Oil Discounting Water

Posted by Willard Anderson on February 13th, 2011.

Climate Disaster Feb 2011 Future Discounting

We have to take climate warming seriously. We know now that “the World Health Organization estimates that in the year 2000, mortality from climate change at more than 150,000 deaths”. (John Broome The Ethics of Climate Change, Scientific American, June, 2008) How many of our grandchildren will die in the near future? But CO2 imprint is from petroleum or fossil fuels and the tar sands pose a special case. The reason is that oil companies assume that the value of different things is lower than its real worth. They discount the value.

When economists discount the value or price of a product for the future they have a specific model in mind. For example they would say that the 2008 financial collapse was a matter of relocating wealth to the few rich from the poor. For them there was no problem. If the calculation did not consider values or ethics to enter into the discussion, the result was a pure transfer of wealth. But the problem is that by defining the terms they have already made an ethical judgment, that is the problem, with the loss of invested pensions people suffer. They discounted the value of injury to people.

If they chose to discount price of a product they might say that 1 oz of gold in hand today is worth $1500. But they could say we will allow that 1 oz of gold to be worth $1,000. in their calculations for 2108. After all the USA fixed the price of gold at $35. per ounce for many years. One could say they have only manipulated a formula. But of course we only apply economic models because we are applying them to profit from human conditions. As soon as we do that we cannot escape values and ethics. We have a purpose – we discount USA currency against gold to make it easier for the USA to pay off it’s debt.

We did do some future discounting for investment trusts. We said that after 2011 they would have less value because they were subjected to tax. But there are problems. At the same time, once these were all taxable corporations and we made them non taxable as investment trusts, we multiplied their future value. That simply helped destroy the government economy. We did not discount future value but multiplied future value for the select group that could afford to buy the trusts. Future multiplying value is every bit as justifiable as future discounting.

What if we say that a good is always discounted, that iron will be worth say $1,000. per ton in 2010 but $500. per ton on 2110. Then we are saying that wood or concrete or other materials that have a competitive use will be more in demand or be more in demand in the market by 2110. Not as much likely profit in iron, so we can discount it. This is a futures market.

But what if we say that iron is worth that much less but then what about fresh water. If climate models are correct we will have a wildly escalating value for water. The simple multiplier of being worth twice as much may be out of step. The price of water we could guess would now depend on how many people will live or depend on water for their lives. But we also know it is not a replaceable good so we always have to value it in synch with the: hydrological cycle, habitat maintenance, agriculture demands, city demands, transport, recreation and so on. Now we have the problem that we have an escalating future price, not a discounting, but rather a multiplier price for water. Because of the multiplier perhaps we should price water in Fort McMurray at 100 times current local price. (Of course only after having researched and priced in the cost of habitat loss, drought, hydrological cycle dysfunction etc.) We as well now have to be much more careful how we use water, as every use influences price. Now how much multiplier should we be putting on water that is currently being used for separating oil from bitumen in the tar sands and that in addition uses a lot of natural gas that has perhaps higher uses? It appears now that we have put far too low a price on the water used to separate oil from bitumen and we have a very high cost future multiplier price placed on petroleum that may be worth tremendously less than the hydrological cycle, habitat maintenance, agriculture, or city support. We know for instance that the Saskatchewan River flow has been reduced by 80% from the Rocky Mountains to Lake Winnipeg. Calgary and Edmonton with growth will run short of water because we have used a discounting model on the price of water in the tar sands instead of a multiplier model on the future price of water. Let us get it straight guys.

Economists have designed their models too narrow mindedly because their only objective is to make money at other peoples and at the living environments expense, and at our grandchildrens’ expense. This cannot be allowed! “Democracy

requires debate and deliberation as well as voting.” (ibid) Petroleum companies discourage this and send out fall information with their own discounting included. The “true arrogance is imagining that you are the final arbiter of the democratic process.” (ibid) This includes corporations and politicians.

Politicians that allow this are certainly not leaders and know little about real world economy. For example it would suggest that cigarette companies should discount present cost of cigarettes because many more children could afford them. We are using exactly the same sort of ethics and values in determining water use in the tar sands. We need to begin class action suits.

There are limits to discounting. Disruption to animal life could be one. If you give a man a fish he will live for a day, if you teach him how to fish in an ecologically sustainable way then he will support his family forever. That can guide the amount of discounting. So discounting relys on the vision of ecologically sustainable use. In the same way the model for any organic or life determining good has to be based upon a future multiplier, because the criteria for life will now become more pressing. That is exactly what the climate models now show and with absolute certainty. Therefore it is a criminal act for politicians to discount the price of water by applying only the need for dissolving oil out of bitumen, and that activity ould now be considered a frivolous use of water. So allowing tar sands excavation to control discounting is an arrogance worse than the cigarette companies behaviour. So to save our grandchildren it is time we started class action suits against the perpetrators.

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