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Comment by phaedrus | Hacker News Reader

The YouTube channel Second Thought recently put out a video (https://www.youtube.com/watch?v=3gSzzuY1Yw0) whose thesis was that even being cheaper than fossil fuels is not / will not be enough for green energy to win, because under capitalism a cheap thing that also has low profit margin will not attract investment compared to a bit more expensive thing which can be exploited for more profit. I wonder if a similar effect affects sites like Twitter and Reddit: the more efficient they are at connecting users and providing value for user's efforts, the less room there is for profit margin. As a coworker once pointed out to me, the parameter which represents "profit" in an economic system would correspond to "inefficiency" in an engineering context.

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That video makes no sense. If renewables are cheaper, then fossil fuels have even worse margins. The video claims for some reason that fossil fuels are "more exploitable" and more profitable, but assuming you're baking storage into cost, a lot of energy is fungible. Furthermore, solar can easily be installed on prem and many energy users have plenty of unused roof space, so even if all energy providers conspired to keep energy prices high, energy users can install their own solar.

It's worth noting that a decent portion of the value/products generated by by the fossil fuels industry isn't gasoline or diesel.

Tons of products are made with byproducts from the refining process, much of the research done by these companies over the last century was focused on inventing new products and creating markets to sell them to.

Replacing transportation use of fossil fuels with renewables doesn't actually replace all of the profits in the fossil fuel industry, and doesn't explain how those products we've now grown to expect will be created if we aren't refining oil for gasoline and diesel.

> Tons of products are made with byproducts from the refining process

Fun fact: Gasoline only became the fuel for cars because it was a refinery byproduct that had no real economic value, and so was very cheap. Before that, cars ran on alcohol or electricity, but oil refining was still a pretty large business anyway.

If we stopped fueling cars with gas, refineries would still operate to provide all of the other products we need, just as they did before gas was a thing.

Having worked for the upstream research arm of a major US oil company, I can confidently say this is no longer the case regardless of what the industry may have looked like when Esso was still a business.

Modern oil companies are extremely proud of the additional revenue streams they have invested to consume oil byproducts. The most disgusting of which, in my opinion, was the humble bragging that Hershey's chocolate includes petroleum products in the chocolate bars.

If we stopped consuming oil for gasoline today massive industries would collapse, both due to the loss of byproduct inputs and the transportation required to move products across the country. It wouldn't be the world returning back to a nineteenth century era where trains all ran on coal and lamps were fueled by whale blubber.

I wasn't claiming that there wouldn't be a large economic upset. There obviously would. I was only claiming that oil refining would remain as an industry. Probably a much smaller industry.

But all of that would only be for the good.

Your coworker is wise. Economic theory holds that in a truly efficient market, profits approach 0.

That’s economic profits that approach 0. You can still run an accounting profit, it’s just not bigger than it would be if you invested your money somewhere else, like land or mining or coffeeshops or whatever.

Economic profit is still there, it's abnormal profits that would go to zero. With zero EP the opportunity cost of staying in business would be to high.

With 0 AP, the industry is in equilibrium, with no companies dropping out, and no companies entering the market.

The economic profit is literally defined as the accounting-type profits, minus the opportunity costs. When the opportunity cost is large like that you are describing negative economic profit.

Probably I had already heard it in a longer version but wow, summing it up like that really hits home.

does that mean that investment is fundamentally beholden to market inefficiency?

We ship fruit from Argentina where it is grown, to Thailand to be packaged, to the United States to be consumed.

While it may be efficient from the perspective of a spreadsheet, its inefficient due to the external costs, ie pollution from shipping, the delicate nature of just-in-time shipments, etc.

Your fruit cup might cost a bit more if it was to be done all in one place, but I would call that a cost for a less fragile system.

Exploitation of a knowledge gap and existing market constraints.

If all you can think of are services, maybe. But the people that make things don’t agree.

“Market failure”, “Market gap”

no more than engineering is fundamentally beholden to imperfect science.

"Green energy cheaper why not using it" => it's not cheaper under a broad enough definition of cheap.

Junk bonds have high yields, why don't why all buy them?

True until it can be "monopolized". I guess in the near future govt will regulate green energy to some model that can give enough profit margin for corporates, and that will increase green energyp price to near fossil fuel, with bigger margin. Subscription based solar panel and electric vehicles come to mind.

