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This is bad, because it will incentivize more natural gas being drilled and burned. The long term logic is ironclad and simple: Given a price P of a resource, a

This is bad, because it will incentivize more natural gas being drilled and burned. The long term logic is ironclad and simple: Given a price P of a resource, all recources available cheaper than P will be eventually dug out and used. The only feasible way to stop digging fossil fuels is to get their price so low that it is not worth extracting them.

syops 5y ago
That’s not the only feasible way to accomplish this. Taxing natural gas enough would accomplish this too. Banning it’s use will do the trick also. Making usage of alternatives cheaper is another way.
- beefield 5y ago
  Those are just some of the means to get the price of natural gas lower, which is still the only fundamental reason that reduces the amount of gas/oil/whatnot being dug out.
  - lotsofpulp 5y ago
    The fundamental reason that fossil fuel is pumped out is because people buy it, and the price is a reflection of where supply curve meets the demand curve. People will choose to buy less if alternatives are cheaper and accomplish the same needs, but with something like fossil fuels where all the infrastructure is already setup and fossil fuels are convenient, the end user price going down almost certainly means demand going up. The only way less fossil fuel is consumed is if people cannot afford it (equivalent to prices rising) or if people prefer something else. Or if there are less people overall period.
    - beefield 5y ago
      If people can't afford it, it means it is expensive, and only way for it to be expensive is that someone can afford it. And the more expensive it is, the more it is going to be extracted. In the end, it is very simple. You want to stop fossil fuel consumption, you need to get the price paid to the producer so low that the producer does not want to produce. Producer price can be high only if someone is willing to pay it. In economics terms, you do not only need to get price down, but the whole demand curve. That is, with any given price, there needs to be less demand than currently is. The supply side is fixed. Anything profitable will be extracted and burned. I do not see how anyone can disagree with that.
      - lotsofpulp 5y ago
        I believe you have cause and effect backwards. You move along supply and demand curves to come to the price. Prices move according to demand and supply curves, not the opposite. For example, if fossil fuels became 10x cheaper, that will flow into all economic activity that uses fossil fuel to be cheaper, which is basically everything. Which then means people will consume more of everything, because that is what people like to do. The supply side of fossil fuels is definitely not fixed. It is true that sufficiently low fossil fuel prices will cause some producers to not make a profit, who will then stop extracting fossil fuel. But due to the nature of fossil fuels being able to facilitate in almost all aspects of life and being a very fungible source of energy, eventually the steadily increasing demand will cause prices to eventually increase (unless sufficient alternative sources of energy are available at sufficiently cheap prices and convenience). The world has 8B people, with more than half who can easily consume far more fossil fuel as they gain more wealth and catch up to developed nations. Making fossil fuels cheaper just means more poorer people will gain the ability to buy bigger cars, air condition their homes, start flying to places, etc. Just look at fossil fuel consumption worldwide: https://ourworldindata.org/grapher/global-fossil-fuel-consumption https://ourworldindata.org/grapher/global-fossil-fuel-consum... It has been 13 years since fossil fuel prices dramatically decreased, and consumption has continued to rise. https://www.macrotrends.net/1369/crude-oil-price-history-chart https://www.macrotrends.net/1369/crude-oil-price-history-cha...
        beefield 5y ago
        of course you can also shift demand curve. If you have current price P and demand D, and you slap a tax T on top of the price P, the demand at price P is going to be lower, thus the whole curve is shifted. Yes, ceteris paribus if you lower the price, there is going to be more demand. But you can't lower the price ceteris paribus because there is not going to be more supply. So in order to lower the price you need to figure out a way to lower the demand. Be it regulation, taxation or cheaper alternative products or something else. As long it is cheaper to run a solar panel than a generator in a developing country, it does not matter if the fossil fuels become 10 times cheaper, people will use the solar panel. Higher price means higher resource extraction and consumption, that is a fact that you can deduce by just looking a the supply side. If you double gas/oil price, for sure more is going to be extracted? (And by price I do not mean post-tax/regulation consumer price, but the price the gas/oil producer gets from the commodity in the market)
- rdiddly 5y ago
