The world we live in

Both of these articles are from this evening’s New York Times:

U.S. to Be World’s Top Oil Producer in 5 Years, Report Says


Text Messaging Declines in U.S. for First Time, Report Says

Furthermore the reports seem pretty plausible.  If you foresaw both of these trends five years ago, bravo to you.  If you didn’t (or even if you did), the case for epistemic humility remains worthy of your attention.


To quote a wise man: Hail David Hume!

Or to quote the NYT correction -

'Correction: November 12, 2012

An earlier version of this article misstated the International Energy Agency’s prediction of American self-sufficiency in energy production. The agency said 55 percent of the improvement would come from more oil production and 45 percent from improvements in energy efficiency. It did not say that domestic oil production would rise 55 percent. Also, an earlier version of a photo caption with this article misidentified the equipment shown in use in an oil field in Greensburg, Kan. It is a pump jack, not an oil rig.'

Which is good, because there is no way that American crude production will rise 55% from the 2012 August total of 6,147 - which even if such an increase occurred, would still place it beneath the November 1970 Field Production of Crude Oil (Thousand Barrels per Day) peak of 10,044 -


What is epistemic humility? I didn't do so well on the SAT, is that kind of like eating crow?

"What is epistemic humility?"

ask Paul Krugman...

Not surprising since they overcharge so much for texting:

For cell phone users paying a la carte, the retail price of transmitted data is around $1 a megabyte. At that rate, the price of a 10-character message ought to be about 1/1,000 of a cent. Rounded to the nearest cent: free.

Even the 1/1,000-cent figure arguably overstates the true cost of a text. Unlike e-mail, Internet, and voice data, text messages are piggy-backed onto the cellular network. They occupy otherwise unused space in a control channel used for network maintenance. So as far as text messages are concerned, the cell phone companies are like the mean clique in high school who sold elevator passes (and there’s no elevator.)

Given that consumers have little sense of what texts ought to cost, they take their cues from the phone companies. The text message business plan has been a huge success. From 2005 to 2008, the price American carriers charged for text messages doubled, from about 10 cents to 20 cents. In that time, the volume of text messages grew about tenfold.

What a bizarre misunderstanding of market value.

If something is expensive, people buy less of it.

" At that rate, the price of a 10-character message ought to be about 1/1,000 of a cent."

"Ought" has no place in a discussion of market value. Again, bizarre.

By "ought", the author means the cost of an average text message.

People use alternative messaging apps now because with smartphones they have to pay for a data plan each month. Since they've already paid for the internet access, they use the apps that provide free messaging over the internet rather than text messaging over their carrier's cellular network.

The carriers make money by charging people each month for data plans. Since messaging is a major use of phones these days, more important and more heavily used than talk minutes for many people, if there weren't such a premium charged above text messaging's cost, the carriers wouldn't be able to induce many people to pay a lot each month for data plans they rarely use. People would still want touchscreen smartphones, but many would just want it for unlimited texting and some talk, with only occasional internet usage. Many people wouldn't be induced to pay so much for data.

In the U.S., a handful of companies in an uncompetitive industry are charging whatever customers are willing to pay. People in nearly every other country in the world pay far less for text messaging and for wireless internet access and still manage to have cellular companies that earn a decent profit. Americans are simply being fleeced.

I see this stated time and again, and yet when US cell phone plans are compared (with comparable) foreign plans (for example ones that cover the entire EU) they are usually somewhat higher, but not drastically so.

Indeed, I suspect your average American pays so much less on his first big car purchase as to negate the difference in cell phone pricing for a lifetime.

The text messaging trend is not all that surprising. Communication of short messages via mobile devices is not on the decline at all. The expression "text messaging" just happens to exclude Facebook, iMessage, BBM, etc.. This is about as informative as learning that Hotmail use is declining.

If there was a trend of people communicating less often and with fewer people, then that would be very surprising.

The oil trend on the other hand...

It's surprising if you read "text messaging" as "text messaging" and not "SMSing"

Actual text messaging is almost certainly continuing to increase

Actual text messaging will continue to increase, whether as SMSing or iMessaging, so long as young people prove incapable of spending idle time in contemplation or observation of their surroundings. In particular, this will be the case so long as girls, who text much more than boys and are more actively engaged with their smart phones and social media, feel incapable of confronting the specter of free time.

In my day, young ladies would spend their idle time in contemplation or observation of their surroundings. Of course, this was 1878, so I mean, they were kind of busy cooking and cleaning and stuff to have much idle time.

yes, the solution to female attention whoring appears to be: keep them busy doing something useful.

I didn't mean to summon you, lol, with my comment. I capitalized it.

