Hurricane + Guest Column

August 29, 2005,
     Waiting for Hurricane Katrina to land on New Orleans this morning, the news reports are ominous. But the photo above (posted on Internet news services) says a lot to me about the current condition of the American people. While we know many of those who sought shelter in the New Orleans Superdome are poor and without means of escape, they end up trapped in the high priced seats passively awaiting a spectacle that may destroy their way of life. Fate becomes just another spectator sport.
     It seems possible to me that we will be seeing gas station lines all over America within the week.
     With that, I yield to this week's excellent guest columnist.

ON WHY HIGH IQ FAILS US, THE FREAKONOMICS OF PEAK OIL, AND HORSE BREEDING, MANHATTAN STYLE

by Dmitry Podborits

Part One

I find myself in a very strange situation. Everywhere I look I see very smart people expressing confident opinions about some future developments of various large and small-scale financial and economic phenomena. One might assume that these opinions should somehow filter into various decision making processes for for various kinds of analytical, strategic and tactical thinking. Therefore, one might hope that the opinions expressed by the smartest people with the most confidence are the most informed, balanced and rational.

However, often I observe the opposite trend: the smarter the people are, the less they are interested in the world around them and the more confident their opinions become. Under these conditions, high IQ becomes almost a handicap. It is almost as if a storm would be forecast and a person would be warned to seek shelter, and his response would be – "Don't try to scare me – I am too smart to seek shelter. I am confident in my ability to always outsmart the storm".

You would think that his level of confidence would be correlated with the information the person has about the severity of the coming storm. But no, the person is not even interested in the storm. He cheerfully observes that he has little understanding of storms in general and has not even bothered to look into the information gathered by others about this particular approaching storm. He is not interested in these things. This, however, does not affect the confidence of his opinion or forecast which (the confidence) is based solely on understanding himself as a smart, high-IQ person. And this is something that is hard to argue with – yes, he is smart, "high IQ" is written all over his forehead. Nevertheless, you almost wish he wasn't, since high IQ makes him more vulnerable, not less, and his forecast more flawed.

One can speculate on the origins of this paradox. There is a well-researched phenomenon in evolutionary biology called Zahavi's handicap principle, which establishes that certain types of animal morphology and behavior evolve precisely because they reduce the animal's fitness and penalize its chance for survival. A peacock's tail is an obvious example. One can observe that a peacock's tail is almost "deliberately designed" to introduce a higher cost for survival for the host animal and therefore to communicate to others (including predators and potential mates) that the peacock-carrier of the larger tail is the animal with superior genes.

I propose that a very smart person deliberately ignoring reality and expressing extremely shallow opinions with extreme confidence based on no thinking at all behaves much like a peacock advertising to predators his costly tail. The message that he broadcasts is basically this: "Look at me -- I am so obviously smart that I can deliberately make extremely dumb statements with a very high degree of confidence; it takes a really high-IQ person to totally ignore reality and still be this confident in his forecast".

Under these circumstances, the worst possible thing someone on the receiving end of an "opinion" can do is to assume that smarter people express more informed, more based-on-reality, and more rational opinions. I cannot warn people strongly enough: beware of smart people expressing confident opinions or forecasts.

A case in point – a recent series of commentaries on the topic of "Peak Oil" by two eminent economists (and self-described "rogue" economists) who wrote an award-winning and best-selling book, Freakonomics. The book, which I greatly enjoyed (in the audio version) discusses various phenomena traditionally viewed outside the realm of economics from the classical economics standpoint. The book is well-written, insightful, makes a number of interesting observations and very quickly appeared on multiple bestseller lists.

I'd like to note, however, that the self-definition of the Freakonomics' authors as "rogue" economists is largely misleading. The success of the book is based on the application of the known patterns of human behavior -- the chief of which is the generalization that "people respond to incentives" -- to the analysis of human dynamics nontraditional to the economics at large, such as illicit drug dealing and abortion. Obviously, if one can talk about "the economics of Hollywood" and "the economics of healthcare", one can also talk about the economics of crack-cocaine, because in all cases it is ultimately the human behavior that underlines all of these dynamics. In this sense, the authors are not really "rogue" economists, as they do not undermine any of the reigning economic principles; they embrace them and apply them to the areas of human behavior unfamiliar to the economics as practices by the "economic establishment" (if there is such an institution).

The problem starts, however, when the "freakonomists" begin to obnoxiously profess that since some dynamics can be understood within the context of human behavioral patterns, then all dynamics can be understood with human behavioral patterns.

