Some considerations on the Malthusian and the "Smithian" models especially in reference to the price of oil.

The argument here: consumption is a very good thing for humanity. It generates jobs, raises standards of living, pays for better health coverage, reduces family size, encourages altruism and generally makes us more humane; consider what would happen to the economy if we did not grow and consume? Back to the Dark Ages?

As you read through this, bear in mind that science may provide a "prediction" of when we will run out of petroleum based on current consumption and known reserves.

Classical economics [admittedly the 'dismal science'] predicts that as the supply declines and the demand is steady or increasing, the price should rise until society conserves and/or develops alternatives.

The questions are:

• what is the "real" price of petroleum?
• would rationing work?
• And what is the price level that would yield conservation?

Note that oil producing countries make rational POLITICAL decisions about how much oil to release; in many European countries the price of gas includes a tax of 80 to 85% above the market price. Indeed, and as is demonstrated by the chart below, one might make a case for honoring the petroleum companies for keeping the price low. Their success has clearly 'feuled' economic growth and the rise in the standards of living world-wide.

Consider the following:

Conclusion? What is 'feuling' [I know it is a the pun] consumption? Scarcity? or a low price? low demand?

In these two charts (prepared by nic) the price of gas over the last 50 years is compared to the gross domestic product, to the Dow Jones 30 industrials and to the price of white bread.

Note: the price of bread in Market of Choic was for OroWheat "Country White" probably a more higher end bread than the generic white.

In Germany on Sunday the price of gas was $8 / gallon; and no sign the consumption is being reduced. And in Venezuela it is $0.12 / gallon.

The 'real price' here is in $ adjusted for inflation.

description	1954	real price 1954	2004	change since 1954
GDP	1522	10,281	43,950	3.27 x
Gas	$0.28	$1.89	$2.20	0.11
DowJones Industrials	330	2,229	12350	3.64
white bread	0.15	1.02	3.59	2.52

Will we run out of petroleum? ever?

If you believe there will be real shortages soon, then you have to ask

• Are our politicians are urging a rational / scientifically based course of action to encourage conservation when they complain about price gouging of the oil companies? Surely if we want to reduce consumption we should raise the price. Why would citizens object?
• And if we really believed we were going to run out of oil in the near future, why do we collectively fail to act rationally to reduce oil consumption?
• What are the options?
  • Perhaps we need a more authoritarian system to distribute oil based on the needs of the collective. Afterall, the "enlightened" will have an answer
  • or, alternatively introduce a system of 'rationing' one in which each person receives the same amount
  • convince people to consume less and accept a reduced life style including the inevitable decline in productivity and employment
  • allow, indeed encourage the price to rise to discourage consumption and/or find alternatives

The conundrum: science and reason may suggest a course of action, but politics, emotion, values, etc. [aka: CULTURE] all affect the outcome.

Does this mean that CULTURE is bad for us? and SCIENCE good?