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Good Bye Peak Oil Hypothesis

Good Bye Peak Oil Hypothesis

I have posted on this topic in the past and have been very skeptical of this concept and the Hubbert model in particular. The story is simple and very believable, the amount of oil is finite therefore the production of oil will follow a “bell curve” in that it will rise, peak and then go into decline. It is inevitable and there are potentially very bad implications (the more dire predictions sound like something out of a Mad Max movie).

However, I present the following:

Peak Oil Lowe U.S. 48

That graph is for the production of oil in the lower 48 states of the U.S. The green line is actual, the red line is the “Hubbert” curve. Notice a problem starting in the mid to late 1990s? Yeah, it no longer is following the model. This was one of the few accurate predictions those pushing this peak oil/Hubbert view clung too. Hubbert got right the production in the lower 48! Welp…not so much.

What happened? Fracking. That deviation and then complete reversal of trend is due to hydraulic fracturing, aka fracking. In short, my claims that the Hubbert curve as a predictive model were correct. It is a rubbish model for predictive purposes. The usual response is well you can fit more than one “bell curve”. Great! How many? A predictive model should tell you that? What you can’t? Sorry, your model is rubbish. Crap. Junk. Useless. In short, just get out.

As for peak oil, that too is a load of crap. Yes, someday we’ll peak in terms of oil production just as we have peaked in the production of lots of other things. I am sure we are well past our production of covered wagons, wooden teeth, and whale oil. While the prediction is almost surely going to be true, it is one that is really not all that big a deal. When we hit our peak in oil production that is when alternatives will start to look more appealing. Alternatives like solar.

Solar, you scoff. Let me tell you about solar power. Here in California in the electricity market we will have 50% of our electricity needs met by renewables like solar and wind in the not too distant future. Already, one of the problems with solar and wind is that when combined with base load generation there are some hours of the day when electricity prices can go negative. Yes, negative. Base load plants cannot ramp up and down quickly. And if it turns out that solar and/or wind production is greater than was anticipated there is an over-supply of electricity and prices will go negative.

Another interesting story is that of the Net Energy Metering customers in Hawaii, California and other states. These are residential customers (there are some commercial and industrial, but the bulk are residential) and they have solar panels on their roofs. Another interesting thing is that during the day when most residential customers are out at work or school their load is very low…right about the time their solar production is peaking. So they actually export energy back to the grid.

And then there is the effects of fracking on natural gas production. Like oil fracking has lead to a dramatic rise in natural gas production as well. This is good for heating, using natural gas to generate electricity in base load and combustion turbine plants, as well as even possibly as fuel in cars.

So this notion that suddenly we are going to be plunged into a world of horror and destruction because of peak oil, let alone just increasing economic problems is not…laughable. Is it a coincidence that the Oil Drum made their last official post on September 2013? Maybe, but I’m guessing they saw that the old discussion was now pointless. All the hand wringing about peak oil, Hubbert curves and that crap was…well crap.

I’ll also point out that the various people who fell for this nonsense should have known better. The reason for this is The Coal Question: An Inquiry Concerning the Progress of the Nation, and the Probable Exhaustion of Our Coal-Mines which was published by the great William Stanley Jevons, co-discoverer of the marginal utility theory along with Carl Menger and Leon Walras. The article is Jevons concern about there being enough coal to sustain the current pace of economic growth.

DAY by day it becomes more evident that the Coal we happily possess in excellent quality and abundance is the mainspring of modern material civilization. As the source of fire, it is the source at once of mechanical motion and of chemical change. Accordingly it is the chief agent in almost every improvement or discovery in the arts which the present age brings forth. It is to us indispensable for domestic purposes, and it has of late years been found to yield a series of organic substances, which puzzle us by their complexity, please us by their beautiful colours, and serve us by their various utility.

And as the source especially of steam and iron, coal is all powerful. This age has been called the Iron Age, and it is true that iron is the material of most great novelties. By its strength, endurance, and wide range of qualities, this metal is fitted to be the fulcrum and lever of great works, while steam is the motive power. But coal alone can command in sufficient abundance either the iron or the steam; and coal, therefore, commands this age—the Age of Coal.

Coal in truth stands not beside but entirely above all other commodities. It is the material energy of the country—the universal aid—the factor in everything we do. With coal almost any feat is possible or easy; without it we are thrown back into the laborious poverty of early times.

With such facts familiarly before us, it can be no matter of surprise that year by year we make larger draughts upon a material of such myriad qualities—of such miraculous powers. But it is at the same time impossible that men of foresight should not turn to compare with some anxiety the masses yearly drawn with the quantities known or supposed to lie within these islands.

Geologists of eminence, acquainted with the contents of our strata, and accustomed, in the study of their great science, to look over long periods of time with judgment and enlightenment, were long ago painfully struck by the essentially limited nature of our main wealth. And though others have been found to reassure the public, roundly asserting that all anticipations of exhaustion are groundless and absurd, and “may be deferred for an indefinite period,” yet misgivings have constantly recurred to those really examining the question. Not long since the subject acquired new weight when prominently brought forward by Sir W. Armstrong in his Address to the British Association, at Newcastle, the very birthplace of the coal trade.

This question concerning the duration of our present cheap supplies of coal cannot but excite deep interest and anxiety wherever or whenever it is mentioned: for a little reflection will show that coal is almost the sole necessary basis of our material power, and is that, consequently, which gives efficiency to our moral and intellectual capabilities. England’s manufacturing and commercial greatness, at least, is at stake in this question, nor can we be sure that material decay may not involve us in moral and intellectual retrogression. And as there is no part of the civilized world where the life of our true and beneficent Commonwealth can be a matter of indifference, so, above all, to an Englishman who knows the grand and steadfast course his country has pursued to its present point, its future must be a matter of almost personal solicitude and affection.

In other words, Jevons was worried, deeply worried, about running out of coal. Jevons could not foresee what would replace coal and thus…there was nothing. Jevons wrote this 1865. Clearly Jevons’ fears were unfounded. And let me be quite quite clear. People knew about oil back then. Oil was actually a Bad Thing™. If you had oil on your land it reduced the value of your land….until one day when somebody figured out you could do something useful with it, like refine it into kerosene (note by the way, most refineries making kerosene…dumped this useless by product into rivers…that by product…wait….wait…gasoline). Some might say, “Oh, well that was just dumb luck.” I would argue, no, that is not dumb luck. Much of our economic progress is done via innovation where somebody ways, “You know I could find a use for that,” or “I can do something with that and people will pay me for it,” or “I have this crazy Idea, how about we build a machine so we can fly?”

People sit there and cannot see the Next Big Thing™ and thus to them the Next Big Thing™ cannot possibly come to be. But it does. We now walk around with phones that have more computing power than computers from 35 years ago. Because somebody had a crazy idea. Yes, lots of crazy idea are crazy ideas and nothing comes of them. But the one’s that do…that is where things can take sudden and surprising leaps and turns. Take a look at technology in 1865 when Jevons was deeply worried about coal and look at what we have now. Trying to tell a brilliant person like Jevons we’d have these devices where we could walk around and in the blink of an eye communicate with hundreds even thousands of people and he call you a kook.

[Note: And if you really like the idea of peak oil, don’t worry it won’t really die. Horribly bad ideas never die. They just get revived like in the movie Re-Animator and want to eat your pineal gland. It will be back and there we much hand wringing and worrying.]

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About Steve Verdon
Steve has a B.A. in Economics from the University of California, Los Angeles and attended graduate school at The George Washington University, leaving school shortly before staring work on his dissertation when his first child was born. He works in the energy industry and prior to that worked at the Bureau of Labor Statistics in the Division of Price Index and Number Research.

Comments

  1. Just 'nutha ig'rant cracker says:

    Well, the availability of nearly any resource will follow a bell curve–provided that we know where 100% of that resource is located. At the time of peak oil projections, fracking was considered a net loser in that it cost more to produce than it could be sold for. And does again at this particular moment (unless the market changed again–I don’t follow it).

    Good observation. But I feel a desire to note that there is a difference between not following a bell curve and having expanded options shift the demand to additional options. In the energy question, my position has been that we should expand our options paying little attention to the “economics” and has been for a long time. It is difficult to be too rich, too thin, or to have too many choices of how to run the lights, the kitchen appliances, and the AC.

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  2. Dave Schuler says:

    If you look at the graph of US coal production from 1930 to 1960 it depicts a bell curve with “peak coal”. around 1945. That changed. People are talking about peak coal again now.