One such dynamic of supreme importance centers around the Peak Oil phenomena that has finally entered into the mainstream of public debate, as evidenced by the Peter Maass' article in New York Times magazine. Jim Kunstler criticized Maass' article last week for being wishy-washy about the issue of Peak Oil; to his criticism I would add that Maass in the article dedicated in part to the research by Matt Simmons noncritically repeats the official Saudi number for total recoverable Saudi oil reserves as 260 billion barrels (the claim never substantiated in public statements by field-by-field breakdown by Saudi Aramco or the Saudi government), while analyses abound by Simmons, Campbell, McKillop and other authoritative industry observers claiming that the official number has no basis in reality.

Nevertheless, I believe that the Maass' article is a valuable and welcome development since it increases, not decreases the overall public understanding of the Peak Oil phenomenon.

Freakonomists, however, confidently claim that the Peak Oil will be a non-event. In the leading commentary on the topic in the authors' blog, titled "Peak Oil: welcome to the new media's version of shark attacks," and then in the follow-up commentary, they ridicule the PO phenomena as a media-fabricated frenzy and portray the people analyzing this topic as a new incarnation of obscure alchemist tinkerers -- charmingly ridiculous in their doomed determination, but harmless.

On what basis? After all, the freakonomists cheerfully state that "I don't know much about world oil reserves. I'm not even necessarily arguing with their facts about how much the output from existing oil fields is going to decline, or that world demand for oil is increasing. But these changes in supply and demand are slow and gradual -- a few percent each year."

Well, this is how they describe their worldview:

"What most of these doomsday scenarios have gotten wrong is the
fundamental idea of economics: people respond to incentives. If the
price of a good goes up, people demand less of it, the companies that
make it figure out how to make more of it, and everyone tries to
figure out how to produce substitutes for it. Add to that the march of
technological innovation (like the green revolution, birth control,
etc.). The end result: markets figure out how to deal with problems of
supply and demand.

Which is exactly the situation with oil right now. I don't know much
about world oil reserves. I'm not even necessarily arguing with their
facts about how much the output from existing oil fields is going to
decline, or that world demand for oil is increasing. But these changes
in supply and demand are slow and gradual -- a few percent each year.
Markets have a way with dealing with situations like this: prices rise
a little bit. That is not a catastrophe, it is a message that some
things that used to be worth doing at low oil prices are no longer
worth doing. Some people will switch from SUVs to hybrids, for
instance. Maybe we'll be willing to build some nuclear power plants,
or it will become worth it to put solar panels on more houses."

And finally, the last nail in the coffin of these pesky Peak Oil doomsayers:

"As [Maass] notes, high prices lead people to develop substitutes.
Which is exactly why we don't need to panic over peak oil in the first place."

The scariest thing for me here is not the flimsiness and the stupidity of the rebuttal, but the CONFIDENCE and the LACK OF INTEREST IN THE REALITIES OF THE WORLD that they are pronounced with. Even scarier,
however, is that these commentators are smart people with high IQ, regarded throughout the world as authorities in economics. When these two talk, many listen.

Of course people respond to incentives! Of course markets will attempt (as they have been attempting for a long time, without success) to find substitutes within the same basic economic structure.

However, is there a physical law stating that an adequate substitute, fitting into any existing infrastructure and cost structure, and satisfying the needs of any living arrangement, has to exist? I wish the freakonomists were there with me during my various travels -- from Mexico to Greece to Alaska -- where I saw communities of various scales abandoned and in ruins because the populace couldn't find at sufficient cost and quantities the resources they have come to depend upon, from water to arable soil to fish in the sea to mineable minerals. What if the vast literature dedicated to discussing the inadequacy of all currently known putative replacements for cheap oil has a point?

So, if we are not lucky enough to find a sufficient replacement for cheap oil, what will our response be? How will we, so to speak, respond to incentives?

Well, as Kunstler euphemistically puts it, "we will have to make other arrangements." This will basically mean that the society will change its very fabric and structure in response to the post-cheap oil circumstances.

The structure of the "new arrangements" arrangement may be, however, very unfamiliar from the point of view of "the world as we know it" -- a Maass' term that the freakonomists disagree with. I also think that a better term would be "the world as we practice it".

For example, one of the "responses to incentives" can be described as "making do with less", as in malnutrition or starvation.

Another response under the same circumstances can be described as "going to war".

Yet another response can be described as "mass migration away from the areas that have become uninhabitable, into the still habitable areas whose longtime residents would not be too happy to share their own resources with the newcomers".

And yet another response could be described as "reorganizing the economy around local food production".

