The market does some crucial jobs so well that we're tempted to make a quasi-religion of it. But at other jobs it fails: for example, at giving a timely signal to prepare for "peak oil."
In their new book, analyst Robert Hirsch and his colleagues take on the coming decline in global oil production, or as they put it, "the impending world energy mess." They estimate that a decline will start in 2-5 years, following the present "fluctuating plateau" on a graph of production.
The kicker is their conclusion that, once we start a "crash program," shifting our fleet of vehicles will take "more than a decade"; and building the infrastructure for new fuels, 10-20 years.
Starting the transition when? Well, we could have begun when the same authors, in a report to the U.S. Department of Energy, made clear in 2005 that the transition would probably take that long. But apart from enough spread of ecological consciousness to elicit some "greenwashing," this transition of infrastructure has hardly begun, and according to an interview with Hirsch, probably will not start until after the decline actually begins or, as an economist would say, when we get the market signal.
If we say the decline will begin by around 2014 and use a duration of just 15 years for the transition, that would bring us to 2029. After then, life could be less turbulent, at least as far as energy is concerned; we can look forward to celebrating. Until then, trouble. But we can still lessen the trouble.
While Hirsh in passing indicates some skepticism about global warming (praise to him for focusing on at least one crisis), people who take warming seriously describe it, in the phrase of Nicholas Stern in a U.K. report, as "the greatest market failure in history."
Ideally, we would explore what each mechanism (such as "the market") is good for, in order to discover its sweet spot, and avoid making an ideology out of something of great but definitely limited usefulness. If so, we'd honor the market for what it does well, and reject any claims that it will necessarily help us to adjust, in a timely way, to situations such as climate change (Stern) or the peak of global oil production (Hirsch).
Governing by quasi-religious beliefs has led humanity down some strange roads. Then mechanisms that do yield huge benefits may get driven into the scrapyard when a grandiose ideological extension gets us into trouble.
Meanwhile, Hirsh and his colleagues deserves a Cassandra medal, named after the Greek princess who could foretell the future but was fated not to be believed. To the medal we could, for Hirsh, attach a Sisyphus ribbon in honor of the chap sentenced to push a stone up a mountain, only to watch it roll down again, then start pushing again.
In 2005, also with coauthors Roger H. Bezdek and Robert M. Wendling, Hirsch declared that it would take "more than a decade" to "achieve significant overall fuel efficiency" and that "world-scale" efforts to replace conventional liquid fuels for transportation "will require 10-20 years of accelerated effort." The starting line for a a crash program keeps being pushed forward, but in Hirsh's present view, the decline will begin no later than 2015, possibly as soon as 2012.
In a recent video interview, Hirsh displays the controlled demeanor of a careful, well-informed analyst, though the mask slips when he speaks of critics of the Canadian oil sands project: They look at the environmental effects, he says, "from the point of view of being fat and happy," and assume that "these wonderful renewables [such as windmills and solar panels] are going to take care of everything. That's just plain wrong." What is their basic problem? Growing a bit hyperbolic, Hirsh says "they don't understand how it is to have nothing."
Hirsch and his team merit our thanks for their basic message is that conventional liquid fuels are soon going to become increasingly scarce and expensive; that mitigation will take a long time; and that the alternatives can't make up for the oil we are going to start losing.
The model T arrived in 1908, and of course oil was a major factor in the Second World War, but the major expansion in petroleum use came within about the last half century. Much of what almost anyone under 60 years old regards as normal depends on an ample supply of cheap oil. This fuels our transportation system for people and goods, allows globalization, facilitates industrial agriculture, serves as feedstock for plastics, pesticides, and many other products.
If the supply begins to fall off in just a few years, and especially if demand for fuel increases, we will get a severe shock, in the form of price volatility that will drag down the whole economy, even if the economy has meanwhile returned to what we regard as normal.
If the public has absorbed what is likely to happen and begun responding to it, we can still gain 2-5 years of transition time. In any case, Hirsh has some tips for individuals wanting to prepare.
What's the lesson about the market?
The market did not prevent the recent economic breakdown. According to Alan Greenspan in recent testimony, his paradigm for what the market could accomplish was mistaken. And the market did not jolt us into preparing, in time, for at least two major crises soon to become obvious.
Given that we can't invest trillions on the basis of mere speculation, and that we are accustomed to responding to market signals, where are we going to get the data on the basis of which to prepare in time? How is this data to be taken seriously when vested economic interests would be upset by the data and have learned techniques for casting doubt on it? And when our only model for shared sacrifice is a war or an economic collapse?
Some say that easy oil isn't running out; the planet isn't warming up; species aren't dying; it doesn't matter that corporations have shipped so much of our industrial base abroad; the economy is recovering or would if only we shrank the government; and we can always count on the market to signal when something needs to be done. I wish any part of this were supported by the weight of the evidence.
But thanks to some analysts, there's still time.