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  3. Davebo says:

    Already, one of the problems with solar and wind is that when combined with base load generation there are some hours of the day when electricity prices can go negative. Yes, negative. Base load plants cannot ramp up and down quickly.*

    The same is true for Coal electricity production. See the state of Queensland in Australia which is mostly coal powered and has next to no wind power, and also has negative price events as coal power plants play chicken with each other to see who will shut down first when demand falls.

    The solution in the case of wind and solar and all other forms of electrical production is something that’s needed to be addressed for decades, a modernization of the US electrical grid.

    The problem with theory of Peak Oil is that far too many either don’t understand it, or deliberately misrepresent it. Hence you can see pieces which in one paragraph call it a “load of crap” and literally one word later admit it’s inevitability.

    The concept has nothing to do with Mad Max scenarios though I’m sure some could nutpick people claiming it does.

    It’s basic economics. A massive increase in Chinese imports of porcelain frac sand caused a huge decrease in day rates of ultra deepwater drillships and eventually, a massive decrease in imports of Chinese frac sand.

    Peak Oil is inevitable. It’s just not inevitably bad.

    * ” Base load plants cannot ramp up and down quickly.” For an hour and a half of negative pricing that isn’t really negative at all due to Federal tax credits for renewable energy certificates that amount to $23 per MWh not including State incentives. Again, investment in our energy grid, which we need to do regardless makes this issue irrelevant.

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  4. grumpy realist says:

    Well, at least you’re not claiming that we’re not going to run out of oil because it gets regenerated down deep there in the Earth.

    But as for the rest…? Dude, stop looking at such a small spot geographically (The U.S.) and over such a short timeline (120 years). Come back 200 years down the pipeline, cover the whole world, and see what we have.

    Assuming that technology is always going to rescue us from our profligacy also seems a bit of wishful thinking. It may be the best bet we have to get out of the jams we get into, but that doesn’t say that it’s always going to happen. Especially if we sit back, shrug our shoulders, twiddle our thumbs, and say “hey, we don’t have to worry about R&D or basic science or government backed anything. The free market will take care of all of that.”

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  5. MarkedMan says:

    It a good thing that the US Government has promoted alternative energy policy says the Carter administration. It means that when one type of energy becomes overly expensive there is an infrastructure in place to allow us to smoothly moved to a newer type.

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  6. stonetools says:

    GR is, as usual, realistic. The best thing I’ve read on peak oil is Noah Smith’s blog post. It’s worth reading the whole thing, including the updates and comments. The nub:

    We switched to something worse than conventional oil: unconventional oil, which is more expensive to extract and/or to refine into usable products. This has left us permanently poorer than we would be if conventional oil hadn’t hit global supply constraints. Filling up your gas tank is twice as expensive now, in real terms, as it was two decades ago. And that looks unlikely to change. In the wider economy, increased transportation fuel costs may be a main driver of the Great Stagnation, which manifests most clearly in the stagnation of transportation technology since the 1970s.

    Basically, what happened is this: Scarcity attacked humanity, and Human Ingenuity battled back. Through heroic efforts, doomsday was averted. But Ingenuity did not win a smashing victory, as it did when we switched from wood to coal, or from whale oil to oil. Instead, humanity was forced into a fighting retreat, with Ingenuity executing a brilliant rear-guard action and forcing Scarcity to call off its pursuit…for now. But humanity has lost ground.

    And Scarcity may not wait very long before launching another attack. Future increases in shale oil production (including tight oil and oil shale) is likely to be a lot more expensive than the low-hanging fruit we have picked thus far. Coupled with continued rises in developing-country oil demand and continued decline in conventional oil fields, this could cause another rise in oil prices. That will bring back the “Peak Oil” meme, which only seems to interest most people as an investment story. But sadly, The Oil Drum will not be around to chronicle the return of Peak Oil.

    In the meantime, whatever you think of the predictive prowess of the Peak Oilers, the policy implications of the permanent transition from cheap oil to expensive oil are the same. Humanity is running out of high-quality, fungible, energy dense transportation fuel, and there is no substitute on the horizon. Creating a substitute – be it biofuels, batteries charged by cheap solar, or whatever – is going to take a lot of research, which is going to cost a lot of money. And realistically, the only entity that will put up that kind of money is the government.

    Even shorter: We need to invest like hell in alternative energy sources NOW- because peak oil has been postponed, not vanquished. Airy talk about the magic of the invisible hand and the inevitable triumph of human ingenuity isn’t a substitute for planning and preparation for an expensive oil scenario.( Note that planning is another kind of human ingenuity too).
    Fortunately, President Obama is a planner. His stimulus plan made big investments in alternative energy , and it kickstarted solar energy, wind energy and battery technology. The early results?

    You can argue about this kind of green industrial policy, but it did what it was supposed to do. In 2008, I think 80 percent of the average U.S. wind turbine was made of imported parts. After the stimulus created all these factories — not just making the whole turbine, but making all of the 8,000 parts that go into a turbine — now it’s only 40 percent imported. That creates a constituency for wind power, and it also reduces the cost, because wind turbines are big honking pieces of equipment that you don’t want to be importing from abroad. It is true that a lot of these factories and a lot of these wind farms are owned by foreign companies, like Abengoa, but it really doesn’t matter whose corporate name is on the polo shirts. What matters is that these are American jobs and it’s producing green power in America.

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  7. Tyrell says:

    This article has a lot of information and topics – too much for me to get through on one read.
    Solar and wind have limits, and critics. Wind turbines are knocked for killing birds, radio interference, and sometimes cause air flow disruptions to nearby airports. A lot of people complain about the way these wind farms look. Solar: many homeowners build their own units, but it takes a long time to realize a pay off. There needs to be large tax write offs for solar. And the government and business need to do more with solar. Solar has two problems: must be kept clean and the cells need periodic replacement. Also, many housing developments don’t allow solar panels.
    I would like to see at least one of the candidates offer this challenge: nuclear fusion plants in operation by 2020 !
    Thorium, thermal, and ion power are also potential prospects.
    The last thing we need is $3+ gal. gas prices.
    The gas “shortage” of the ’70’s: the biggest hoax ever pulled on the American people.

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  8. stonetools says:

    All this skips over the related problem of global warming, which probably deserves its own post( I have a feeling Mr. Verdon doesn’t buy that global warming is a problem).

    Book recommendation: a nice science fiction treatment of a world where humans DON’T solve the peak oil problem is “The Windup Girl” by Paolo Bacigalupi.

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  9. steve says:

    Boudreaux has written extensively on this topic. His thoughts probably represent standard libertarian thought. We can’t really run out of stuff because we will always find a substitute, or we will just pay more for the same stuff. Markets are magic, remember they really do believe that, and will create alternatives.

    So, in the case of substitutes, it is quite clear that basic and applied research, often supplied by government funding, has been key. Libertarians want to eliminate all government funding. Since there is little immediate return on a lot of this research, we are unlikely to see substitutes develop in any useful time frame. As to the second scenario, we just pay more for stuff (which is what Noah Smith points out), that is just fine with libertarians. Remember that libertarians always make sure that the wealthy will continue to do well.

    Steve

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  10. Modulo Myself says:

    It’s fascinating that people who believe in the Next Big Thing don’t want this Next Big Thing to be renewable and ecologically-harmless. It can’t be Solar, because that means the hippies pa told me were all queer might be right. Gotta be butch, I mean real butch–like nuclear reactors run by deregulated corporations cutting corners on third-party contracts.

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  11. Slugger says:

    Have any of you heard of Tony Seba? He has a talk entitled Creative Disruptions which is googleable. He shows the cost of solar energy and battery technology dropping logarithmically and becoming competitive and even cheaper than hydrocarbon energy within a few years. He points out that a $100,000 Tesla performs much like a similarly priced Porsche or Mercedes. He says that the switch from horse powered to motorized personal transport happened over just a few years early in the twentieth century and predicts similar rapid transition to EV. I don’t know if he has great foresight or is full of moonshine, but his talk is quite convincing.
    The price of oil is certainly reflective of big changes. I am seeing few articles touting the brilliance of North Dakota’s politicians. I know that activity has slowed on the North Slope in Alaska. I wonder if Texas is going to feel a chill.
    The politics of energy consist of denying the realities. Obama is accused of “killing coal,” and I heard Mr. Trump level that same charge against HRC. Of course, natural gas is simply cheaper, cleaner, and more convenient. I expect that any new technology in energy will meet political resistance from the established energy companies. Everybody loves the free market till their competitors have an advantage then markets get manipulated.

