RE: [MLUG - DISCUSSION] Unfolding Universe (discovery channel)

["(8?»" <EMAIL:PROTECTED>]

>
> > We are arguing 2 different things here. I agree with you that
> > countries that produce commodities hold no power, since there is
> > no ability to differentiate products. That commonality does not
> > negate how critical a certain commodity might be when considered
> > in light of global supply and demand forces though.
>
>But (if I understand you correctly) I think it does.  How critical
>or important any particular material (or technology) is depends
>pretty strongly on the current technology being used to produce
>whatever it is we're *really* interested in, which (outside of food
>production) is not necessarily a commodity.  History is full of
>demonstrations that "critical" inputs can become dramatically less
>important pretty quickly once there is any incentive to minimize
>their use or work around them entirely.  If all your country can do
>is produce raw materials, you are just not in a strong position even
>if you "luck out" and produce many of the rarest and most desirable
>ones.  So South Africa is a gold mine for, well, gold, but also
>diamonds, platinum, tungsten...the list goes on and on.  They even
>have (or have had) market corners on some of these.  By African
>standards, it's a pretty impressive place economically, but I don't
>think I need to say much more about its history or future prospects
>here.

OK, I agree with that.

I would say that oil is a special commodity, and those rules don't apply. 
It has no current alternative, and as I said before, every transaction in 
our economy has an oil element.


>
> > Whoever controls the ability of a commodity to move has an
> > advantage over markets.
>
>Yes, but there are two difficulties here.  The first is that it is
>phenomenally tough to control the market in most of these
>commodities, and control itself tends to be unstable if there's any
>prospect of a new or existing producer "cheating" on you.  So you
>may be familiar with the De Beers story, which has to be the best
>success story of this kind ever.  But I think it's getting clear now
>that in the long run, they are just totally busted.  And the only
>reason they've gotten away with it so long is the fact that gem
>quality diamonds are just not that important in the big scheme of
>things.
>
>The second problem is that neither supply nor demand are constant
>over time or independent of price.  Once anything critical gets
>expensive enough, other potential producers have an increased
>incentive to get into the market, while users of the product look
>for substitutes or new technology to eliminate the issue.

Your points are valid, but do not prove the absence of market manipulation. 
You are assuming the existence of the mythical free market. Barriers to 
entry are present to preclude both producers and consumers from exploring 
alternatives, many of which are in the form of laws.

>Markets tend to lead to the result that the cheapest fuel for a
>given purpose is the one that gets used.  In the case of
>automobiles, the reason why we use gasoline is that, with *current*
>technology, only gas or diesel fuel has the combination of energy
>density, relative safety, reliable supply infrastructure etc. for
>the kind of cars that people are willing to drive.  LNG is used in
>(some) busses because it is the cheapest fuel in those situations.
>There were in the past steam-powered cars and trucks (and trains),
>but gasoline-powered ones became cheaper and better.  (With trains,
>the situation is a bit more complicated, but the diesel-electric
>locomotive is a big advance over older technologies.)
>
>It is good to point out that the pump price in the US is not really
>the total cost (it would be higher if we forced it to include
>expenses that the government now pays for in different ways).
>
>The point you make that sounds like "technology lock-in" (aka
>increasing returns to scale) is also important, but what that can
>usually only accomplish is change (delay) the switchover point.
>So DVDs are much cheaper to make than videotapes, and a much higher
>quality product, but you did see lots of people arguing that they
>wouldn't take over the market "any time soon".  At which point
>that's just exactly what they did. :-)  But we did have to get to
>the point where DVD players were just as cheap as VCRs so that
>enough of them got bought so that enough movies got shipped to the
>new format so that more people bought DVD players and...

Technology lock-in exactly. Another point is that the power structures 
locked into these technologies do not adopt the "new model" if it is so 
different that they see it as competition. Take this one step further, and 
realize that the "they" (energy power structure) is our government. They 
will be determined to maintain the "oil economy" at all costs.

An awesome book on this subject is: The Innovator's Dilemma - When New 
Technologies Cause Great Firms to Fail by Clayton M. Christensen, Harvard 
Business School Press (1997).

Here is an overview.

http://www.accesstoenergy.com/view/ate/s41p877.htm


> > As is the case in any power structure, those at the top want to
> > stay there, and aren't interested in alternative fuels
> > (competition).
>
>Nobody wants to compete, and the status quo is really the best
>situation for oil companies.  But it would take a lot of stupidity
>and hubris for them to completely miss the riskiness of their
>situation in the long-run.

If you read the book I mentioned above, you will see it as the rule, not 
the exception. Another example is watching RIAA die in the richest possible 
environment. Where else could you have a business where production and 
distribution costs become negligible, yet they still won't compete in that 
space, because it isn't 'safe' yet. Meanwhile they seek to gut any possible 
competition through the judicial and legislative process.


> > >Wartime scenarios are, of course, incredibly important if you're at
> > >war (or planning to be) and the war is against a superpower or is a
> > >global war.  If you are not at war, then almost everything is
> > >different.
> >
> > We are in a permanent "war-time" economy now.
>
>Um, no we aren't.  I know you're probably being sarcastic here (it's
>*so* hard not to... :-)), but I don't think the current situation
>has anything to say about the importance of the world's oil supply
>in the big scheme of things.

No, no sarcasm here. We are spending close to $400B on 'defense' in 2002. 
Plus Uncle Dick is telling us 'the current war won't end within our 
lifetimes'. If that isn't permanent war....

>
> > The only way to influence supply, is through control. Oil production BTW,
> > peaked in the US in the early 70's, world production is predicted to peak
> > within the next 3-7 yrs. At that point in time, supply and demand curves
> > will forever move away from one another, and prices will rise without end.
>
>Baloney.  Nothing that cannot go on forever will actually go on
>forever.  Gotta run.

Well, if you're gonna be that literal, of course not. I meant oil prices 
will continue to rise until oil is dethroned as 'the' fuel. I'm just not 
sure humanity can survive that struggle.



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