Stay classy, tough guy.

messages are not declining, people are just switching to other options such as whatsup and kakaotalk. the latter even includes a free call option which is works over continents and its own social network

This trend in 99% due to iMessage. All of the other options, are either niche or in decline (read: BBM). Since iMessage is the default on one of the leading smartphone platforms, it has a disproportionate impact. If Google releases an Android version that is the default, text messaging will plummet. Basically, SMS traffic will be places where there is a crappy data connection or in messages between iPhones and Android phones.

Oh no, it's here -- "peak text" !!!

I must say sir, for that joke you pass the Turing Test with flying colors!

Nowadays they use facebook or twitter from their phone.

We measure oil production within geographic boundaries that are accidents of history. Let's do the same for consumption: The US is number one, no?

So what?

I actually think that's exactly why it's important/interesting. The chance that the country with the most unconventional oil would just so happen to be the one which was the largest consumer of oil before the "unconventional revolution" is very low. A more likely- though not certain- explanation is that there's tons and tons of unconventional oil all over the world, it's just that the oil companies have been working harder in the U.S. and found these deposits first.

You are correct, there is unconventional oil all over the place. There is also lots of untapped conventional oil that could also be produced. No-one can deny the economically huge volumes that exist in the Canadian or Venezuela oil sands for instance, to take just one example. What people forget is that outside of some small areas (mostly US states) the oil industry is state managed. This means huge rent seeking, and admitted collusion (OPECs whole raison d'être). Thus applying normal supply/demand analysis to this industry, which is fundamentally what the Peak Oilers tried to do, is doomed to failure. It is true that the fracced horizontal wells are rather expensive (at the moment) sources of hydrocarbons, but it is the only area where the free market is allowed to work. Only once the private oil industry (in its broadest sense) became convinced that the collusionists would keep prices high did they start to actively exploit the potential in the only place they could.

The industry remains fragile though. If the collusionists start to see their rents seriously threatened, they might try a variation of the 1998 Saudi Strategy where for a while they flooded the market with oil. This drove down the price of oil to less than $10/bbl which wiped out a huge chunk of industry capacity (people left the industry in droves) leading to the current price ramp up.

Not surprised with the first one.

Shocked with the second one. In fact don't believe it. Must be a blip of some sort.

Bring on Facebook!

And in the real world, U.S. conventional oil production peaked in 1970, and even bringing the North Slope onstream later that decade changed nothing.

Beware of the ongoing shifting definitions - these days, many things are included under 'oil' that no self-respecting driller in West Texas would have ever considered.

Also beware of the fact that the U.S. was pretty much the world's leading oil producer for decades - the problem being that the U.S. is also, by far and away, the world's largest oil consumer.

So to compare 1970 to now using the figures at -

U.S. Field Production of Crude Oil (Thousand Barrels per Day)

August 1970 - 9,560 (The peak was November 1970 at 10,044)

August 2012 - 6,147

We only need to increase current oil production by 2/3s to return our oil production of 42 years ago. Hint - this is never going to happen. But much like we have continued to produce coal in West Virginia by destroying mountains, we will continue to produce oil by digging up tar sands in a region as large as Florida, then say that oil production is rising in North America, and call the resulting product 'crude.' Well, OK, the people actually making do a better job naming it - 'Syncrude Canada Ltd. is one of the world's largest producers of synthetic crude oil from oil sands and the largest single source producer in Canada.'

I think this says more about production and export elsewhere than the US, and it's not good.

I live, like everyone, in my own bubble, but I personally am not at all surprised by the second one since, as I read the article, it doesn't include iMessages and similar things.

The only thing that would truly shock me about the first one is if that five-year projection holds true (but what do I know, maybe projections with oil are insanely accurate).

I will admit to being surprised by the first item. While not being a card-carrying peak oil nut job, I did expect more much supply-side pressure in the energy sector.

Of course, the downside to growing fossil fuel production is the eventual destruction of the planet, but hey ...

In the 1970s, we needed to use less oil because it was going to run out, and the consequences of using it until it ran out would be terrible. Today, we need to use less oil because it's not going to run out, and the consequences of going on using it forever will be terrible.

2 is not surprising. With the increase of smartphones, ppl are using whatsapp, viber, imessage, bbm, facebook and what not.

The first item is truly surprising to me.

Text messaging, however, became obsolete when people started having internet connections in their phones, which was almost ten years ago. The fall of text messaging is inevitable.

I think mobile users in Japan have been using email apps with push messaging for years. The decline of text messaging is just the U.S. catching up to the frontier of technology a few years late.

Do we get half credit for not attempting to make these kind of predictions either way?