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  12. Tim D. says:

    Climate change has rendered peak oil moot. It’s clear that already discovered reserves of coal, oil and natural gas are enough to push us over 2 degrees C of warming (or the more ambitious goal of 1.5C). So we already have a really good reason to decarbonize our economy long, long before we’ll run out of the stuff.

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  13. Mister Bluster says:

    Since 1961 the federal government has spent nearly $187 billion (in current dollars)* for the development of advanced energy technologies and basic energy science research. About a quarter of the funds were spent during the oil crisis of the 1970s. According to an October 2008 report by the Department of Energy’s Pacific Northwest National Laboratory, $66 billion of that $187 billion has been spent researching nuclear energy, $65 billion on basic energy science, $28 billion on fossil fuel research and development, and $28 billion on renewables and conservation.http://www.freerepublic.com/focus/news/2251971/posts

    *2009

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  14. MarkedMan says:

    @Mister Bluster: And I would say that is money well spent. Countries that have a government that can foresee problems longer than the ten year horizon factored into corporate decisions are successful countries. Countries that let the market take care of everything are hell holes in a transition state to a dictatorship.

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  15. Tyrell says:

    @Slugger: “rapid transition to ev” : The big problem remains the same – short charge range. A ten hour vacation trip requires probably two long recharging stops. What is needed is a recharging time of no longer than ten minutes – exact time of a restroom – snack break at the convenience stores. EV’s are low maintenance: no oil and coolant, no spark plugs. I would consider one for around town local driving, which is about 95% of what I do. But they cost at ten thousand more than the same car with a gas engine. And at some point the battery pack needs to be replaced and that runs a thousand or more. Some dealers used to throw that in for free as long as you own the car. There need to be some big tax incentives.
    Another promising alternative is the amazing gas vapor engine – 50 mpg + ! See fuelefficientvehicles.org (Not an advertisement ).
    See also hydrogen fuel cars – already being done.

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  16. stonetools says:

    @steve:

    , in the case of substitutes, it is quite clear that basic and applied research, often supplied by government funding, has been key. Libertarians want to eliminate all government funding.

    Libertarians have a blind spot about government funding. Libertarians, for example, love the space industry and the Internet-two institutions that simply would not exist without government intervention and funding. In the same way, Mr. Verdon celebrates this:

    Here in California in the electricity market we will have 50% of our electricity needs met by renewables like solar and wind in the not too distant future.

    without acknowledging this:

    Following deregulation of the electric utilities in 1998, the California Energy Commission was placed in charge of a new Renewable Energy Program to help increase total renewable electricity production statewide. This followed decades of bipartisan legislative and gubernatorial support for renewable energy, helping to make California a recognized leader in the field.

    The Energy Commission’s Renewable Energy Program provided market-based incentives for new and existing utility-scale facilities powered by renewable energy. It also offered consumer rebates for installing new wind and solar renewable energy systems. The program also helps educate the public regarding renewable energy. Find out more about the history of the program.

    From 1998 to December 31, 2006, the Energy Commission’s Emerging Renewables Program funded grid-connected, solar/photovoltaic electricity systems under 30 kilowatts on homes and businesses in the investor-owned utilities’ service areas, wind systems up to 50 kW in size, fuel cells (using a renewable fuel), and solar thermal electric. The California Public Utilities Commission (CPUC) funded larger self-generation projects for businesses. Since 2007, the Emerging Renewables Program has focused on providing incentives toward the purchase and installation of small wind systems and fuel cells using a renewable fuel.

    I can imagine that building on the government investments championed by Obama and Jerry Brown, ( and hopefully continued by Hillary Clinton, Republicans permitting) the USA gradually moves in a slow, jerky fashion from an gasoline powered transportation infrastructure to an electric car based transportation infrastructure powered by a smart grid based largely on renewable energy. After that happens, I can imagine future Steve Verdons and Doug Mataconises claiming, “See? Behold the wondrous power of the free market. It’s a good thing we kept the heavy hand of Big Gumint out of the energy industry!”

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  17. michael reynolds says:

    @Tyrell:

    My test for EV’s is whether I can drive from the Bay Area to LA (400 miles, give or take) in roughly the same time as a gas-powered drive. Not that I have any special need to get to LA in a day, but it represents the limit of how far I’d be likely to drive in a single day. Show me a 500 mile Tesla and I’d be all over it – they’re lovely cars.

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  18. Pch101 says:

    Back in the mid-2000s, I was noting that high oil prices were largely attributable to a temporary speculative bubble and not to peak oil. I was never a devotee of the Oil Drum et. al. But this sort of blog piece makes me wince.

    Pounding your chest about fracking is akin to boasting that you have an endless supply of cash because you keep finding change in your couch cushions. The US remains dependent upon imported oil, and we should have learned during the 1970s how that can be a political liability. And that’s in addition to the environmental issues that are obvious to those who aren’t in denial.

    People sit there and cannot see the Next Big Thing™ and thus to them the Next Big Thing™ cannot possibly come to be.

    That worked out well on Easter Island. If only they had been more optimistic.

    I’m all for going out there and finding the replacement for oil. I’m not content with having a bunch of overweight gas guzzling Yanks sucking up fuel while doing nothing to find that replacement. Complacency isn’t smart; if you want a solution, then you have to go look for one instead of hoping that it shows up at the right place at the right time and at a price that we can reasonably afford to pay. Prayer is not a strategy.

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  19. Steve Verdon says:

    @Davebo:

    Yep, they are working on that too. One thing that is getting alot of attention is battery storage. Fill up the batteries with solar/wind when prices are low, discharge them when prices are high.

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  20. Steve Verdon says:

    @Dave Schuler:

    Yeah, well the only thing is that is not quite my point. I don’t doubt that someday into the future we will have a peak oil situation not because “we ran out of oil” but because we found something better.

    The peak oil worry warts assume there is literally nothing else going on. No R&D anywhere. At least that is my assumption since why worry otherwise. I’ll point again to Jevons who was worried, quite deeply and sincerely, about running out of coal, but your graph says that fear in 1865 was totally, completely, and utterly unfounded. Throw in oil, natural gas, and now solar and wind, and you might as well worry about everyone spontaneously bursting into flames at once.

    Lets worry about something that is worth worrying about.

    But there you go….here we are talking about peak coal….again. Bad ideas never die. They are the true zombies.

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  21. Steve Verdon says:

    @michael reynolds:

    I like that test.

    EVs are another thing representing somewhat a challenge for the U.S. electrical grid in that they could result in people demanding electricity when solar/wind is largely offline, at least solar, and most base load plants are off line and since solar might lead to fewer base load plants overall, a challenge to meet that demand.

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  22. Steve Verdon says:

    @Tim D.:

    That does appear to be one of the drivers in the U.S. for turning to solar/wind wear feasible.

    But as I like to point out, this is not without environmental impacts.

    First building utility scale solar can and will impact the surrounding environment.

    Second batteries…they are not full of cotton candy, rainbows, and lemonade. Building and having lots of giant battery systems to discharge electricity back to the grid at 10PM will lead to adverse environmental outcomes.

    But this is the standard type of trade-off we face in economic decision making all the time. Which do we prefer the least.

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  23. Steve Verdon says:

    @stonetools:

    I believe in the global warming hypothesis. I changed my views when a warming trend appeared in the MSU data.

    I am not opposed to solar. I am not opposed to renewables. I am not opposed the roof top solar (NEM). I just think these things need to dealt with realistically.

    For example in California there are issues with NEM customers. The issue is the grid is paid for via energy charges. But NEM customers can avoid those. Basically benefit from the grid without paying for it. Since it has to be and will be paid for it means those who cannot put solar on their roof tops are subsidizing the NEM customers. Our rate structure needs to change. But that is doable.

    So don’t be so quick with the assumptions.

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  24. Steve Verdon says:

    @Davebo:

    Try reading that again. It is a load of crap as a predictive tool. If you disagree, tell me how many bell curves we will need, ex ante.

    If you can’t, it is not a predictive tool and trying to use it as one is just amazingly foolish if not downright stupid.

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  25. Steve Verdon says:

    @Slugger:

    Creative disruptions….wow, way to steal somebody else’s idea.

    Joseph Schumpeter described the market process as “creative destruction” back in 1942 when it first appeared in Schumpeter’s Capitalism, Socialism and Democracy. One can event argue the basic premise goes back to Marx although he did not use the exact phrase.