Of course, there could be still other arrangements including elements of several or all of the previous four, plus some other yet unmentioned. However, they all would reflect "the new equilibrium" of the post-cheap oil world.

If someone can show me that a perfect market and even a lessaiz fair economy cannot respond to incentives along these lines, I would be very interested. I think that a big mistake that the freakonomists make even in their "pure economic," i.e. maximally abstract, nonspecific and detached-from-reality considerations when they dismiss any changes, is that they equate the notion of a market economy with the notion of a growing economy, and also with a consumer economy. These, however, are not the same things. A market economy, for example, can remain such even while becoming, under post-cheap oil circumstances, a contracting or imploding economy. How this scenario would correspond to the notion of the consumer economy I would leave as an exercise to the esteemed freakonomists.

Furthermore. I have carefully looked at the economic side of the argument and have not found any substantiation of the claim that "the changes in supply and demand would be slow and gradual – a few percent per year." I don't see how even against the backdrop of a perfect market economy, say, Ghawar's production cannot collapse fairly quickly due to geological maturity and overinjection of seawater, as Simmons suggests. I don't see how the same cannot happen with any other of the currently producing fields, or several fields at once at some point in the fairly near future. What cutting-edge economic thinking precludes, for example, the oil province of Saudi Arabia to start declining at the rate of, say, North Sea or Alaska's North Slope?

The authors claim:

"If oil prices rise, consumers of oil will be (a little) worse off.
But, we are talking about needing to cut demand by a few percent a
year. That doesn't mean putting windmills on cars, it means cutting
out a few low value trips. It doesn't mean abandoning North Dakota, it
means keeping the thermostat a degree or two cooler in the winter."

It appears to me that the authors somehow missed in their analysis that the decline of, say, 5% per year in consumption of fossil fuels (against the backdrop of, say, 1% of overall population growth due to demographic reasons and mass migration away from the areas hit the hardest) would translate into a roughly 50% of fossil fuel usage reduction after 10 years. That's the core of the PO argument with which the authors "are not necessarily arguing with" -- that past peak, the oil production will continue to fall, as it will take ever-increasing heroic expenses to keep it flat, and any successes in keeping it flat will be necessarily temporary.

So, in a dozen of years in this scenario -- probably still within the economic life time of a brand new Hummer H2, which has by then recently descended from a factory conveyer somewhere in the state of Michigan on the day the oil has peaked (that day will be known only post factum, of course), purchased through an employee incentives discount and financed on credit, the owner will have to cut a nonessential 50% of his overall driving, keep the thermostata mere 25 or 30 degrees lower and face doing more of the same in subsequent years, all without abandoning North Dakota, or making any other lifestyle changes.

One could comment that the "freakonomists" seem to have gone pretty far in life for people exhibiting the kind of thinking (as well as the level of confidence in their own thinking) that they demonstrate. This observation helps matters very little, though. It is not the shallowness of their analysis, total lack of interest to the underlying realities, and a 15 second attention span -- it is how widely and noncritically such views are accepted that I find most disturbing here.

Part Two

On a more general ground, it is interesting to revisit the earlier made point that when supply/demand imbalances occur, the structure of the society changes in response. This goes very contrary to the central dogma of "freakonomics" (which is really traditional economics in disguise), that as supply/demand imbalances occur, mysterious market forces "make sure" that the adequate substitute is found, irrespective of the laws of physics, chemistry and geology.

Basically, this means that the structure of any observed society (that is not in a state of flux or discontinuity) reflects the balance between supply and demand of all critical commodities, existing in that society.

It also means that when new types of products, services and commodities become available through, say, geological discoveries or the efforts of inventors and innovators, or opening of the new trade routes, the demand for them does not occur immediately, but only builds up gradually and with much effort and large energy expenditures (witness, for example, the enormous expense companies go through in order to get their product accepted in the market), because such penetration of the new product into society essentially means restructuring the society around the newly available product.

This is illustrated by the history of penetration of absolutely indispensable items into the current North American living arrangement such as automobiles, computers, mobile phones and commercial airliners. Take away any one of them (much less several of them), and the structure of the society will change dramatically. However, when these items were introduced, they did not get incorporated into the then-existing living arrangement immediately and without effort. When they finally gained widely acceptence, they forced change, or restructuring, of then-existed living arrangement.

There is an observable diminishing returns effect here: further innovations do not create demand for new products if the new products do not "knock out" already established products occupying the same niche in the existing living arrangement. Thus, a person who was forced to buy a new computer (maybe even reluctantly) when the societal structure changed around him so much that the computerless life no longer adequately worked, may have less incentive to upgrade, even if the new computer, on its own, is overall better, cheaper and shinier.

