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March 16, 2009


Seto Kaiba

Well, currently, "everyone" seems to be betting on peak oil and higher commodity prices in the future. Just go to "Seeking Alpha" and the people there aren't "paranoid, market-hating crackpots" and many of them now "believe" in peak oil. (Well, maybe they are crackpots.) Of course, the "peak oil" thesis did make tons of money for those who used in 2004-2005 and the first half of 2008. Regarding the market, it is in contango as market participants except higher oil prices in the future (maybe they believe in peak oil.)

Of course, consensus investing is a disaster. And falling oil prices do not falsify peak oil... the high oil prices could be explained by index-speculators bidding up the prices on oil futures and rolling them over near maturity. When a bunch of people decided to cash out of that ponzi scheme (this is not a negative criticism of the market, but rather market participants), then oil prices fell.


[...And falling oil prices do not falsify peak oil... the high oil prices could be explained by index-speculators bidding up the prices on oil futures and rolling them over near maturity...]

Okay, so this is bullshit. If falling oil prices dont falsify peak oil, then how could rising oil prices have established peak oil in the first place? This is classic immunization against falsification -and thats what annoys me about the entire peak oil cult. Peak Oilers claim that rising oil prices predict a future in which oil will become near non available - what causes rising prices is irrelevant. What is relevant is the effect of rising prices - which will be to make oil near nonavailable. Now, oil prices begin to rise and peak oilers shout Yay! They fall and peak oilers begin - "well, the oil prices werent really rising the first time - it was just index speculators! But just you wait... Just you wait... They'll rise again for sure! And this time around, it'll be due to peak oil!" Classic Marxian immunity! Explain away everything that falsifies your hypothesis!

Look Seto Kaiba, I have a simply question for you - what observable phenomenon do peak oilers believe will falsify their thesis? Because it is those putting up a theory that have a responsibility to establish that their theory passes the muster of scientific thinking. Peak Oil isnt falsifiable, it goes against basic economic thinking, and history cautions against the sort of interventions that Peak Oilers demand that we make!

Seto Kaiba

My main quibble is not whether peak oil is valid or not... It is whether the people who believe in peak oil are "market-hating crackpots." Of course, most people who believe in peak oil are "market-hating crackpots," but there are a few people who accept peak oil and tried to use the market to make money off of it such as Peter Thiel, Jim Rogers, and T. Boone Pickens. I do not think one can call them "market-hating crackpots."

I also stated that the oil futures market was like a ponzi-scheme in the first-half of 2008 were people were "investing" in commodities because it was a "diversifier," an inflation hedge, and that classic argument about commodities being scarce. Eventually there wasn't enough demand or money to buy the oil futures when commodity index funds decide to roll them over because they don't take delivery.

Well, I do accept your criticism of peak oil where rising prices "confirm" it and falling prices do not falsifiy it.

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