    Of course, this doesn’t make him wrong.

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  26. michael reynolds says:

    I get annoyed by people who insist that every debate be binary. Government or Business. Oil or wind. Cops or civilians.

    Life is not a True/False test, it is multiple choice, and quite often the answer is e) All of the above.

    Push renewables, build nuclear plants, find more domestic gas and oil, this is not either/or. These are all good things. I’m willing to bet that 30 years from now we’ll have a mix of renewables, nuclear and fossil fuel still being used.

    That said, we should bear in mind the environmental costs and the national security costs. How much longer are we to be responsible for keeping the Persian Gulf and the Suez canal/Red Sea open for oil tankers? How much longer are we to shove great stacks of money into the hands and secret bank accounts of vile governments like that of the KSA or Iran?

    National security alone calls for more energy independence, and it strongly suggests a major government effort to develop renewables and safe nukes. Terrorism lives on oil money. Wars are being funded by oil money. We spend billions of dollars preparing for or actually fighting oil wars. You want to hurt Putin? Make Europe energy independent through nukes and renewables. You want to undercut the Salafi ideology of terror? Take away their source of both money and geopolitical importance. You want to blunt Chinese naval expansionism? Make their offshore oil and gas fields irrelevant.

    Renewables and nukes (fusion would be lovely) obviate a number of serious problems beyond the immediate needs of the moment. If there is a useful place for USG R&D dollars, this is it. It would be a very different world if we could simply not give a shit about Saudi Arabian oil and Russian gas.

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  27. Steve Verdon says:

    @steve:

    The idea of government funding for the next substitute is bad. It is bad because it ends up being subject to the same political pressures we are seeing right now with regards to trade. Clinton, who at least a few months ago was more free trade, has bowed to political pressure and is now moving closer to Trumps position. In other words the political process will not give us the next substitute. It will ordain the next substitute, whether or not it will work, and throw inordinate amounts of resources at it.

    You also misrepresent Boudreaux arguments, which is what I’d expect from you. His view is encapsulated by the statement, “Let a thousand flowers bloom”. He and nobody else can really know what the Next Big Thing™ will be. Nor do you. Nor does some people sitting in comfy offices in DC. So let people try different things. Let them try their crazy ideas. Most of them will turn out to be just that, crazy. But if you are trying 1,000 crazy ideas vs. trying to pick 1 crazy idea that will work, the process with 1,000 trials will probably produce the Next Big Thing™. It is basically a law of large numbers style of argument. Yours on the other hand is an argument of special knowledge. That a group of people, who may or may not listen to experts (and recall those Oil Drum guys were all supposedly experts and yet now they have nothing to talk about and may even be wondering what to work on IRL) will some how via magic know what the Next Big Thing™ is.

    Boudreaux and others who believe in the market process are quite willing to admit it may not always work. But when it comes to innovation it works really well. Did you know that standard economic growth theory is shit at backcasting growth. That is if you calibrate one of those models from say 1900 and then “run” it forward to 2000 its results are pretty bad. Pretty bad in that those models can only explain about 20% of the growth. These are some of the models modern government policy friendly Keynesians like Solow and others like. Hell Solow developed the first such model. Where is the other 80% of the growth? Innovation. Solow even admits he left innovation out…mainly because he could not mathematically model it.

    Innovation is a big driver in the economy. If I can innovate on a current process and thus lower my costs relative to all my competitors, for example, I’ll enjoy substantial economic profits. That increase in economic profits is what drives innovation. Of course, the competitive process will lead to innovations that cut my profits, some competing firms might try and copy my innovations also cutting my profits over time. Thus, there is a continuous drive for constant innovation. The amount of innovating going on in the private sphere is quite likely much, much larger than what the government can direct.

    So Boudreaux’s point is why not go with the process (the market vs. political) that is going to have the most innovation and thus the most likely chance for success.

    But no, it is so much easier to lie and misrepresent his position.

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  28. Steve Verdon says:

    @michael reynolds:

    Yes, there is truth in that view Micheal.

    While writing my reply to steve, I was thinking of DARPA. Their approach to various “problems” is much like Boudreaux’s, IMO. They throw money at a bunch of crazy ideas and see what works. Their failure rate is huge, but when they hit on something….

    But it is hard for our psychopathic narcissists we call our elected leaders to go with that approach. They can never be content to sit there and say, “I don’t know, we are taking a shot gun approach and seeing which of these 1,000 ideas gives us the answer. And we are also letting the market try an additional 1,000 ideas too. Hopefully, an answer will emerge.”

    Nope. That rhetoric will ALWAYS fail to, “Elect me and I will save us. I have a plan right here in my jacket pocket that will get us out of this mess. Look at that other guy, he doesn’t have a clue, he as much as admitted it. Try 1,000 things and hope something emerges. This is serious, we need somebody who knows exactly what to do and I am that somebody!”

    That is the rhetoric of Trump and Clinton. And, IMO, after awhile they start to believe their own rhetoric. After all, they must be special to have been elected President and given all that power to solve that problem, this problem, and so forth.

    Presidents….they are not there to ensure the Constitution is being followed and implement the law, they are there to solve our problems. All of them…because…well…they are special people with special knowledge.

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  29. Steve Verdon says:

    @Pch101:

    Yeah, and on Easter Island, why do you think that happened?

    Here are some points to consider:

    A small closed economy is going to be much more vulnerable to various “shocks” such as adverse weather events, sudden illness, etc. Take for example, the standard Robinson Crusoe models used by macroeconomists. A sudden flu outbreak in such an economy and whoops, game over. While it might not be true once we add Friday, it sure could result in a serious change in terms of the growth path of that economy. So one solution is for a larger open economy….which both candidates are backing away from now, one much more so than the other, but look at how awesome the political process is at moving us in the more reasonable direction. [insert rolling eyes icon here]

    There was almost surely some form of governance on the island, so to what extent did that governance structure help or hinder the environmental degradation of the island? Considering that the proliferation of the large stone statues is what contributed to such degradation I am going the governance structure contributed vs. hindered. But hey, if you have evidence to the contrary….

    As for finding no replacements, well the U.S. being a place that is still, despite best effort, much more friendly to innovation will likely find that replacement for oil and gasoline than not.

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  30. Pch101 says:

    @Steve Verdon:

    There was almost surely some form of governance on the island, so to what extent did that governance structure help or hinder the environmental degradation of the island?

    Are you seriously trying to argue that excessive regulation led to the destruction of Easter Island?

    Now I’ve read everything. You anarcho-capitalist types aren’t just out in left field, you’re in an entirely differently galaxy.

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  31. Pch101 says:

    @Steve Verdon:

    There was almost surely some form of governance on the island, so to what extent did that governance structure help or hinder the environmental degradation of the island?

    Are you seriously trying to argue that excessive regulation led to the destruction of Easter Island?

    Now I’ve read everything. You anarcho-capitalist types aren’t out in left field, you’re in an entirely differently galaxy that isn’t even aware that there is a field.

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  32. Thor thormussen says:

    what happened was hubbard was right. We’re just in a temporary glut of hideous fracking-based production which is poisoning shit rapidly while causing earthquakes. So?

    The average quality of the front-page posts went down markedly a few weeks ago. Some of these posts are like things Reason magazine rejected as too clearly Dunning-Kruger. Back to James and Doug please.

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  33. michael reynolds says:

    @Steve Verdon:

    When put to a severe test – real war, for example – the government often performs with astounding efficiency. D-Day involved 6,900 ships, 11,000 aircraft, 200,000 men, all arriving at the same place at the same time, carrying literally millions of different types of food, medicine, ammunition, spare parts, and doing it all in secrecy, while at various points being shot at.

    And that was in the pre-computer era. Imagine the decisions that had to be made years earlier: this type of ship, this tank, that aircraft, this food, that means of transporting fuel. All of those decisions were carried out by government employees working with business.

    Nuclear power, the internet, mass vaccination, the interstate highway system, the Apollo program, GPS, the air traffic control system, are all government run or government-financed, and like D-Day, they work – or worked – pretty well. Government is not inherently incompetent.

    Nor is business inherently brilliant: the SST, Betamax, the Corvair, Thalidomide, BP in the Gulf, the Exxon Valdez, Phen-phen, the 2008 crash, and whatever the hell Yahoo thinks it is.