In this light, maybe certain utterances commonly ridiculed as shortsighted may be viewed more charitably in the new context. Take, for example, the famous pronouncement of a top IBM executive circa 1950 that in the entire world there is market for maybe five computers. That statement reflected the realities of the living arrangement of the time, that's all. Yes, it is an absurd statement from today's standpoint because it would take tremendous changes in the societal structure to have computers as ubiquitous as we observe them today. However, it is extremely hard even for a very smart person immersed in the daily realities of his busy life to imagine, let alone anticipate, the changes in the societal structure that are lying ahead.

It may be just as difficult for some to imagine the extent and the direction of the societal changes that will result from the supply/demand imbalance (from today's arrangement's standpoint) in the energy supply. This is another notion that freakonomists ridicule without realizing how vulnerable and superficial their criticism looks.

For example, is it possible that in the post-Peak Oil world the price for oil would decline? Yes, of course it is possible -- without even finding the adequate substitute for oil. For example, disappearance of commercial airlines from the historic scene and inability of air travel for most people would make it possible (for a while).

Now, a society without air travel would be a differently structured society, wouldn't it? It would solidly fall within the "other arrangement" notion. There go a lot of things currently taken for granted, such as high mobility, tourism, globalization, and so on. But yes, it is possible -- within the context of a perfect market economy. I would even venture to assert that it is far more probable than finding an adequate substitute for oil. This kind of a change would fit well within the currently understood natural laws scheme.

Is it difficult to imagine a world where some of the ingredients for something like affordable air travel might not be adequately available, and it would have never, so to speak, taken off? Wouldn't our current necessities deemed indispensable today in the easy air travel world seem strange and foreign to people inhabiting that, alternative, living arrangement?

The "efficient markets" religion is so pervasive that people who make pronouncements in the spirit of the freakonomists do not even stop to look around them and think what they are really saying. Where does it come from that a perfect market society has to satisfy every human need?

Well, here is an example of a market society which is still relatively very wealthy: the United States circa 2005. And here is a basic need which even an economist would not dare to dispute: adequate health care for its population. In this society with about 40 million medically uninsured (some of which resort to pulling out their own decaying teeth with pliers, as Malcolm Gladwell reports in The New Yorker), and with the medical care and insurance industries virtually in the crosshairs of the economic "science", how can this market aberration be possible?

Clearly, this need in healthcare can be satisfied under some other living arrangement, as evidenced by countries where we do not observe such a large contingent without medical care. No laws of physics, chemistry and geology would need, most likely, to be changed for that; maybe only something in the public psychology and the currently existing system of priorities and values. What makes people think that under dramatic increases in the cost of energy, much reduced mobility, etc. other life support systems in the currently arranged society (such as, for example, food production and distribution, law enforcement, finance, government services, etc.) will perform better than the healthcare performs currently?

Finally, I'd like to observe the following seeming paradox from the "efficient markets will satisfy every need" standpoint.

I note that many of the residents of Manhattan, as a segment of the US population, are doing better financially than the average, and have more discretionary income. Some of these well-off Manhattanites happen to be economists, and some happen to like horses at the same time.

As it presently stands, horse breeding is generally incompatible with the life in Manhattan. Therefore, the stables in which the economists' keep their horses are typically located far from Manhattan, in places like Long Island, New Jersey and Upstate New York. This circumstance creates, I would assume, a major inconvenience for the economists who visit their hooved friends during the weekends (consider the stress of long distance driving, tunnel tolls, road rage, harassment by truck drivers and other unpleasant circumstances).

It would have therefore followed from the efficient market principle that the economists would be willing to pay extra, if someone figured out a way, or a substitute, that would allow them to keep horses right there, in Manhattan and avoid the inconveniences.

It is possible that someone already tinkered with, say, breeding smaller and smaller horses to fit a Manhattanite's lifestyle, but such substitutes didn't take off, probably because they wouldn't provide the potential clientele with the adequate horse experience. So, this way or another, the current economists' living arrangement for those of them who combine both horses and Manhattan in their lives has been restructured around certain inconveniences. The inconveniences, it appears, are here to stay.

I wonder, how this discrepancy might be explained by the freakonomics worldview.

_________________________________
Dmitry Podborits was born and grew up in Odessa, (then the USSR). He immigrated to the US in 1991.  He specializes in analytical software for interest rate derivatives  and works in a major investment bank in New York City.