  In a democratic nation of laws you could tax or ban something profitable (although even there it's a tough sell getting people to vote for higher taxes or costs), but in an oligarchy like the US, that lobby, those oligarchs, will work to undermine those regulations, e.g. by buying off Senators to vote against banning/taxing. Call me cynical but I agree with the GP that if there's money to be made, it will be made, regardless of the consequences. The government has kind of become just another part of the economy, in some sense.
- sitkack 5y ago
  You have to follow the petro playbook and also destroy the supply chain. Buy infra and repurpose it or cause unrecoverable shocks in their operations. http://www.verdant.net/natlcity.htm http://www.verdant.net/natlcity.htm
rob_c 5y ago
>> The only feasible way to stop digging fossil fuels is to get their price so low that it is not worth extracting them. Not sure that would have the impact you think. In convinced that suppliers would just stockpile in this case. Remember at the start of lockdown when cude turned negative on the stock markets. Didn't really do much other than push the price of petrol in a car tank upwards.
- Jtsummers 5y ago
  Based on my family's connection to the oil industry (farmland being drilled in OK), when the prices drop, they stop pulling out oil. It's stockpiled by leaving it in place, there's no point in pulling it out when that means you have to pay the landowners and find a way to store it for the longterm.
  - lumost 5y ago
    Cheap fossil fuels tend to create demand in the form of less efficient energy use. After all, energy efficiency costs money. If you look at periods of cheap gas they typically lead to more use of flights, bigger and less efficient cars, and a reduction in alternative investments. Compare the cars from the 70s oil shock like the VW Golf with the SUVs of the 90s.
foolfoolz 5y ago
natural gas is a by product of oil wells. there is no reason to not capture it and use it
- winphone1974 5y ago
  Sometimes, but most natural gas actually comes from gas wells that produce very little oil.
- jacquesm 5y ago
  There are plenty of gas fields where the gas is pumped up directly without being the result of cracking longer molecules. https://www.britannica.com/science/natural-gas/Location-of-major-gas-fields https://www.britannica.com/science/natural-gas/Location-of-m...
andrepd 5y ago
If you don't get out of the mindset that unrestrained neoliberal capitalism is the only way to organize our economic affairs then yes, that's the only feasible way. Meanwhile in sanity-land there are multiple ways to tackle this problem, the simplest of all is to simply price externalities correctly to end this outrageous situation where our future is being plundered to enrich some people today, and then use the revenue to fund a Green New Deal.
- antisthenes 5y ago
  Pricing externalities correctly just raises P, which leaves more fossil fuels in the ground. No need to berate OP for outlining a simplistic model of a market solution. The hard part isn't creating the policy anyway, it's having the political capital to get it approved and put into law.
  - imtringued 5y ago
    As I said in a different comment. There isn't just P there is also C (as in cost to extract). P-C is your profit. Raising taxes increases C and thereby lowers the profit incentive to extract resources. The idea that the profit margin is fixed is stupid.
- NineStarPoint 5y ago
  Isn’t pricing externalities correctly exactly the neoliberal capitalist solution to these sorts of problems? I suppose ignoring that’s what you meant by “unrestrained”, but at that point you’re really just describing laissez-faire capitalism obliquely. Neoliberalism is all about using the market to solve problems instead of direct government intervention, so pricing externalities then letting the market take care of it is classic neoliberalism. Edit: And that lobbying and competing interests get in the way of actually pricing externalities correctly is the most obvious flaw of modern neoliberaism, but the theory isn’t the issue there.
  - imtringued 5y ago
    > Neoliberalism is all about using the market to solve problems instead of direct government intervention, so pricing externalities then letting the market take care of it is classic neoliberalism. By neoliberal standards even a CO2 tax/tariff would be considered government intervention that must be avoided at all costs. Neoliberalism is about diminishing the role of the state in the economy. Capitalism itself has enough leeway to introduce a CO2 tax, neoliberalism doesn't because it is a self contradictory mess of wishful thinking. For neoliberalism letting lobbying and competing interest get in the way is part of the idea.
joe_the_user 5y ago
To get prices low, you need to have demand lower than supply. If you want actual consumption to be low also, that means absolute demand has to go down to a tiny fraction of what it is now. It seems to me the only to achieve that is actual regulation - prohibit the use of fossil fuel.
imtringued 5y ago
I'll be honest. I don't understand what you said because you are making hidden assumptions that heavily affect outcomes without telling anybody what they are. Is it a sellers market and buyers are outstripping supply? Big profits, dig everything up. Is it a buyers market and sellers are outstripping demand? Low or no profits, keep it in the ground. High prices don't mean high profits. Low prices don't mean low profits. Once you add a carbon tax you have a high price with low profits. Some countries subsidize coal mining. The price of coal is cheap even though there are high profits for the companies.