    The problem is ideological. We have less tolerance for government screw-ups and more for industry screw-ups. We idolize business and trash government. Because we have some control over government we focus on their failures. And because we prioritize wealth above any and all of the usual virtues, we corrupt business with our sheepish tolerance of their misdeeds. Government failure is punished by voters while business failure is rewarded with golden parachutes.

    If you look at the performance of government and business objectively, sans ideological filter, you quickly conclude that both are competent and incompetent, both are innovative and resistant to innovation, both are brilliant and stupid.

    Rather than define the battlefield as government vs. business, we should look at what works, regardless of source. A non-ideological approach might free us to see better ways to use both government and business to achieve our goals. FedEx is really good. So is the US Marine Corps. Apple is great. So is the CDC.

    Ideology inhibits rational thought.

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  34. michael reynolds says:

    @Thor thormussen:

    I disagree. I’m happy to see Verdon back. He addresses topics that James and Doug do not. You may disagree with him – I do much of the time – but he’s providing a different narrative, causing interesting discussion to break out. All ideas should be considered, that’s how we learn and grow.

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  35. Franklin says:

    @Tyrell:

    A lot of people complain about the way these wind farms look.

    I love this complaint. So, aesthetically, smokestacks belching mercury into the air is much prettier!? And this is how we should choose our energy sources???

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  36. Tyrell says:

    @Franklin: That was not my opinion, a group of people who lived down near the coast where they had a wind farm complained.

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  37. Gustopher says:

    Given how much of our infrastructure is oil based, we will figure out ways to squeeze every last drop out of the ground, since it is cheaper to pay a small fortune for oil than to pay a large fortune to change our infrastructure.

    Electric vehicles are decent for most people in cities — which is most people in America — but the range does limit the ability to do things we almost never do anyway. But, it’s a loss of freedom in the absolute sense — you can’t just drive three states over without either renting a gas car, or plotting your route out carefully for charging stations.

    If we expect to change our infrastructure quickly, it’s going to require government action — at the very least it will require subsidies to private companies and individuals. Electric charging stations for electric cars, electric heat for more more homes, cleaner electric power plants. As dirty fuels get more expensive to extract, we would slowly get there, but to do it quickly, we need to subsidize it.

    Global warming requires we move quickly. Peak Oil wasn’t a doomsday scenario, it was optimistic — a sharp forcing function that would have gotten us off gas, and changed our infrastructure by necessity.

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  38. Andre Kenji says:

    @michael reynolds: To me, the real test is when I begin to see these cars in the streets of Sao Paulo, even in a very high income neighborhood. I don´t see even hybrids like the Prius.

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  39. Hal_10000 says:

    @Steve Verdon:

    The problem with government investment in alternative energy is that it has a profound tendency to be concentrated in marginal tech that is, by a strange coincidence, dear to powerful political interests. The GOP complained about Solyndra but ignored the biggest problem: it was an investment in marginal tech, the kind the private sector can do on its own.

    Where federal research dollars should be going is breakthrough tech. Nuclear fusion is a good example. Energy storage is another. Current battery tech is only slightly more advanced than lead-acid batteries. Germany, for example, may see their greenhouse gas emissions *increase* because their solar/wind has to be backed up by fossil fuels (since they shut down their nuclear plants) and ramping fossil fuels up and down is incredibly inefficient.

    My litmus test for whether environmentalists are serious is how they feel about nuclear power. If the oppose it, they’re not serious about fighting global warming. Because current alternative energy plants without nuclear backup means an increase in greenhouse gas emissions.

    Fracking is a little more tricky but fracking is the biggest reason our greenhouse gas emissions have fallen over the last decade because it has switched a lot of our energy from coal to gas (with way less environmental harm than claimed).

    As for the Peak Oil theory, it’s a perfect example of why models of anything need to be treated with several trainloads of salt. Peak Oil was the kind of model where most of the critical data was in the future. You could fit peak oil models to oil trends … but you could also fit plenty of other models. The actual hard data didn’t distinguish peak oil from other theories. This is a continual problem in science (one I’ve blogged about but one the popular press has difficult in conveying. Just because your model fits the data doesn’t mean your model is right.

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  40. Mister Bluster says:

    @MarkedMan:..money well spent.

    Maybe.

    In 1979, as lines at gas stations snaked for blocks, the House of Representatives, by a vote of 368 to 25, created the U.S. Synthetic Fuels Corporation, an “independent” federal entity charged with creating new fuel sources by spending $20 billion in seed money ($57 billion in 2009 dollars) during its first five years. Originally, the Synfuels Corporation was projected to spend $88 billion ($250 billion in today’s dollars) over 12 years to build the capacity to produce the equivalent of 1.5 million barrels of oil per day from coal.

    After Carter’s ambitious moves, global oil prices dropped like a rock. The deregulation of natural gas led to vast new fossil fuel supplies, and abundant stocks of cheap coal kept electricity humming down transmission lines. Meanwhile, the federally funded Great Plains Coal Gasification Plant, on which I worked, became the largest construction project in the United States, costing $2.1 billion ($5.3 billion in today’s dollars) to build. The plant was supposed to convert coal into 125 million cubic feet of natural gas per day, an amount equal to about 20,000 barrels of oil. Instead, by 1984, as the price of natural gas continued to fall, Great Plains went into bankruptcy. It was eventually sold in 1988 to a local electric cooperative for $85 million—a little more than 4 cents on the dollar. The $2.1 billion the plant cost to build, if invested in bonds, would have grown to about $8.4 billion by 2009. Instead, Congress disbanded the Synthetic Fuels Corporation in 1986, the money irretrievably lost.
    http://www.freerepublic.com/focus/news/2251971/posts

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  41. Ben Wolf says:

    The Hubbert curve specifically addressed conventional oil production. It was perfectly accurate.

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  42. stonetools says:

    @Steve Verdon:

    That is the rhetoric of Trump and Clinton. And, IMO, after awhile they start to believe their own rhetoric.

    Trump has said something like that. Clinton has not. Heck, her campaign slogan is “We’re stronger together.” The predecessor-and the current President- had as his slogan , “Yes, we can.” So I don’t think we can accuse either of overweening narcissism. Now, to be sure, every leader of every organization ever has said, “Follow me, I know the way”. but in a representative democracy we get to vote on our leaders.
    I think you are doing some projection , here. There’s a word of difference between the guy who says, “I know everything, I alone can save you” and the one who says, “I know some things, I want to lead , and we can succeed together”. Trump is an example of the former category, Clinton the latter.
    I also wonder why you are so suspicious of government leaders (who are accountable to us) and not of private actors (who are accountable to no one). Just because private actors are not in government does not mean that they are inherently better or less selfish: probably the latter in fact. Milton Friedman was sure that no drug company would put an inherently dangerous drug on the market, for fear of market discipline and because of enlightened self interest. The thalidomide crisis demonstrated that he was wrong beyond the shadow of a doubt. There have been many such examples.

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  43. Steve Verdon says:

    @Ben Wolf:

    Even if that were true it makes it a useless model for prediction and policy.

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  44. stonetools says:

    @Steve Verdon:

    Boudreaux and others who believe in the market process are quite willing to admit it may not always work. But when it comes to innovation it works really well.

    Well, yes it does but government can innovate too. the US government won WW2, built the atomic bomb, the Hoover Dam, the first transcontinental railroad, and the interstate highway system, put a man on the moon, and invented the Internet and GPS.Government action eradicated polio and smallpox( Disease control is indeed a primary government function that government does so well that most libertarians barely remember that infectious disease was once a huge problem.)
    Government has been involved in fossil fuel production since its inception and indeed subsidizes it till today. Read “The Prize” for a history of the energy industry. You’ll find government playing a role at many points. ( Most US oil is found in the West. The West as it exists today is virtually a creation of the federal government).
    Given actual history , it’s not surprising that government must play a major role in the transition away from fossil fuels. Our task as voters is to shape what that role will be by voting in people who understand the situation, or at least are willing to listen to those who do understand.

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  45. stonetools says:

    @Hal_10000:

    Time to post again from Michael Grunwald’s article . Yes, Solyandra was a failure. But there were many successes.

    Obama promised that he would double renewable power generation during his first term, and he did. In 2008, people had the sense that renewable energy was a tiny industry in the United States. What they forget is it was a tiny dead industry — because these wind and solar projects were essentially financed through tax credits, which required people with tax liability, and everybody had lost money, so nobody needed [the tax credits]. By changing those to a cash grant, it instantly unlocked this industry. Another thing that’s helped to create the wind and solar industry were advanced manufacturing tax credits, which were a gigantic deal. I think there were about 200 factories that got these credits. The classic example is Abengoa [Solar], which had shut down projects in Illinois, Texas, some other places. The day the stimulus passed, their chairman announced they were pouring $6 billion into U.S. projects.

