In effect, they are demanding that reality conform to types of efficient market theory, no matter that the pricing of oils, first nationally then internationally, has had little to do with such theories but forms of price management for nearly a century and that the current price regime is centered in both on and off-exchange financial markets, so open to pressures that would not have applied during the days of the “seven sisters” or the relatively short period of OPEC price setting.

Certainly it can be argued that financial markets are, if only at the ‘weak’ level, efficient but behavioral finance and the history of manias/bubbles with their inclusion of socio-psychological channels, seem much more applicable than strictly physical supply/demand arguments.

From mid-1960s considerations of a “social industrial complex” through Forrester and Club of Rome into the modern environmental movement and late 1970s formation of the German Green Party to the rise of peak oil explanations on one hand and AGW on the other, the required social psychology has been under formation.

Equally, the post-1970 decline of ‘Fordism’ as a viable regime of accumulation and attempts to discover/implement a replacement able to resurrect capitalism’s 1950-70 “golden age”.

Consciously and not, what we have been seeing for some time now has been an integrating of the preceeding two paragraphs, an integrating standing with and generating hopes for a ‘green’ solution and/or bubble able to overcome the insufficiencies of its contents.

Very high priced oils/distillates improve the likelyhood of a new regime of accumulation but, to the extent these prices diminish global performance, also detract from such possibility other than, perhaps, on the terrain of finance and its struggle to save itself.

As for the Becker-Posner blog, its one of the best on the web. The two are dueling geniuses… each reaching to outsmart the other.

For the record, I’m an alum of the University of Chicago Graduate School of Business and Law School (JD/MBA)… so I’m biased.

Furthermore, higher royalties shares, especially via production sharing agreements, create the impression of declining reserves because of SEC reporting. (Exxon reports only the post-royalty share of oil, for example, which in high price environments creates the impression that reserve replacement is negative. In fact, oil reserves that were physically added belong to the royalty owner’s account, so the reported reserves reflect only Exxon’s economic interest, not the amount of oil found).

Bottom line: private companies will certainly pump more in high priced environments, but royalty owners (governments) have different incentives. And when governments own some 70% of the world’s oil, they’re the deciders.

It’ll work like this: If you’re HIV positive,for example, then you need to start forking an AIDS tax so that a real cure can finally be established. The disincentive, coupled with a windfall tax will finally put these insidious diseases to rest.

Then…and this is the best part!!….we can teach countries in Africa to do the same. They can apply this simple disincentive-inventive taxation plan to end poverty, war and AIDS.

“Malaria got you down? The government of The Congo hereby annouces the imposition of $1.00 tax on all mosquito bites. An Inspector with a Skeeter Meter will be visiting each village weekly. Anyone who claims that a bite is just acne or a rash prosecuted for tax evasion.”.

Then, with money in hand, watch the government work its magic!

Do you really think a tax will help solve our energy woes? If so, do you think it’ll take $1.00 a gallon or $10.00? Or $20?

Why would you trust our government (or any government) with a solution…to anything?

Spoken like a true crack whore. There’s nothing wrong here that more of the same wouldn’t fix.

Sheesh.

And a lot of the reason our GDP oil intensity is lower now is because so much of our economy has been riding on the back of China (with our energy use transferred to them, while we kept most of the profits) and a financial industry with very iffy prospects.

And I just don’t see any evidence that large amounts of reserves are being deliberately held in the ground as a form of investment. ANWR and the U.S. continental shelf are being held in the ground–true. But there’s no way that this is some kind of investment strategy to gain higher prices later. Since I’m certain that Bush and Cheney understand the oil situation, we may be holding back those reserves to have some supply later, but that would be for dealing with a serious energy crunch, not for higher profits!

Meanwhile, the rest of the world has been positively stupid about its extraction policies. Saudi Arabia, for example, has actually damaged some of its most important reservoirs in an attempt to maintain it’s role of swing producer and image of endless supply. Within the biz, the dominant view until the past year or so has been that OPEC would be able to crank it up and high prices were temporary, so everyone has been pumping like crazy to cash in on the high prices.