syops 5y ago

That’s not the only feasible way to accomplish this. Taxing natural gas enough would accomplish this too. Banning it’s use will do the trick also. Making usage of alternatives cheaper is another way.

beefield 5y ago
Those are just some of the means to get the price of natural gas lower, which is still the only fundamental reason that reduces the amount of gas/oil/whatnot being dug out.
- lotsofpulp 5y ago
  The fundamental reason that fossil fuel is pumped out is because people buy it, and the price is a reflection of where supply curve meets the demand curve. People will choose to buy less if alternatives are cheaper and accomplish the same needs, but with something like fossil fuels where all the infrastructure is already setup and fossil fuels are convenient, the end user price going down almost certainly means demand going up. The only way less fossil fuel is consumed is if people cannot afford it (equivalent to prices rising) or if people prefer something else. Or if there are less people overall period.
  - beefield 5y ago
    If people can't afford it, it means it is expensive, and only way for it to be expensive is that someone can afford it. And the more expensive it is, the more it is going to be extracted. In the end, it is very simple. You want to stop fossil fuel consumption, you need to get the price paid to the producer so low that the producer does not want to produce. Producer price can be high only if someone is willing to pay it. In economics terms, you do not only need to get price down, but the whole demand curve. That is, with any given price, there needs to be less demand than currently is. The supply side is fixed. Anything profitable will be extracted and burned. I do not see how anyone can disagree with that.
    - lotsofpulp 5y ago
      I believe you have cause and effect backwards. You move along supply and demand curves to come to the price. Prices move according to demand and supply curves, not the opposite. For example, if fossil fuels became 10x cheaper, that will flow into all economic activity that uses fossil fuel to be cheaper, which is basically everything. Which then means people will consume more of everything, because that is what people like to do. The supply side of fossil fuels is definitely not fixed. It is true that sufficiently low fossil fuel prices will cause some producers to not make a profit, who will then stop extracting fossil fuel. But due to the nature of fossil fuels being able to facilitate in almost all aspects of life and being a very fungible source of energy, eventually the steadily increasing demand will cause prices to eventually increase (unless sufficient alternative sources of energy are available at sufficiently cheap prices and convenience). The world has 8B people, with more than half who can easily consume far more fossil fuel as they gain more wealth and catch up to developed nations. Making fossil fuels cheaper just means more poorer people will gain the ability to buy bigger cars, air condition their homes, start flying to places, etc. Just look at fossil fuel consumption worldwide: https://ourworldindata.org/grapher/global-fossil-fuel-consumption https://ourworldindata.org/grapher/global-fossil-fuel-consum... It has been 13 years since fossil fuel prices dramatically decreased, and consumption has continued to rise. https://www.macrotrends.net/1369/crude-oil-price-history-chart https://www.macrotrends.net/1369/crude-oil-price-history-cha...
      - beefield 5y ago
        of course you can also shift demand curve. If you have current price P and demand D, and you slap a tax T on top of the price P, the demand at price P is going to be lower, thus the whole curve is shifted. Yes, ceteris paribus if you lower the price, there is going to be more demand. But you can't lower the price ceteris paribus because there is not going to be more supply. So in order to lower the price you need to figure out a way to lower the demand. Be it regulation, taxation or cheaper alternative products or something else. As long it is cheaper to run a solar panel than a generator in a developing country, it does not matter if the fossil fuels become 10 times cheaper, people will use the solar panel. Higher price means higher resource extraction and consumption, that is a fact that you can deduce by just looking a the supply side. If you double gas/oil price, for sure more is going to be extracted? (And by price I do not mean post-tax/regulation consumer price, but the price the gas/oil producer gets from the commodity in the market)
rdiddly 5y ago
In a democratic nation of laws you could tax or ban something profitable (although even there it's a tough sell getting people to vote for higher taxes or costs), but in an oligarchy like the US, that lobby, those oligarchs, will work to undermine those regulations, e.g. by buying off Senators to vote against banning/taxing. Call me cynical but I agree with the GP that if there's money to be made, it will be made, regardless of the consequences. The government has kind of become just another part of the economy, in some sense.
sitkack 5y ago
You have to follow the petro playbook and also destroy the supply chain. Buy infra and repurpose it or cause unrecoverable shocks in their operations. http://www.verdant.net/natlcity.htm http://www.verdant.net/natlcity.htm

rob_c 5y ago

>> The only feasible way to stop digging fossil fuels is to get their price so low that it is not worth extracting them. Not sure that would have the impact you think. In convinced that suppliers would just stockpile in this case. Remember at the start of lockdown when cude turned negative on the stock markets. Didn't really do much other than push the price of petrol in a car tank upwards.