    For advanced biofuels, [the stimulus bill] created this $800 million program that essentially financed new refineries. And so you got the first 18 advanced biofuel refineries in the country just through that 1 percent of the clean energy funding. And there were some loan guarantees for that as well. There was also a whole geothermal technology program that went from about $20 million a year to $400 million. It’s leading right now to a real boom in geothermal production.

    There’s more at the link. You don’t want to admit this, Obama’s stimulus really did kick start renewable energy development in this country, in ways that will pay off down the line.

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  46. Pch101 says:

    @stonetools:

    but government can innovate too

    it is ironic that conservatives use the internet to tell us that this isn’t true.

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  47. Thor thormussen says:

    I also wonder why you are so suspicious of government leaders (who are accountable to us) and not of private actors (who are accountable to no one). Just because private actors are not in government does not mean that they are inherently better or less selfish: probably the latter in fact. Milton Friedman was sure that no drug company would put an inherently dangerous drug on the market, for fear of market discipline and because of enlightened self interest. The thalidomide crisis demonstrated that he was wrong beyond the shadow of a doubt. There have been many such examples.

    see also Alan Greenspan.

    “Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief”

    Free Market fanbois are regularly shocked when their ideology meets reality. I’m sure there are confused idiots in Kansas, just waiting for trickle down to finally kick in….wonder what’s taking so long….

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  48. Thor thormussen says:

    The Hubbert curve specifically addressed conventional oil production. It was perfectly accurate.

    hubbert was remarkably accurate in the shape. His estimate of the peak was off by about 10 years. that’s impressive.

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  49. Thor thormussen says:

    Fossil fuels are reaping $550 billion a year in subsidies and holding back investment in cleaner forms of energy, the International Energy Agency said.
    Oil, coal and gas received more than four times the $120 billion paid out in incentives for renewables including wind, solar and biofuels, the Paris-based institution said today in its annual World Energy Outlook.

    Oil is subsidized way more than even I knew.

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  50. Thor thormussen says:

    $550 billion a year for oil subsidies. $77.19 for every man, woman, and child on the planet. Wow. We’d have to more than triple the subsidies for clean energy to make it fair. I’m down with that.

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  51. Franklin says:

    @Tyrell: I didn’t mean to blame you … I have heard the same complaint about some wind farms in Michigan.

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  52. Guarneri says:

    @Davebo:

    One day the sun will cease to shine, too. And that’s just as useless an observation as yours.

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  53. Guarneri says:

    @grumpy realist:

    It’s called nuclear. Even the tiny balled French have figured it out. When Henny Penny exits stage left maybe we will too.

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  54. Guarneri says:

    Government funding is different than government management and administration. Government is generally god awful atvthevlatter. Writing checks is easier, even if kited.

    He’ll must have frozen over. Lefties citing the military as a model for efficient achievement.

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  55. Steve Verdon says:

    @stonetools:

    Clinton’s convention speech was summarized very well by John Oliver, “I will micromanage the shit out of this office; get granular as fuuuuuuuck. Now drop the balloons.”

    https://www.youtube.com/watch?v=BUCnjlTfXDw

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  56. Steve Verdon says:

    @stonetools:

    I don’t see the innovation there….sorry.

    The government is good at swinging a sledge hammer. It is good when there is a significant free rider problem…sometimes. It is potentially good when there are information asymmetries.

    That does not mean it is simply good. The government needs to do less not more, IMO.

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  57. Steve Verdon says:

    @Thor thormussen:

    That is nonsense and ignores the perverse incentives the government put in place that helped lead to the financial crisis.

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  58. Steve Verdon says:

    @Thor thormussen:

    In other words, he was just flat out wrong.

    Good, thanks for playing and Johnny is going to describe your parting gifts….

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  59. Steve Verdon says:

    @michael reynolds:

    When it comes to an existential war…yes, I think we can all agree we will need the government. Only that way can the resources be brought to bear to ensure that we, as a nation, continue to exist. I completely agree.

    But, I disagree that industry/business screw ups are rewarded or to the extent that they are they are a failure of good corporate governance…but in 2008 was bad corporate governance allowed to fail….or propped up by the full faith and credit of the American tax payer? If it were the latter how did that happen? Probably with the help of the dudes in DC.

    And to be clear I consider that a type of tragedy. The market only works with profits AND losses. If we get rid of the losses the market cannot work. But politicians are too conservative to accept losses of the type they feared might have materialized in 2008. And as such they have kicked the can down the road and set us up for an even bigger problem I fear.

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  60. DrDaveT says:

    @Steve Verdon:

    The government needs to do less not more, IMO.

    That’s about as sensible as saying “the government needs to do yellow, not orange”.

    The government needs to do the RIGHT things — internalize externalities, take advantage of economies of scale, provide a level and type of universal services that in the long run makes us all more prosperous and safe. Yes, of course the government needs to do less of the unproductive (or counterproductive) things. But, just as obviously, the government needs to do MORE of the productive things.

    Libertarians start by assuming that nothing the government does is productive. When it is pointed out that this is idiocy, they start making exceptions, one at a time — but still trying to cling to the principle that less is better. Once you admit that zero is not the correct level, you have admitted that the criterion by which we should judge the correct amount of government is not sheer size. If you were honest, at that point you would try to figure out what criterion you are really using, and look to optimize that.

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  61. stonetools says:

    @Steve Verdon:

    I don’t see the innovation there….sorry.

    If you don’t see innovation in building the first atomic bomb and putting a man on the moon, then I’m sorry for you. We really have nothing to discuss and you need to go back to UCLA or maybe high school and start over.
    Doing something great the first time is the very definition of innovation, as every thinking biped would agree. But somehow you don’t . Just wow. More proof that Ideology makes you stupid.

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  62. Gustopher says:

    @Steve Verdon:

    It is potentially good when there are information asymmetries.

    Is there ever not an information asymmetry when an individual is dealing with a corporation?

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  63. de stijl says:

    It is potentially good when there are information asymmetries.

    Would you also agree when asymmetry does not favor you?

    You posted this article and you are also the person who has commented the most.

    Frack me, Libertarians? They’re the equivalent of Seventh Day Adventist or Mormon missionaries. They only live because they scurry and feed in the shadow of good manners.

    “We have an unarguable and illogical premise, but it would be rude of you to point that out. Terribly rude. Your peers would reject you if you were rude to us. Meanwhile, please allow me to try to convert you to my unsupported worldview. It would be rude and intolerant of you not to listen. You are a tolerant person, yes?”

    It’s salespitch 101, but it’s astounding how many people fall for it. The appeal to manners pitch.

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  64. Rod Campbell-Ross says:

    Economics 101 – substitutes, alternatives, solar, base load, negative prices blah blah blah. Nothing new here, just a lowly religious adherent preaching a belief system learnt kneeling at the alter of his neo-classical economics high priests. No broader thought process – no thermodynamics, no ecology and worst of all no history. It’s like all belief systems – only their book is right. Everything else is a “load of crap”.

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  65. Surreal American says:

    In a way, I dislike most discussions about Peak Oil because the focus tends to be mainly about petroleum as the basis for fuel/energy. Little to no mention is made of the other uses for petroleum (fertilizers, plastics, pharmaceutical products, etc.) and the possible substitutions for those uses.

    Furthermore, getting back to substituting oil as fuel, it took decades and not-insignificant government expenditures to create the infrastructure supporting the mass use of automobiles in the United States. The next big developments in energy and technology may not necessarily contribute to the continued use of individually owned and manually operated vehicles. Are we prepared to make the cultural and infrastructural changes needed to facilitate this transition should that be the case?

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  66. grumpy realist says:

    @Guarneri: Dude, I’m a physicist. I lived in Japan for 12 years. Don’t try to tell me about nuclear. I’d be perfectly happy with nuclear provided you solved the problems:

    1) problem with “lowest bidder == crappy construction.” Bad design (Fukushima)
    2) idiots running it (remember Chernobyl?)
    3) nuclear waste <– this is probably the worst problem because once the damn stuff gets into your groundwater about the only thing you can hope is that your population will evolve into something that's inert to this stuff. Ditto for stuff like Cesium-60 in the damn air, hello thyroid cancer.

