Quote:
Originally Posted by derklug
I am a firm believer that the market will dictate what manufacturers produce, and if left alone would find the best answer to dwindling supplies of fossil fuels. Energy policies set by whomever donates to the winning candidate are not going to get the best end result. Government demanding you build EV's will result in better, more efficient EV's, but could blind industry to a different solution that is better.
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The problem with this line of thinking is that technology takes time. At the moment the market for EVs and alternative fuel vehicles is quite small and not profitable. The big profit margins are still in pick ups, at least for US based auto manufacturers. Without subsidization and other policies encouraging development of alternative fuel technology, the investment in R&D for theses technologies would be very small. Firms can't justify expenditures until there is adequate demand to offset the cost of these expenditures as investors are inclined to favor relatively short-term profits (one generation) over long-term stability (multiple generations). Without research now, there will be a lag time between the shift in demand and the availability of technology to satisfy the change. Our economy is so dependent on oil that the oil-shock from peak oil could do absolutely insane damage to our economy if our industries aren't prepared in advance. Time is the issue.
Imagine if we hit peak oil today and every day from now until the end of time oil supply decreases. It would take time for public and private transport technology to reach a point where current transportation can be emulated with energy sources alternative to oil. What happens in that lag time? Consumption goes way down because people can't afford to drive. This brings output down, dragging investment and savings rates with it. Deflation sets in and we're in a recession. However, unlike the OAPEC crisis of the '70s, oil prices aren't political anymore, global supply figure are driving them up. Oil prices will continue to rise even despite decreasing demand and we see a deflationary spiral while consumption continues to drop because alternative power sources still aren't cost effective. Depression. Pffffffttttt.
Basically, because our economic output is so heavily dependent on oil there is an impending oil-shock that will have a negative impact on our economic output on a global scale regardless of how we tackle the shift. Rather than experiencing that shock in a matter of a few years and driving the global economy into total depression until a few firms can lead industries out, subsidization and policy can spread out the impact of that impending oil-shock over decades and dampen the effect on growth.