The Flat Earth Economists

Posted on November 25, 2008

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At the beginning of this century the price of oil was around US$25 per barrel and the world’s collected economic expertise on the price of oil was unanimous that it would stay the same until 2025. As shown in the figure below the prognosis was extremely “flat”. Colin Campbell gave the economists the nickname “The Flat Earth Economists”. Last week I debated with Michael Lynch, one of the international authorities for the FEE, and last Monday it was time to debate with Marian Radetzki, Sweden’s leading representative of the FEE.

Scania, the Swedish truck company, had organised an ”energy day” and together with some others we discussed energy and the future. Professor Radetzki started with the prognoses that the Energy Information Administration (EIA in the US Department of Energy) and the International Energy Agency (IEA) had presented and took these prognoses as truths. He foresaw a continued increase in oil consumption and even asserted that there were no problems since there already exsisted more resources in reported reserves than it was calculated would be consumed by 2030. Concepts such as depletion and decline were not part of the picture.

The fact that the organisers had placed me after Radetzki gave me the chance to respond to his speech. I pointed out that the EIA and IEA are political organs and that, as a critically-thinking professor, one should be sceptical of their politically-biased energy information. If, like Radetzki, one accepts everything without critical review then one becomes a “politicians’ megaphone”. In 2001 I wrote about peak oil for the first time in the Focus column of the national newspaper Svenska Dagbladet and Radetzki’s reply was that I was engaged in “craziness”. His motivation was that the world’s leading economists had presented prognoses that showed that the oil price would be stable until 2025 and if peak oil was real then they naturally would have suggested a completely different price development scenario.

Today we know that the price developed in a completely different way. Even thought the oil price has recently wandered around the US$50-60 level Radetzki is still 100% wrong. Oil production is still following the prognoses that ASPO presented in 2002.

(Swedish)

I början av 2000-talet var priset på olja runt 25 dollar per fat och världens samlade ekonomiska expertis på oljepriset var ense om att priset skulle förbli det samma fram till 2025. Som framgår av figuren är prognosen extremt ”platt”. Colin Campbell gav ekonomerna smeknamnet ” The Flat Earth Economists”. Förra veckan debatterade jag med Micheal Lynch, en av de internationella auktoriteterna för FEE, och i måndags var det dags att debattera med Marian Radetzki, Sveriges ledande FEE ekonom.

Scania hade ordnat en energidag och tillsammans med några andra diskuterade vi energi och framtiden. Professor Radetzki utgick från de prognoser som EIA, Energy Information Administration (US Department of Energy), och IEA, International Energy Agency, presenterat och behandade dessa prognoser som sanningar. Han såg en fortsatt ökning av oljekonsumtionen och hävdade även att det inte fanns några problem eftersom det redan nu fanns mer resurser i bevisade reserver än av som man beräknade att det skulle konsumeras fram till 2030. Begrepp som depletion och decline fanns inte med i bilden.

Det faktum att arrangörerna hade placerat mig efter Radetzki gav mig möjlighet att bemöta han anförande. Jag poängterade att EIA och IEA är politiska organ och att man som kritisk professor borde ifrågasätta det energipolitiska budskapet. Om man som Radetzki acceptera allt utan kritisk granskning blir man en ”politikerna megafon”. År 2001 beskrev jag för första gången peak oil på Brännpunkt i Svenska dagbladet och Radetzkis svar blev att jag sysslade med ”tokerier”. Motiveringen var att världens ledande ekonomer hade presenterat prognoser som visade att oljepriset skulle vara konstant fram till 2025 och om peak oil skulle vara en verklighet så skulle de naturligtvis ha föreslagit en helt annan prisutveckling.

Idag vet vi att prisutvecklingen vari helt annorlunda. Fastän att oljepriset dalat till 50-60 dollar per fat har Radetzki fortfarande 100% fel. Vad det gäller oljeproduktion så följer den fortfarande de prognoser som ASPO presenterade 2002.

Posted in: Dagsaktuellt