    If I were Emperor of the world I'd do a mix of nuclear-as-a-stopgap, increasingly strict requirements for efficiency in energy-using devices (increasing your efficiency by 50% means you've just effectively doubled your supply of oil), getting rid of any gas and oil subsidies, and much more basic research into carbon sequestration, more fusion, and more basic research.

    Subsidies should be used carefully–mainly to encourage early adoption of technology you want to encourage so the market expands to get over the efficiencies of scale cost hump.

    And fossil fuels are much more expensive that anyone in the industry wants to admit, particularly because we still haven't priced in the cost of future externalities down the road. How much will it "cost" the human race if the world's climate goes up by 4 degrees Centigrade?

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  67. Matt says:

    @grumpy realist: The latest gen reactors including LFTR designs would make an excellent safe lower polluting stop gap measure while we research longer term solutions. Some of the LFTR designs can run on waste fuel from older reactor designs.

    One of the biggest (if not the biggest) problem with Fukushima was that the reactors were designed on slide rules in the 50s… They are so hopelessly outdated it’s damned near a crime. Those kind of reactors are used in the USA too across the country. We need to replace those old reactors with new safe designs. THe issue is it’s incredibly difficult to get the permits to do the construction. NIMBY fierce resistance from so called environmentalists and a variety of other types are setting us up for a future of more accidents as ancient reactor designs continue to age.

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  68. Matt says:

    @stonetools: What I find hilarious is he’s posting this on a computerized medium that came about as the result of massive government investment (DARPANET/etc)…If he really wants to claim that the founding of the internet was not “innovative” then really what is there to say?

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  69. Thor thormussen says:

    If you don’t see innovation in building the first atomic bomb and putting a man on the moon, then I’m sorry for you. We really have nothing to discuss and you need to go back to UCLA or maybe high school and start over.
    Doing something great the first time is the very definition of innovation, as every thinking biped would agree. But somehow you don’t . Just wow. More proof that Ideology makes you stupid.

    yeah, i don’t come here for simple-minded libertardian gibberish. What a waste of time.

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  70. gVOR08 says:

    @Steve Verdon:

    … I was thinking of DARPA. Their approach to various “problems” is…They throw money at a bunch of crazy ideas and see what works. Their failure rate is huge, but when they hit on something….

    But it is hard for our psychopathic narcissists we call our elected leaders to go with that approach.

    They’re funding DARPA. Obama funded Solyndra, and other solar companies. And was attacked by Republicans for it. The problem isn’t “our elected leaders”, the problem is Republicans, who are still denying AGW at the behest of their entrenched industry sponsors.

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  71. gVOR08 says:

    @Steve Verdon:

    That does not mean it (the government) is simply good.

    Strawman unless, without nut picking, you can produce a quote of someone actually saying something like that.

    I don’t see the innovation there….sorry.

    Seriously? WIKI has a good article on motivated reasoning.

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  72. Turgid Jacobian says:

    @gVOR08: Seriously! This is the most bonkers thing I’ve heard. Just who does Verdon think created DARPA and continues it? Same with IARPA. Also ARPA-E, the NIH, NSF, and more?

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  73. Franklin says:

    @grumpy realist:

    increasing your efficiency by 50% means you’ve just effectively doubled your supply of oil

    Sorry to nitpick, but you would need to increase efficiency by 100% to do that.

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  74. de stijl says:

    @Steve Verdon:

    but in 2008 was bad corporate governance allowed to fail

    Artful use of the passive tense.

    Had you chosen the active tense, you’d be arguing that capital G government caused the MBS fiasco.

    Notwithstanding the fact that hugely paid / insanely bonused principals were shorting Mortgage Backed Securities issued BY THEIR OWN BANK and were selling those same “assets” to teacher pension funds and podunk municipalities and backwater German Banks. That was standard operating procedure in the clear knowledge that those “assets” were toxic.

    They shorted securities that they themselves issued.

    They willfully sold securities they knew were toxic.

    They suborned and co-opted rating agencies.

    Like all prudent enterprises, they externalized risk.

    They then blamed the utter and complete systemic failure of unregulated capitalism to check its own excesses on black and brown people who had the temerity to apply for a home loan in a low interest rate environment.

    They turned their shocking failure at properly understanding and managing risk into a racial issue in an attempt to deflect attention at their utter failure.

    Why, if someone were to go down that road, they would be perhaps accusing the Big Banks and the all-knowing, all-seeing Market of totally screwing the pooch, of not seeing the big picture, of not being able to regulate its own interests. It would be like saying that there is an inherent disconnect between unfettered markets and societal health.

    But, I disagree that industry/business screw ups are rewarded or to the extent that they are they are a failure of good corporate governance…but in 2008 was bad corporate governance allowed to fail….or propped up by the full faith and credit of the American tax payer? If it were the latter how did that happen? Probably with the help of the dudes in DC.

    Wow! How long does it take to internalize this extent of rationalization? Two years? More?

    I lost a close friend to Scientology, so I can empathize.

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  75. Just 'nutha ig'rant cracker says:

    @Surreal American:

    The next big developments in energy and technology may not necessarily contribute to the continued use of individually owned and manually operated vehicles (emphasis added). Are we prepared to make the cultural and infrastructural changes needed to facilitate this transition should that be the case?

    It you are asking people who live in the Pacific Northwest, the answer seems to be “no.” We seem to believe that public transportation is for the poor–who really should be living somewhere else anyway, maybe somewhere East of us.

    On the other hand, the Seattle area is so geographically large, that the last time I took public transportation into the city, it was a half day trip–90 minutes into town, 30 minutes at the DMV

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  76. Just 'nutha ig'rant cracker says:

    @Surreal American:

    The next big developments in energy and technology may not necessarily contribute to the continued use of individually owned and manually operated vehicles (emphasis added). Are we prepared to make the cultural and infrastructural changes needed to facilitate this transition should that be the case?

    It you are asking people who live in the Pacific Northwest, the answer seems to be “no.” We seem to believe that public transportation is for the poor–who really should be living somewhere else anyway, maybe somewhere East of us.

    On the other hand, the Seattle area is so geographically large, that the last time I took public transportation into the city, it was a half day trip–90 minutes into town, 30 minutes at the DMV

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  77. Just 'nutha ig'rant cracker says:

    @Just ‘nutha ig’rant cracker: (continuation of comment): …DMV (where I was, ironically, replacing a lost driver’s license), 45 minute wait for the next bus, 90 minutes back home (add 20 minutes to driving time during rush hour, but subtract 15 from wait time as trips increase to one every 30 minutes). And Metro Transit is considered an above average system. The problem is that I was staying about 40 miles away from downtown Seattle–and was not even at the far southern limits of the coverage area.

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  78. Gustopher says:

    @Just ‘nutha ig’rant cracker: We’re building out light rail, which should speed that up a lot.

    I don’t personally take public transportation very often, but that’s mostly because I am enormous and don’t fit in the vast majority of the seats, and I detest crowds. But, when I do take it, there’s a nice mix of upper middle class commuters, and homeless people. I think we just carefully build the lines to no go where poor people live — so it’s clearly not for poor people.

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  79. Davebo says:

    @Steve Verdon:

    It is a load of crap as a predictive tool.

    As I said, some people don’t understand what the theory really is. Hint, it’s not a predictive tool. Nitpicking aside.

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  80. steve says:

    You seriously misrepresent Boudreaux. He would do away with DARPA and all government funded research. He believes, mistakenly, that private entities will make up the loss in basic research. Since he just sits in econ classrooms, he has no idea how much back and forth there is between universities and start-ups. Historically, we have managed to have a pretty good mix of public and privately funded research. It has let us lead the world in innovation. Boudreaux would take away half of that.

    Steve

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  81. Steve Verdon says:

    @Davebo:

    But lots of people argued for the peak oil hypothesis based on the Hubbert curve as if it were a predictive model. I said…probably a decade ago that it was not a predictive model and even though it is true we’ll go through a peak oil period it was not at all clear that the dire predictions people were making were even remotely valid and pointing the Hubbert curve did NOT make those predictions valid.

    There is a reason the Oil Drum guys essentially gave up. They were wrong. They should have known better, IMO, too. I gave the example of Jevons and coal. We can possible forgive Jevons as we can forgive Malthus as the ability of markets to adapt to changing conditions was still a new and largely un-thought of phenomenon. But we went on to develop oil, natural gas, the power of the atom, and now solar is becoming much more wide spread. Could we face a major problem with regards to energy? Maybe, but it is quite unlikely be due to running out of oil.