Comments

[Si]

I don't know about you...but the very last place I would want to sit or send my older relitives to sit at during a CAT 4-5 Hurricane would be a football stadium. I read the last time people sat in the superdome was during a tropical storm...well this is no tropical storm. I read a link today fro PO.com site about the stadium and how it was never tested for hurricanes of this magnitude. if these poor people who are filling this place end up dead because some officials thought it was safe....it would be a cring shame. But also the people who have went to this stadium should ask themselves if such a move is harmful to their health....Anyway I guess if I was major of NO I dont think I would advise a football staduim as the best option to sit out a hurricane.
I read the oil drum site ...seems that this area around NO where the path of the hurricane is has much of ths US production, SRP, refineries and he is a CAT 4-5 coming its way. This sounds like the fictional movie awhile back called Oil Storm...in the movie the Russians saved the day. I wonder if it gets that bad what the outcome could be???
Jim, I agree I think it is very likely that the gas stations will see lines this week all across the USA. It will be interesting to see how the Americans react to this and to one anouther as the wait in these lines.
I think even in worse case senerio that this should only be temporary..worse case 2-3 months of shortage and high prices. But I suppose we are about to see what will happen and how it will play out.
Si

[One Eye Open]

Football stadium or wooden shack? Hummmm! Me take football stadium.

[Si]

Me takes get out of Dodge. Is it true 300,000 NO residents are staying in their homes?

[one Eye Open]

That assumes you can get out of Dodge.

[kd]

Many thanks for the great post, Dmitry.

I work in a bookstore where "Freakonomics" is a best seller, right next to Thomas Friedman's "The World is Flat".
Sometimes I've wondered if both should be reshelved in the "Fantasy" section.

I especially enjoyed your take on Jim's "we will have to make other arrangements", to my mind, the most probable "outcome" of Peak Oil.

"Where does it come from that a perfect market society has to satisfy every human need?" Indeed, a most compelling & pertinent question.

[Syltty]

"So, in a dozen of years in this scenario -- probably still within the economic life time of a brand new Hummer H2, which has by then recently descended from a factory conveyer somewhere in the state of Michigan on the day the oil has peaked (that day will be known only post factum, of course), purchased through an employee incentives discount and financed on credit, the owner will have to cut a nonessential 50% of his overall driving"

BS. Changing to more car with 50 mpg costs only few thousand bucks.

[Barry]

Thanks for a great read, Dmitry -
As you astutely point out, common sense is, by no means, common . . . and those of substantial intellect, somehow, expect that their power for rational thought can cirmcumvent reality . . . unfortunately, people (sheeple) tend to side with the expert that endorses a solution involving the least change to their lifestyle . . . whether that coincides, in any way, with the natural world or not.

[Dave]

Excellent post. Very thoughtful with implications for our present state of affairs.

The situation in NO and the Stadium is a perfect metaphor and real life example of the plight of the existing poor and what the newly poor will experience in the near term future as the proverbial shitstorm of PO and Climate Change begin their deadly work.

Set ups at the Last Barrel Saloon are readily available and Old Dr. Karma sits ready with his admonition "Paybacks a bitch" as the flood waters rise around a region that has been severely compromised due to loss of wetlands due to rising sea levels and OIl and Gas Development. May those unfortunates now trying to survive in that place of hell find solace in the Karmic justice to soon arrive for the now seemingly fortunate what have the means to escape and have allowed this disaster to occur due to poor planning and lack of public funds. They too are soon to hear the words and know the meaning of Old Dr. Karma as they should !

[John]

I too hate the 'free marketers' of the world, but I wary of people who make predictions such as 'long gas lines this week.' The truth about Peak Oil is best left to the Geologists-such as the retired Saudi geologist quoted in the Maas article. I believe in Peak Oil, but when non-scientists make scientific predictions-they discredit the theory because they're using built in prejudices to promote a theory that otherwise has credibility and thus gives ammunition to the 'Freak' economists of the world. I also want to make clear that I enjoyed this post greatly.

[odograph]

There is a phrase which comes to mind in such situations ... "Fixation of Belief"

I think the words have some kind of precise academic meaning, but it just strikes me that we meet a lot of people in our daily lives who have become entirely too "fixed" in one belief or another.

Now, as a high-IQ person I tend to think this problem is not precisely linked to that measurement. I think everyone is vulnerable. It is a flaw in human nature. Unfortunately high-IQ people who have become randomly fixed on some idea are able to argue it that much better ;-).

It bugs you more because the sophestry is that much more effective.

[DigitalDjigit]

I bet the evacuation would go much smoother if railroads were used. A train could haul more people without any traffic. I wonder why in this emergency situation they didn't use cargo trains to move people.

[rushfan]

"He knows changes aren’t permanent...
BUT CHANGE IS!"