As for reddit and twitter it's not the efficiency and room for profit, it's the cost to provide said content outweigh the revenue gained from ads. Hosting and maintaining global social media is expensive, which is there's no many players in that field.

You don't need a monopoly, you need competition. Renewables sell into the same energy market as fossil fuels, and get paid the same price. So you end up with low cost renewables making higher profits than high cost fossil fuels, and so attract more investment.

Long term, when renewables have displaced fossil fuels, then profits will fall. But that only happens after the renewables get investment.

I'm not sure what you mean by efficient, that Reddit gets people to the information they wanted as fast as possible?

I thought the whole idea behind Reddit and other sites was to keep people browsing with algorithms that keep them interested. Wouldn't that be what makes them efficient?

Amusing video. 0/

I have a different theory.

But first...

New projects have stalled because of permitting bottlenecks. 1/

Investment in '22 was $1.1 trillion dollars. Another record. https://about.bnef.com/new-energy-outlook/ 2/

There's plenty of other investors. Like utilities, NGOs, govts, and customers. Here's the list of projects in Bhadla Solar Park. https://cms.mercomindia.com/wp-content/uploads/2020/03/List-... Where's Big Oil, Vanguard, Blackrock? Scanning some dozen other marque projects tells a similar story.

Further, IIRC, the ROI for mega projects are largely predetermined via PPAs and such. Think of them as bonds. There seems to be no shortage of investors (for feasible projects).

Okay, back to my theory...

Big Oil knows this is the end game. But they want to compensated for all their soon-to-be stranded assets, real and (more likely) imaginary.

So this is a hostage negotiation. They've redoubled their efforts to up the stakes. "Pay us! Or we kill the planet!"

It's just straight up extortion.

I have no sense for how it'll play out.

My vote is for nationalizing all the fossil fuel companies. Then put all their execs (say Director on up) and board members in solitary confinement for life. Stage some show trials at The Hague for ecocide or whatever, to add a veneer of legitimacy.

Though I recognize opinions may differ.

0/ I prefer my socialism to be advocacy-oriented, vs whinging, but tastes differ.

1/ Separately, post IRA, the billionaire funded reactionary astroturf campaign is now in full swing. For instance, every single offshore wind farm has been opposed, farmers adopting solar are being harassed, ad nauseum. So even as permitting is reformed, brain worms will likely slow our transition.

2/ Early reports post-IRA suggest new investment, in everything, has gone bonkers. With potential for even more as the Biden Admin firms up the implementation. David Roberts' Volts podcast is one of my primary sources, highest recommendation. https://www.volts.wtf/podcast/archive?sort=new

> "Pay us! Or we kill the planet!"

Well it used to be "Pay us! And we kill the planet!"

My opinion is that the "or" operator is an improvement over the old. It implies that there is a chance to save the planet.

>My vote is for nationalizing all the fossil fuel companies

This will have exactly the opposite effect as you are envisioning. Having every citizen benefit from fossil fuels will make them much harder to keep in the ground.

If you haven't already done so, read Kim Stanley Robinson's article on this topic: https://www.noemamag.com/paying-ourselves-to-decarbonize/

> ...will have exactly the opposite effect as you are envisioning.

Sure.

Or not.

At some point, like with coal before it, oil's price will fall thru the floor. What then?

The fate of the countries listed will vary.

Foreseeing the inevitable, some of the Gulf States and Norway have been diversifying for a while. China is racing to create the post carbon future, hoping to outrun the bear. Russia is choosing oblivion. The others will fall somewhere in between. Or in the schizophrenic USA, somewhere(s).

> read Kim Stanley Robinson's article

Ok, have done. Meh.

Aside: "The Ministry for the Future" presents an absolutely best case scenario, in all its terribleness. Pretty unconvincing.

There's no reactionary movement actively thwarting progress, no emergent right wing eco-fascism.

Technological progress always begets social upheaval. Globe spanning wars were fought over much lower stakes (than climate crisis).

That said, I have no idea how any of this will play out. Can't even guess. But I expect the worse.

And I'm an optimist.

> But I expect the worse. And I'm an optimist.

Same. That KSR article just made me more pessimistic about fossil fuels. Politicians in the West need to quickly show some leadership towards a carbon tax.

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