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Thank you for the thoughtful comment. I believe I read that John D. bought up smaller companies because he was obsessed with the extractive commodity boom-bust

Thank you for the thoughtful comment. I believe I read that John D. bought up smaller companies because he was obsessed with the extractive commodity boom-bust cycle. His intention was to raise prices. I'm really interested in this comment: "oil prices are set low by the market" Do you mean when externalities are included? Re: consortia, and cabals - restricting output and raising prices will bring new entrants into the market. Eventually the cartel loses control.

dredmorbius 10y ago
The market considers only extraction costs, not the natural capital's costs of replacement, ultimately measured in either time or energy, or a combined function of the two. It's as if you came into a windfall account, and could make withdrawals over time, but only counted cab fare to the bank as cost, not depletion of the principle amount. I'm researching on why that was the case, though a developing understanding of many factors involved seems to be at play. One book notes that at the present rates of consumption, a single cubic mile of U.S. coal reserves would last 1,000 years. And there were 1,100 such cubic miles, a one million years' supply. (Henry Erni, 1865, https://archive.org/stream/coaloilpetroleum00erni#page/14/mode/2up https://archive.org/stream/coaloilpetroleum00erni#page/14/mo...) At the time, estimates of the age of the Earth itself ranged from a few tens of thousands of years to perhaps a few tens of millions. So one million years was a substantial fraction of all eternity. Oil was thought to flow underground in rivers, and the "rule of capture" from English common law held (and still does in some states of the U.S.). Incentives were to massively over build extraction capacity, absolutely flooding markets, despite crashing prices. Normal consideration of externalities still fails to properly account for this. It's a flaw in fundamental economic pricing theory. There was a time alternatives were considered. They've been wrongly abandoned.
- anexprogrammer 10y ago
  It's a tendency of capitalism to ignore externalities such as highlighted whenever possible. If we're to have a long term future we need the system to include such costs rather better. > At the time, estimates of the age of the Earth itself ranged from a few tens of thousands of years to perhaps a few tens of millions. So one million years was a substantial fraction of all eternity. James Hutton had been investigating the geology of Scotland and forming much of the basis for modern geologic timescales in the mid and late 18th C. By the mid 19th, most of the geological periods, we still use today, had been produced. Of course many geologists of the time had a tendency to believe in unlimited age! Were it not for Lord Kelvin being so famously wrong we may have got decent estimates quicker. Even Kelvin was in the 30-400m years range. http://www.es.ucsc.edu/~pkoch/EART_206/09-0108/Supplemental/England%20et%2007%20AmSci%2095-342.pdf http://www.es.ucsc.edu/~pkoch/EART_206/09-0108/Supplemental/... (pdf) So they were mainly arguing about tens and hundreds of millions by mid 19th century I believe. It took 50 more years until 1913 when Arthur Holmes took estimates from hundred millions to billions.
  - dredmorbius 10y ago
    Yes, this is the history of estimates of Earth's age I was referring to. Hutton, Huxley, and Lyell famously argued for longer periods, but didn't have a solid basis for their argument other tthan general geological principles. Holmes applied radiologicaal methds and got to the right ballpark, 1-3 billion years. By the mid-1950s, currently accepted estimates of 4.5 billion years were given, with high accuracy, based on meteoric samples as well as very old Earth rock from Western Australia. Note too that plate tectonics, also crucial for understanding fossil fuel formation, weren't accepted until that time. Age estimates were further validated through Lunar and Martian (meteors found on Earth) rock samples. My point is that early theory, law, and practices of petroleum and other fossil fuel extraction were made with a significantly incorrect understanding of the actual facts of their origin. I'm rather in the middle of trying to figure out how inaccurate those beliefs were, but the time period was distinctly off.
    - anexprogrammer 10y ago
      A fascinating, and my favourite, period of history. At risk of distracting you there was a good documentary series, BBC's Men of Rock a few years ago. It's all on Youtube if you want to watch. It's maybe a bit light on details at times, but the stunning views of the highlands make up for it!

dredmorbius 10y ago

The market considers only extraction costs, not the natural capital's costs of replacement, ultimately measured in either time or energy, or a combined function of the two. It's as if you came into a windfall account, and could make withdrawals over time, but only counted cab fare to the bank as cost, not depletion of the principle amount. I'm researching on why that was the case, though a developing understanding of many factors involved seems to be at play. One book notes that at the present rates of consumption, a single cubic mile of U.S. coal reserves would last 1,000 years. And there were 1,100 such cubic miles, a one million years' supply. (Henry Erni, 1865, https://archive.org/stream/coaloilpetroleum00erni#page/14/mode/2up https://archive.org/stream/coaloilpetroleum00erni#page/14/mo...) At the time, estimates of the age of the Earth itself ranged from a few tens of thousands of years to perhaps a few tens of millions. So one million years was a substantial fraction of all eternity. Oil was thought to flow underground in rivers, and the "rule of capture" from English common law held (and still does in some states of the U.S.). Incentives were to massively over build extraction capacity, absolutely flooding markets, despite crashing prices. Normal consideration of externalities still fails to properly account for this. It's a flaw in fundamental economic pricing theory. There was a time alternatives were considered. They've been wrongly abandoned.

anexprogrammer 10y ago
It's a tendency of capitalism to ignore externalities such as highlighted whenever possible. If we're to have a long term future we need the system to include such costs rather better. > At the time, estimates of the age of the Earth itself ranged from a few tens of thousands of years to perhaps a few tens of millions. So one million years was a substantial fraction of all eternity. James Hutton had been investigating the geology of Scotland and forming much of the basis for modern geologic timescales in the mid and late 18th C. By the mid 19th, most of the geological periods, we still use today, had been produced. Of course many geologists of the time had a tendency to believe in unlimited age! Were it not for Lord Kelvin being so famously wrong we may have got decent estimates quicker. Even Kelvin was in the 30-400m years range. http://www.es.ucsc.edu/~pkoch/EART_206/09-0108/Supplemental/England%20et%2007%20AmSci%2095-342.pdf http://www.es.ucsc.edu/~pkoch/EART_206/09-0108/Supplemental/... (pdf) So they were mainly arguing about tens and hundreds of millions by mid 19th century I believe. It took 50 more years until 1913 when Arthur Holmes took estimates from hundred millions to billions.
- dredmorbius 10y ago
  Yes, this is the history of estimates of Earth's age I was referring to. Hutton, Huxley, and Lyell famously argued for longer periods, but didn't have a solid basis for their argument other tthan general geological principles. Holmes applied radiologicaal methds and got to the right ballpark, 1-3 billion years. By the mid-1950s, currently accepted estimates of 4.5 billion years were given, with high accuracy, based on meteoric samples as well as very old Earth rock from Western Australia. Note too that plate tectonics, also crucial for understanding fossil fuel formation, weren't accepted until that time. Age estimates were further validated through Lunar and Martian (meteors found on Earth) rock samples. My point is that early theory, law, and practices of petroleum and other fossil fuel extraction were made with a significantly incorrect understanding of the actual facts of their origin. I'm rather in the middle of trying to figure out how inaccurate those beliefs were, but the time period was distinctly off.
  - anexprogrammer 10y ago
    A fascinating, and my favourite, period of history. At risk of distracting you there was a good documentary series, BBC's Men of Rock a few years ago. It's all on Youtube if you want to watch. It's maybe a bit light on details at times, but the stunning views of the highlands make up for it!