Rush - TOM SAWYER

[kd]

I think readers of this blog might find this interesting:

http://www.dissidentvoice.org/Aug05/Zingh0827.htm

And (thinking today of Pat Robertson's "fatwa") this quote from Aldous Huxley, no lightweight when it comes to prescience:

"One of the great attractions of patriotism, it fulfills our worst wishes. In the person of our nation, we are able, vicariously, to bully and cheat. Bully and cheat, what's more, with a feeling that we are profoundly virtuous."

[bloodnok]

it's ironic to try to concentrate on reading dimitri's well-argued piece whilst some poorly-paid sod is making a horrid racket with one of those nasty petrol-powered leaf blowers. turns out there's someone wandering about my home every weekday with one of those ghastly machines. makes me hope the peak oil stories come true sooner than later ...

[NeoLotus]

"What most of these doomsday scenarios have gotten wrong is the
fundamental idea of economics: people respond to incentives. If the
price of a good goes up, people demand less of it, the companies that
make it figure out how to make more of it, and everyone tries to
figure out how to produce substitutes for it.

I read this and thought of what happened to Easter Island as they felled the last tree.

[Andy R]

re: John's comments:
"when non-scientists make scientific predictions-they discredit the theory because they're using built in prejudices to promote a theory that otherwise has credibility"

Global warming was the first thing that came to mind when I read that. It's very counterproductive to politicize science and expect people to take you seriously.

I think Dmitri's discussion falls into the same trap in one particular area:

I can relate to Dmitri's observations regarding the non-chalant attitude of "smart people," but I think he goes a bridge too far in attributing free market beliefs to such behavior. Saying that a free market solution will never be able to overcome a dwindling resource base, tends toward a strawman argument meant to delegitimize the free market as a means of dealing with peak oil.

It seems that in discussing free markets, the bar for a peak oil "solution" is purposely set high in order to discredit the idea of a free market response that will lessen its impact.

This contrasts sharply with other scenarios we discuss on this blog (our often-discussed example of post-Soviet Cuba comes to mind)

In short, Dmitri tends toward trashing the free market because it won't solve everything - while we have the authors of Freakonomics casually claiming that it will, thus providing easy ammunition to free-market detractors.

Like any other response to this problem, there is a certain degree to which many approaches can be constructive, while too much of a good thing might not be. Government solutions can quickly become too much of a good thing (at least they always seem to end up that way)
So we should consider that before we react negatively whenever the term "free-market" comes up in discussion.

[Mad Dog Rackham]

"I bet the evacuation would go much smoother if railroads were used. A train could haul more people without any traffic."

Until a locomotive breaks down. It's really hard to pass on a railroad track.

"I wonder why in this emergency situation they didn't use cargo trains to move people."

Packing people into boxcars for "relocation" has a certain stigma attached to it.

Excellent post, Dmitri. Still chewing it over.

[kochevnik]

1) Being 'educated' (or published) is not the same thing as being high-IQ.

2) Being smart is not the same thing as being wise.

3) I belong to several PO sites where polls on IQ indicate that Peakers are generally at the very VERY high end of the IQ range.

4) Those same sites also show tha Peakers also belong to VERY SPECIFIC personality groups (as measured by the MBTI). Some 70 percent belong to 2 groups which comprise just 2 to 4 percent of the general population.

You figure it out.

[Bud Wiser]

A storm in the gulf, labor day weekend, tension in the middle east, the "big-five" have hit the trifecta......

The price and profit of gasoline already produced goes up, and everything in the pipeline goes up more!

[Matt Holbert]

re kochevnik's comments:

I am willing to bet that the MBTI profile is either INTJ or INTP. Several years ago I read that many CEOs were either one or the other. When will they get tired of the growth game and get into the steady state game? The steady state game is far more interesting and challenging.

[Aladdin Sane]

By BRAD FOSS, AP Business Writer
30 minutes ago

Hurricane Katrina disrupted Gulf Coast petroleum output and rattled energy markets on Monday, sending crude oil to a new intraday high and setting the stage for a spike in retail gasoline prices.

The Bush administration said it would consider lending oil from the nation's emergency stockpile to companies that request it, while analysts awaited details on the extent of the damage to the region's platforms, pipelines, refineries and electric grid.

"We're losing a lot of crude oil and also a lot of natural gas," said Lawrence J. Goldstein, president of the New York-based nonprofit Petroleum Industry Research Foundation. Goldstein estimated that total refinery production of gasoline, heating oil, diesel and other fuels could fall by as much as 20 million barrels over the next 60 days.