    In fact, we probably won’t ever run out of oil. Not because of some crack pot theory that oil is produced by bacteria down deep in the earth’s crust, but simply because we’ll likely find something to replace that is even better than oil. Thus, those last oil reserves will simply remain untapped…thus we’ll never truly run out in a literal sense.

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  82. Steve Verdon says:

    @steve:

    Really, exactly how many of the EconTalk podcasts of his have you listened too? I have listened to them all. I read his blog routinely. While he is very much opposed to the current size of government he is not an anarchist and has stated that the issue is finding what government can do better than the market, but that when we discuss that topic it is correct to talk about the market and government in realistic terms. Yes the market fails, but so does the government. Simply because the market fails does not mean that government is the solution nor that it will succeed even if it can in theory provide a solution. And one additional problem with the political process is that it picks what is popular vs. trying a variety of different approaches. Government often ends up with a top down and one-size-fits-all solution vs. a more varied and diverse response.

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  83. Steve Verdon says:

    @steve:

    This article says you are incorrect.

    The first topic is best expressed as a question: how much of our material standard of living do we owe to research funded by the government? Nobel-laureate economist Joseph Stiglitz asserts that we owe a great deal to government funding:

    “While free marketers rail against industrial policy, in the US the government actively supports new technologies, and has done so for a long time. The first telegraph line was built by the US federal government in 1842; the internet was developed by the US military; and much of modern American technological progress is based on government-funded research in biotechnology or defense. (“Do as the US Says, Not as it Does,” Guardian, October 29, 2003.)”

    I have little doubt, although I could be wrong, that this is your view. That government funded research has been a great boon to society. However, Boudreaux argues for caution with this view.

    He points out that those resources used in government research had to come from somewhere and that it is most likely impossible to say if the above claim is true or not via just theory alone. That the resources must come from somewhere means that those resources cannot be used for what the initial owners of those resources might have intended. Granted, perhaps it would have been spent on something other than research, but we don’t know that. This is the same point Bastiat raised around 150 years ago or so. We cannot know what effects the confiscation of those resources might entail for private research efforts, maybe nothing, maybe something nor can we ascertain how significant.

    Further, pointing to some examples does not tell us the overall contributions of government funded research to the overall “well being” of society. It could be 1%, 10% or say 50%. Pointing to the internet and a few other examples doesn’t tell us much.

    And how does this justify the other trillions of dollars in resources confiscated by the government and frittered away on frivolities like ensuring a high enough income for sugar beet growers and other nonsense? Maybe you are right, that we need some level of government research….so the government’s budget must be as big as it is currently? Why were those resources frittered away on the incomes of sugar beet growers not allocated to research?

    Additionally is there a crowding out effect by government funded research? Does the government research dissuade private research and if so by how much? In other words, you and Stiglitz are ignoring the opportunity costs of government funded research.

    So, I do not see Boudreaux saying he’d remove all government funded research he is just doubtful of the absolute certainty that it is a good thing you and Stiglitz assert.

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  84. Rod Campbell-Ross says:

    @Steve Verdon: Sorry, Steve but this is all Econ 101 garbage. The laws of thermodynamics do count, as does history and ecology. We are a species in deep overshoot rapidly using up a temporary supply of non renewable energy. And this is as much an issue about timing as anything else. Your backstop argument is that we will find something else. Maybe. But there now isn’t time to transition to what ever that new something turns out to be. One of the facts of modern life is that constant economic growth is vital – otherwise our credit system falls over. Some will argue it has already fallen over, if it hasn’t it is certainly wobbling. Which means the transition and all of its massive investment will not happen. So, please write something a little deeper in this space. I personally am convinced conventional oil has peaked and most likely tight oil has as well. That doesn’t mean production is going to rapidly decline. It probably means prices gyrating between $50 and $100, plenty more QE around the world, and a few more PIIGS and Syrian crises.

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  85. Eric Florack says:

    @Dave Schuler: to this I can only suggest that the reason that coal production is falling off at the moment is because of the federal government’s war on coal

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  86. Eric Florack says:

    @grumpy realist: well, I would add that we don’t even know specifically what the natural processes of oil creation are. Before recent times we haf always considered that oil was a finite product and we really didn’t have a clue as to what produced it.

    In watching the last few years worth of oil production, it seems that that opinion is changing, and that natural oil production is a continuing process not something that ended millions of years ago which would explain why we continue to find it in places we had thought already tapped out. Russian scientists seem to agree that this is an ongoing process and not a finite one

    Seems clear to me that that was also not on the minds of those creating the peak oil argument.

    What was on their minds? Creating an artificial scarcity of a product so as to exert political control.

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  87. Just 'nutha ig'rant cracker says:

    @Steve Verdon:

    we can forgive Malthus as the ability of marketshumanity to adapt to changing conditions was still a new and largely un-thought of phenomenon.

    FTFY

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  88. Franklin says:

    OK, I’ve understood for a long time that there’s a lot of oil, but that it will continue to become more expensive to extract it. I take it the Hubbert model failed to envision anything other than the least expensive way, is that correct?

    I’m actually not sure if I would consider such a model a “load of crap” and a bunch of other words meaning the same thing. The model is certainly incomplete, and worked for a long time. (Shrug) … and so did Newton’s model of gravity and a lot of other useful models.

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  89. gVOR08 says:

    Peak coal in the UK seems to have been around 1913. So Jevons was correct about running out of coal, which followed a lovely bell curve, but failed to anticipate technical developments 50 to 100 years later.

    An aside – I’m surprised that production fell in both World Wars. I would have thought coal production would be a priority despite it’s manpower requirements. Did rationing make up the shortfall? Cut off of exports? Cut off of non-essential production? Anybody know?

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  90. Matt says:

    @Eric Florack: I wish there was a war on coal. Coal power generation has the highest fatality rate of any source of power. Not even including the long term effects of the radioactive and heavy metal laden fly ash leftovers that has to be stored somewhere.

    Only the delusional ideological idiots that you read thought that oil was infinite. Those of us based in reality have known it was a finite source for well over a century now. We know how oil is formed and we know how to fake the process to an extent. Hence the synthetic products and the Navy producing some hydrocarbon fuel with ocean water.

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  91. MBunge says:

    @Steve Verdon: simply because we’ll likely find something to replace that is even better than oil.

    That is actually a great example of how people like Mr. Verdon damage our public discourse. Their arguments are built on flawed premises, which are built on other flawed premises, which are built on other flawed premises, which means refuting them requires explaining and refuting each flawed premise in the nesting doll of stupidity. And that usually takes an impractical amount of time and effort.

    There may very well be nothing on Earth that equals petroleum as a naturally occurring, easily accessible and energy intensive source of power, but explaining that requires explaining what oil is, where it comes from, how it works and how it differs from other past and potential energy sources.

    And by the way, everyone talks about electric cars, but what about electric semis, electric airplanes, electric cargo ships and electric tanks? How many batteries will it take to fly something as big as a 747 or drive something as heavy as an earthmover?

    Mike

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  92. Matt says:

    @MBunge: I’ve got a very strong feeling that Steve Verdon lacks education in basic chemistry…

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  93. Eric Florack says:
  94. Loviatar says:

    @MBunge:

    That is actually a great example of how people like Mr. Verdon damage our public discourse. Their arguments are built on flawed premises, which are built on other flawed premises, which are built on other flawed premises, which means refuting them requires explaining and refuting each flawed premise in the nesting doll of stupidity. And that usually takes an impractical amount of time and effort.

    .

    This is why I said in another thread that Verdon was a danger.
    .

    You’re the equivalent of Ryan Lochte.

    A danger to those who don’t no better. A danger to those younger than yourself who will follow you into situations which will cause them harm. If you weren’t such a danger I would actually feel sad for you, but all I feel is contempt and fear for the harm you may cause.

    Dude, grow up.

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  95. gVOR08 says:

    @Eric Florack: You will note that they offer a link to back up their statement that cheap natural gas is hurting coal production but offer no link, no examples, no nothing to back up their claim that Obama regulation is also hurting coal production. So you’re making your argument based on unsupported assertion by the Daily Caller (snicker). Did I miss anything?

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  96. Matt says:

    @gVOR08: Yeah there isn’t a single thing in there to support Florack’s assertion that there is a war on coal…

    @MBunge: Apparently Tesla is already working on that as they recently confirmed work on Buses and Semis. Earth moving equipment wouldn’t be too far from that and the torque of electric motors would be very effective there.

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