technology. This is the central crux of peak oil, will it, or won’t it?

[mididoctors]

Is the methodology sound?

you have to compare the different resource bases in different points in time with the same extraction or harvesting technology to be aware if there is a low hanging fruit argument..

you can run it backwards...

I am not saying one way or another if LHF is correct or not

can people get present extraction rates now with harvesting methods used in days gone by?

Boris
london

[mididoctors]

Btw i am a big fan of JD posts as they make you think

boris
london

[Aaron]

LHF in oil primarily speaks to discovery.

You tend to find the "easy to find" oil first... no mystery there.

The proof is in the pudding as John eludes to.

Despite massive strides in technology to locate and recover oil supplies, we are actually finding and recovering less oil than the prior year.

Why?

Because we found the easy stuff first, and now must work harder to locate smaller fields.

[rerere]

$this->bbcode_second_pass_quote('mididoctors', 'I')s the methodology sound?

[rerere]

$this->bbcode_second_pass_quote('Aaron', 'L')HF in oil primarily speaks to discovery.

[rerere]

$this->bbcode_second_pass_quote('JohnDenver', '
')Low Fruit hypothesis (energy version):
"People pick the low hanging fruit first, therefore the energy expended harvesting resources will increase."

[rerere]

$this->bbcode_second_pass_quote('mididoctors', 'B')tw i am a big fan of JD posts as they make you think