Royal Dutch Shell PLC said on its Web site that two of its drilling rigs equipped with tracking devices — one operated by Noble Energy, the other by Transocean — had "drifted off location." The company said it would send aircraft to check the status of its assets "as soon as it is safe to do so."

Also Monday, several refiners said damage at their plants appeared to be minimal and oil prices retreated from the day's high of $70.80 a barrel. But if a bleaker picture emerges in the days ahead — it may take more time to assess damage, depending on how rough the seas are — prices could run-up once again, analysts said.

Based on conversations with oil and gas companies operating in the Gulf, Goldstein said it appeared that Katrina would not curb output for as long as last year's Hurricane Ivan, even though the short-term impact was significant.

The federal Minerals Management Service said Monday that 92 percent of the region's oil output was shut-in, with more than 3 million barrels of production lost since Friday. The agency said 83 percent of natural gas output was shut-in, resulting in a loss of 15.5 billion cubic feet of lost production since Friday.

Wholesale gasoline prices in the New York and Gulf Coast markets soared by 25-35 cents a gallon on Monday following reports that as much as 10 percent of U.S. refining capacity had been shut down as a precaution ahead of the storm. One analyst said pump prices nationwide would likely average more than $2.75 a gallon by week's end, up from about $2.60 a gallon Monday.

"Unfortunately, I don't think $3 a gallon is a hyperbolic number in some markets anymore," said analyst Tom Kloza of Wall, N.J.-based Oil Price Information Service. He emphasized that the market reaction is a reflection of supply tightness, not shortages.

Natural gas futures briefly surged more than 20 percent after the temporary closure of a critical distribution hub and on concerns that power outages and flooding could prevent processors from running their plants for days, if not weeks. Even before Katrina arrived, the Energy Department had warned consumers who rely on natural gas to heat their homes to expect sharply higher bills this winter.

On Monday, Puget Sound Energy of Bellevue, Wash., filed a request with state regulators to pass through higher natural gas costs to its customers, and analysts said more such requests were likely around the country.

The powerful storm hit an area crucial to the U.S. energy infrastructure — offshore oil and gas production, import terminals, pipeline networks and numerous refining operations in the southern states of Louisiana and Mississippi.

On Wall Street, companies that ferry workers to and from offshore oil platforms, as well as those that provide other support services to the industry, saw their stock prices rise. Shares of Offshore Logistics Inc. climbed 2.14, or 7 percent, to $34.59 on the New York Stock Exchange, where shares of Oceaneering International Inc. rose by $1.68, or 4 percent, to $43.88.

Chevron Corp., Royal Dutch Shell PLC, BP PLC, ExxonMobil Corp. and others began evacuating workers from the region over the weekend. The government said 615 platforms and 96 rigs were evacuated. As a precaution, refineries capable of processing some 1.6 million barrels a day were closed, while others reduced their production levels. Sabine Pipe Line LLC on Sunday shut down the Henry Hub, a natural gas distribution center that connects to interstate pipelines; the hub was reopened by Monday afternoon.

The Louisiana Offshore Oil Port, the largest oil import terminal in the United States, evacuated all workers and stopped unloading ships on Saturday. Any significant damage to the port would have a devastating impact, analysts said.

With top winds of 145 mph, Katrina passed just to the east of New Orleans as it moved inland and later dropped to a 105-mph Category 2 storm, sparing this vulnerable city its full fury.

"The damage to the electric power grid is the most important source of damage to consider in evaluation of the impact of Hurricane Katrina," said energy analyst Dan Lippe of Petral Worldwide in Houston.

Lippe said the operations of oil refiners, natural gas processors and chemical manufacturers could be disrupted for as little as a few days or as long as a few weeks. The extent of the damage will not be known until later this week, he said.

Light sweet crude for October delivery settled at $67.20 a barrel, an increase of $1.07. Crude futures settled at $67.49 last Thursday, the highest closing price since oil began trading on Nymex in 1983.

Oil prices would need to rise to about $90 a barrel to match the highs of 25 years ago, when adjusted for inflation.

Gasoline futures zoomed 13.37 cents to $2.0606 a gallon on Nymex, but on spot markets in New York and the Gulf Coast, prices were as much as 8-15 cents higher, according to Kloza. Nymex heating oil futures rose by 7.22 cents to $1.9088 a gallon.

Brent crude was not trading Monday, with London's International Petroleum Exchange closed for a bank holiday.

While the precautionary shutdown of oil production and refining roiled oil markets, analysts said the storm's potential long-term damage to facilities was the bigger worry.

Hurricane Ivan resulted in the loss of nearly 44 million barrels of oil production between September 2004 and February 2005.