Tyler: this is why we love you.

Frankly, the whole, let me repeat, whole text messaging and Facebook, Twitter, etc. is NONSENSE designed to exploit the immaturity of young people. What value do one's thoughts have if you have not given them much thought?

Why screen your own thoughts when someone else can do it for you?

Not to mention, there are 24 hours a day that we have to kill time for kids, so you talk about this like it's a bad thing!

Frankly, the whole, let me repeat, whole commenting on blogs is NONSENSE designed to exploit the immaturity of slightly older people. What value do one’s thoughts have if you have given them only a little bit of thought?

Anyone not brain dead saw this five years ago, due to unconventional oil. I was trying to explain to people that the US had the world's largest unconventional oil reserves, but they were very very hard to get the oil from. I made a few bets on oil prices at the time.

Who cares if we become the world's #1 oil producer.

We have not built a single refinery in the past 30 years. We have hit peak refinery capacity.

We can double oil production and it would not do us any good, gas prices are still going to rise.

"We have not built a single refinery in the past 30 years. We have hit peak refinery capacity."

Yes, this is true.

"We can double oil production and it would not do us any good, gas prices are still going to rise."

Some caveats apply. The US still has more refining capacity than we currently use. So we export the remainder (Ergo, we import oil, refine it to gas and export some of what we imported). While, I think you are potentially correct, we won't run into any capacity constraints until population and/or economic growth are significant.

Wrong and wrong.

The U.S. has expanded it's largest refineries over the last 30 years. It has shut down the smaller ones in remote areas that can't compete from scale advantage. Gas prices have risen due to pipeline constraints, environmental requirements, and the higher costs of producing non-traditional crude.

Upgraded Oil Sands oil cost $60-70/barrel in operating and capital costs. Horiztonal is around $50-$55. Deep Water is $40-50.

It is not plausible that the United States will become the world's largest oil producer simply by expanding production at existing sites and facilities. New sites and facilities will be required, of such a scale that each of them will in turn require the explicit approval of several government regulatory authorities.

I think I would prefer an analysis that addresses the (un)likelihood of this happening any time in the next four years. Keystone can't get a pipeline built, but somehow massive new fracking fields and GTL plants - with their own associated new pipelines - are going to sail right through EPA review, etc?

Post-election, Keystone is going to happen.

I think this is probable. Obama needed the green vote before the election. After the election the economic growth will be more attactive.

Obama doesn't need anyone's vote, ever again. More importantly, the bureaucrats who implement regulations, never needed anyone's vote in the first place. Explain why either would be so enamored of economic growth (which they will not personally benefit from) as to reverse their previous policies?

The postulated massive expansion of US oil production does not merely require a president who says, "economic growth takes priority over environmental concerns, ha ha, fooled you with all that Green crap". It requires a president who will devote himself tirelessly to reforming multiple bureaucracies operated by people who basically can't be fired. Obama is unlikely to be the former president; it is almost inconcievable that he is the latter. It is unlikely that even Romney would have been the latter; he'd have been inclined to try, but stretched too thin to do the job right.

You make some good points. However, I'm still inclined to believe that the Keystone pipeline will get belated Federal approval.

Possible, but unlikely and almost irrelevant. If the only energy projects that happen are the ones where the President of the United States personally intervenes to make them happen, the United States does not become the world's largest oil producer. We're going to need hundreds of these things; Obama has (and Romney would have had) too much else on his agenda to handle them all. The important point about Keystone XL is not whether or not POTUS 44 ultimately signs off on it, but that it reached the Oval Office as a matter of active controversy in the first place.

The IEA's report is frankly a sign of them going off the deep end, Tyler. They replaced their earlier conservative methodology from 2011 that had America lagging Saudi Arabia to 2035 with a "New Policies Scenario" that assumes some pretty crazy policy changes and some highly overenthusiastic numbers.

For example, they claim that demand destruction in energy will essentially come from rising vehicular fuel standards alone. A 45% decrease in oil usage by 2020 from vehicular fuel standards? It takes ~10 years for those to propagate throughout the vehicle fleet. Most of the recent research I've read also suggests that the long term price elasticity of demand for gasoline over three-to-five year periods since 2000 is close to -0.04, which is far more inelastic than it needs to be if we are to have that much demand reduction.

It's also worth noting the following: they predict a consistently high oil price, at least $125 in 2011 dollars in 2035. So high prices are here to stay.

paul and yeah -
Read the article, it specifically refers to the decline in sms text and points out that the decline is offset by internet based messaging.

text messaging is down because it's being substituted by things like Whatsapp, which don't (over)charge to do the same thing.

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