In a column yesterday, Paul Krugman discusses the widely held theory that the recent spike in oil prices is the newest financial "bubble." He entertains various possibilities and concludes that financial speculation is not the most fundamental basis of the rise in oil prices.
"The only way speculation can have a persistent effect on oil prices, then, is if it leads to physical hoarding — an increase in private inventories of black gunk. This actually happened in the late 1970s, when the effects of disrupted Iranian supply were amplified by widespread panic stockpiling.
"But it hasn’t happened this time: all through the period of the alleged bubble, inventories have remained at more or less normal levels. This tells us that the rise in oil prices isn’t the result of runaway speculation; it’s the result of fundamental factors, mainly the growing difficulty of finding oil and the rapid growth of emerging economies like China. The rise in oil prices these past few years had to happen to keep demand growth from exceeding supply growth."
In short, the rising cost of oil is due to rising demand and constant, even declining, supply.
What's most interesting about Krugman's column is his observation of the political reaction to the growing evidence of constrained oil supplies. He writes, "Traditionally, denunciations of speculators come from the left of the political spectrum. In the case of oil prices, however, the most vociferous proponents of the view that it’s all the speculators’ fault have been conservatives — people whom you wouldn’t normally expect to see warning about the nefarious activities of investment banks and hedge funds. The explanation of this seeming paradox is that wishful thinking has trumped pro-market ideology. After all, a realistic view of what’s happened over the past few years suggests that we’re heading into an era of increasingly scarce, costly oil."
The denial of the growing evidence of - yes - "peak oil" by commentators on the Right resembles their vociferous denial of global warming (more sophisticated responses now reveal that, all along, it wasn't the reality of global warming that bothered them; it was the implications. And they are daunting).
The same is true of the reaction on the Right about Peak Oil (in fairness, there's a good deal of techno-optimism on the Left as well; while the Right thinks there's plenty of oil - enough in ANWR to run our civilization for another century, it is implied - the Left thinks we're going to replace oil with algae and fairy dust.)
Krugman's column prompted Andrew Leonard over at Salon.com (their in-house Peak Oil man - h/t Joe Knippenberg) to post a smart column about "the peak oil culture wars," observing what should be obvious at this point - the debate isn't about the facts, it's about the implications. And, people on the Right - "fighting like caged rats" - don't want to entertain the possibility that all those "dirty Gaia-worshipping hippies might be right" - and worse still, we might have to change our behavior.
"Partisan conservatives pooh-pooh peak oil (and human-caused climate change) because they think that to concede that these challenges are real and must be confronted is to acknowledge that greed is not always good, and that free market capitalism must be restrained, or at least tinkered with substantially. Peak oil and climate change are fronts in the culture wars, and to some conservatives, watching the price of oil rise as the Arctic ice melts, it might feel like being in Germany at the close of World War II, with the Russians advancing on one front while U.S.-led forces come from the other. The propositions that cheap oil is running out and the world is getting hotter -- as a result of our own activities -- threaten a whole way of life. The very idea that dirty Gaia-worshipping hippies might be right is absolute anathema.
"Given that many on the left also see peak oil and climate change as cultural battlefields, as weapons with which to assault enemies whose values they politically and aesthetically oppose (see James Kunstler), it's no wonder that some conservatives are fighting back like caged rats, or that they want to blame speculators for oil prices, or biased scientists for climate change."
My own view is that this debate is going to collapse as more people realize that our high oil prices are NOT the consequence of financiers or the evil oil companies stoking profits (all along, their production of oil is declining), but the cold hard facts of reality. The tired Left-Right consensus - one essentially designed to obscure that there is no real disagreement about whether a growth economy premised on an itinerant and rootless workforce is desirable - is going to collapse and something else will take its place. The great fear is that a new consensus will form that someone is to blame, and we have plenty of weapons to get what we want, or at least to distract us from our penury. The great possibility is that we will realize that a future of less driving, stable neighborhoods, greater localism, the reinvigoration of diverse local cultures isn't as bad as our kneejerk panic about impending change would lead us to believe. Surely this is something a "conservative" would not object to?
What may be most productive in coming years is to stop calling this cadre of economic libertarians - what we now call "the Right" or even conservatism - conservatives. There is nothing they want to conserve - nothing in the natural or moral ecology. They are rapacious exploiters who want to use every last natural and cultural reservoir for their own immediate profit - even at the price of leaving nothing for their children. Recall, it was Dick Cheney who said "Conservation may be a sign of personal virtue, but it is not a sufficient basis all by itself for a sound, comprehensive energy policy." Probably true, but it's a damned good place to start, and we fool ourselves if we think we are not going to need substantial reservoirs of personal and political virtue in coming years.
Soon, if not soon enough, I predict, there will be a party of conservatives and a party of "live now'ers." Live now'ers have original sin on their side, and are likely to win a lot of votes until it's clear that the grasshopper was wrong and the ant was right. Then they will tell us it's time to get the guns. Are you sure that's the side you want to be on?