Tuesday, June 15, 2010



Abiotic Oil and the BP Gusher














Cushing asks if oil comes from dead things.

It appears that the never ending and expanding gusher in the Gulf is bolstering the abiotic oil theory. That is: oil did not form out of dead plants and animals. Abiotic or abiogenic oil theory holds that hydrocarbons were present at the formation of the earth and were trapped in abundance in its mantle. One may consider that the atmosphere of the gas giant planets contains methane in relatively large quantities. Carbon and hydrogen are  plentiful elements in the solar system and the universe.  Both must have been present in large quantities in and on the Earth at its formation; our kind of life is based on it. Under pressure and heated within the Earth these elements joined as hydrocarbons. Therefore hydrocarbons were present in a relatively pure form on earth before there was carbon-based life. Organic chemicals led to organic life. It is difficult to explain deep wells six and seven miles below the surface of the earth gushing oil at thousands of PSI using the biological hypothesis. So we must begin to accept the possibility that life came from petroleum; not the other way around.

Peak oil theorists tend to get a bit perturbed by abiotic theory. I am in sympathy with their desire to end dependence on oil consumption to power the world for many reasons; but facts are facts. Biogenic oil is looking more and more ridiculous. It seems that the big dirty secret is that there is more oil than can be imagined deep below the surface. I am researching this issue and will post more on it in the future. It is interesting that this theory is quite well accepted in Russia and they are drilling deep wells and selling as much oil as they can. Perhaps they understand that the 'oil is scarce and running out meme' has run its course and they are cashing in as much as possible before we all catch on. Meanwhile I think we can expect abiotic oil theory to become more and more accepted and discussed as BP's oil gusher destroys the Gulf and beyond.

Sunday, June 13, 2010

Say's Law
or, the Law of Markets 

la loi des débouchés


"Aggregate supply creates its own aggregate demand."
[Inherent in supply is the wherewithal for its own consumption.]
-Jean-Baptiste Say (5 January 1767 – 15 November 1832)
Traité d'économie politique, 1803

Say was a French economist. His Law has been variously interpreted. But it is not so simple as it appears. It is obvious that there can be no consumption without a product that may be consumed. But it is also obvious that there are limits to consumption no matter how much supply may appear in any market. We have seen an example of an unbridled real estate supply generated by unscrupulous banks willing to loan money for mortgages to almost anyone. Government policy implicitly insuring the banks against loss turbo charged this supply. Housing is still a desirable and necessary commodity but the public's ability to pay for this commodity which was also seen as an investment could not keep up with rising expectations. The same social elements that desired to profit from this market also suppressed the wages of those who were expected to pay the price of the endlessly rising housing valuation. 
So we see that a desirable commodity may not always create its own demand if the price is too high and the market is based on an unsustainable easy credit. 
We also know that undesirable and inferior commodities do not create an aggregate demand. Say also had no experience with our consumer culture that magically and alchemically turns vast quantities of useless, or ephemeral objects into desirable accoutrements.
But Say wrote in a time when money was real. It was gold or silver. Or one paid for product with product.
Today money is a ghost. It is created by banks out of nothing by decree. The old Laws do not apply and economists have fallen through the looking glass.

Say on the need for good government:
"When public authority is not itself a spoliator, it procures to the nation the greatest of all blessings, protection from spoliation by others. Without this protection of each individual by the united force of the whole community, it is impossible to conceive any considerable development of the productive powers of man, of land, and of capital; or even to conceive the existence of capital at all; for it is nothing more than accumulated value, operating under the safeguard of authority. This is the reason why no nation has ever arrived at any degree of opulence, that has not been subject to a regular government. Civilized nations are indebted to political organization for the innumerable and infinitely various productions, that satisfy their infinite wants, as well as for the fine arts and the opportunities of leisure that accumulation affords, without which the faculties of the mind could never be cultivated, or man by their means attain the full dignity, whereof his nature is susceptible."
But Say also felt that there was a potential for replacing government with a kind of private system of security. However he had no experience with the modern gigantic corporation (which is in itself a creature of bad government) that cares nothing for anything but profit.

"Home life ceases to be free and beautiful as soon as it is founded on borrowing and debt." Henrik Ibsen, A Doll's House


My Maxim of the Day
Corporations are created by government; men are created by God.