Jtsummers 5y ago
Based on my family's connection to the oil industry (farmland being drilled in OK), when the prices drop, they stop pulling out oil. It's stockpiled by leaving it in place, there's no point in pulling it out when that means you have to pay the landowners and find a way to store it for the longterm.
- lumost 5y ago
  Cheap fossil fuels tend to create demand in the form of less efficient energy use. After all, energy efficiency costs money. If you look at periods of cheap gas they typically lead to more use of flights, bigger and less efficient cars, and a reduction in alternative investments. Compare the cars from the 70s oil shock like the VW Golf with the SUVs of the 90s.

foolfoolz 5y ago

natural gas is a by product of oil wells. there is no reason to not capture it and use it

winphone1974 5y ago
Sometimes, but most natural gas actually comes from gas wells that produce very little oil.
jacquesm 5y ago
There are plenty of gas fields where the gas is pumped up directly without being the result of cracking longer molecules. https://www.britannica.com/science/natural-gas/Location-of-major-gas-fields https://www.britannica.com/science/natural-gas/Location-of-m...

andrepd 5y ago

If you don't get out of the mindset that unrestrained neoliberal capitalism is the only way to organize our economic affairs then yes, that's the only feasible way. Meanwhile in sanity-land there are multiple ways to tackle this problem, the simplest of all is to simply price externalities correctly to end this outrageous situation where our future is being plundered to enrich some people today, and then use the revenue to fund a Green New Deal.

antisthenes 5y ago
Pricing externalities correctly just raises P, which leaves more fossil fuels in the ground. No need to berate OP for outlining a simplistic model of a market solution. The hard part isn't creating the policy anyway, it's having the political capital to get it approved and put into law.
- imtringued 5y ago
  As I said in a different comment. There isn't just P there is also C (as in cost to extract). P-C is your profit. Raising taxes increases C and thereby lowers the profit incentive to extract resources. The idea that the profit margin is fixed is stupid.
NineStarPoint 5y ago
Isn’t pricing externalities correctly exactly the neoliberal capitalist solution to these sorts of problems? I suppose ignoring that’s what you meant by “unrestrained”, but at that point you’re really just describing laissez-faire capitalism obliquely. Neoliberalism is all about using the market to solve problems instead of direct government intervention, so pricing externalities then letting the market take care of it is classic neoliberalism. Edit: And that lobbying and competing interests get in the way of actually pricing externalities correctly is the most obvious flaw of modern neoliberaism, but the theory isn’t the issue there.
- imtringued 5y ago
  > Neoliberalism is all about using the market to solve problems instead of direct government intervention, so pricing externalities then letting the market take care of it is classic neoliberalism. By neoliberal standards even a CO2 tax/tariff would be considered government intervention that must be avoided at all costs. Neoliberalism is about diminishing the role of the state in the economy. Capitalism itself has enough leeway to introduce a CO2 tax, neoliberalism doesn't because it is a self contradictory mess of wishful thinking. For neoliberalism letting lobbying and competing interest get in the way is part of the idea.

joe_the_user 5y ago

To get prices low, you need to have demand lower than supply. If you want actual consumption to be low also, that means absolute demand has to go down to a tiny fraction of what it is now. It seems to me the only to achieve that is actual regulation - prohibit the use of fossil fuel.

imtringued 5y ago

I'll be honest. I don't understand what you said because you are making hidden assumptions that heavily affect outcomes without telling anybody what they are. Is it a sellers market and buyers are outstripping supply? Big profits, dig everything up. Is it a buyers market and sellers are outstripping demand? Low or no profits, keep it in the ground. High prices don't mean high profits. Low prices don't mean low profits. Once you add a carbon tax you have a high price with low profits. Some countries subsidize coal mining. The price of coal is cheap even though there are high profits for the companies.