Tuesday, April 18, 2006

One Teeny-Weensy Little Mint

Say what you will, the economic journalists do learn from their mistakes. A year ago they were saying that the world economy would be harmed if oil prices stayed above $50 a barrel. They’ve certainly learned not to say that anymore. Unfortunately, that doesn’t mean they were wrong the first time, even though oil at $72 a barrel hasn’t resulted in an obvious slow down. It may just mean that the law of overshoot is in operation and that everybody will have lost interest in the catastrophe before it arrives and surprises their exhausted expectations. Even then, the temptation will be to ascribe the crisis to dramatic world events in Iran or Venezuela rather than to unsupportable underlying trends.

Everything happens at once, which is certainly inconvenient. Out here in California, for example, you still hear people insisting that our power crisis was the result of market manipulation rather than of a lack of generating capacity. Indeed, there would have been no blackouts had the power companies been staffed by angels. On the other hand, the narrowness of the reserve margins is what made it possible for Enron and the others to ravage the state. By the same token, when things go to hell over oil, some particular set of events will punctuate the transition to a new energy regime; but the fact that a civil war in Nigeria or an attack on Iran or another hurricane in the Gulf of Mexico could upset everything will have been a result of the advanced state of the game of Jenga in which we are currently engaged.

You need both the shit and the fan. Unfortunately, there isn’t any shortage of either.

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