PVM Oil Associates in Vienna, Austria, said Katrina had the potential to do more damage to southeastern Louisiana than Ivan, which damaged seven platforms and 100 underwater pipelines.

The Gulf of Mexico normally produces 2 million barrels of crude oil a day, or about 35 percent of the United States' domestic output, according to government and industry data.

___

Associated Press Writers George Jahn in Vienna, Austria, Gillian Wong in Singapore and Justin Bachman in New York contributed to this report.

___

http://www.ea.doe.gov/hurricanes.html

[Jeroen Polak]

Great post or posts, in this case, and i read them, understood them, mailed them to a few friends who didn't even bother checking them, and i decided to put on a Charlie Parker album, with my feet on the table, a beer and a Cuban cigar.

I'm done convincing people with the inevitable stuff i read here and elsewhere. They won't listen, think i'm a fool, and go on with their everyday life.

It's good to know there's sites like Jim's.

[Jeanne]

"The will to believe is perhaps the most powerful but certainly the most dangerous human attribute."
~Dero Saunders

[george]

Looks like the storm wasn't all that bad. As for using the train to evacuate people what do you do with your $80,000 Audi A-8, or your $60,000 Hummer (or 2001 Acura in my case)? Leave them to the floodwaters and looters?

[Tom Lord]

You go girl. Very nice essay and thinks to Mr. Kunstler for giving
you the mic.

It's so good that I feel really comfortable focusing on a few flaws
that ought to be pointed out and a little bit of "attitude adjustment"
for which I advocate. I had a hunch this site had *something* to
offer to intellectualism and, doggonnit, you've proven it.

First, don't stick to painting this as a battle between progressives
and a detached "high IQ" elite. It may make good copy but it's
divisive and intellectually weak (if not outright dishonest):

Good economists are some of the finest political *technicians* of our
time. Their predictions are significantly accurate though often
couched in a technical lingo that resembles but does not equate to
what other people would mean if they spoke the same words -- they
speak a "technical lingo". You've done a service with this essay by
offering a bit of a Rosetta stone: very good theories that predict
"markets will adjust" do not mean that "there won't be massive social
disruption, including the possibility of widely spread privation".
(Economics 101 says, simply, that such privation will be, in some
technical sense, optimally distributed.) When read carefully, both
sides of this "debate" agree that massive social disruption is a
plausible and perhaps likely outcome in the medium-term future (where
"medium-term" refers to a modest percentage of a single human
lifetime). It's rhetorically effective, I think, for you to frame
this shared conclusion as a disagreement but it is not really a
logically sound contribution to the debate to label your "opponents"
in this debate as liars or oblivious fools when, really, nothing you
are saying contradicts anything they have said. They are using (and
advocating for) a technical language and you are citing flaws in the
practice of interpreting their technical language as plain english.
(My understanding is that the freakonomics book aims to convey the
semantics of the technical language in order to better convey the
theories it is used to express -- a wholly legitimate exercise though
one that seems to have failed in your case.)

Second, let's not be overly protective of the pre-peak (and
pre-war-on-terror) social order. Uninterrupted by these disruptions,
it is predictable that the economic injustice and ecological disasters
of our social order would perpetuate and increase from their already
obscene proportions. In other words: may you live in interesting
times. You, me, and the rest of us face a "crisis-aka-opportunity".

Massive social disruption is, *potentially*, a welcome thing. It is a
chance to correct many of the ills inherited from history. It is
incumbent upon progressives not to criticize the right for failing to
be more shrill in describing the upcoming disruptions, but rather the
progressives ought to be wondering how to *plan and execute*
preparations for those changes, so that we land in a more socially
just, more sustainable, more desirable state.

By the way, have you noticed that WW-III is ongoing? The cold war
didn't end, it simply thawed out. Between frozen and "hot" is a
period of relative normalcy which could (only slightly arbitrarily) be
defined as the time between the fall of the Berlin wall and 9/11.
Like the climate itself, it's on a trajectory to just get hotter and
hotter. There is no room for internecine rivalry in this climate.
It's time for progressives to figure out how to organize and lead
pragmatic change. Simple changes in consumerism ("I'll buy a cabin
and install solar panels; I'll only buy organic; I'll convert my volvo
to biodiesal") won't cut it. Use your "leisure" time to buckle down
and focus on other (especially oppressed) people's "pleasure" -- and
don't make the anti-economic-theory assumption that you can lead, from
your privileged position, by examples of how you spend your money to
preserve a pre-crisis lifestyle simply because it makes you feel more
virtuous.

-t