Peak Oil and Food
I’ve blogged on these topics many times before, and the relationship between the two. This week’s Peak Oil Review, published by ASPO-USA, states the relationship so clearly I won’t bother to do anything but quote it:
US wheat inventories have now reached a 60-year low and wheat prices have risen by 50 percent in the past month. Global wheat stocks are expected to fall to a 30-year low shortly. With global oil production relatively stagnant as the demand for more oil from Asia and the Middle East continues to grow, biofuels production has been plugging some of the gap.
Food and energy are converging so that to a considerable extent they can be used interchangeably as dictated by market forces. In the last six years, land for biofuels has increased from 12 to 80 million hectares worldwide as subsidies and national policies mandating their use are driving the biofuels substitution for oil. The US is offering subsidies of $.50 to $1 per gallon and the EU is attempting to reach a 10 percent biofuels target in the next three years.
Many knowledgeable observers are worried and are predicting that famines will break out in the underdeveloped world during the next 18 to 24 months, due to declining availability of grains for export and worsening climatic conditions. The recent snows in China are believed to have caused considerable crop damage and Beijing is becoming increasingly concerned about the prospects for feeding its 1.3 billion people.
All this suggests that policies mandating the use of biofuels and biofuel subsidies may have a very short half-life as the reality of inadequate food supplies overcomes cries of “energy independence.” The elimination of mandates and subsidies would put more pressure on petroleum products and force prices still higher.
Our government is keeping it’s head in the sand about peak oil while even members of the US government have conceded that the debate is over. Global food prices are sky-rocketing, making our agricultural industries very happy, but meantime our working poor and beneficiaries are getting squeezed financially while the government turns a blind eye. As for biofuels, mandating biofuels up to 3.4 percent, as the current legislation would require, is easily achieved in New Zealand simply from our current waste stream. It remains to be seen whether the government will put teeth into the sustainability standards for biofuels that the Greens have negotiated.
February 12th, 2008 at 12:41 pm
Wheat prices: take a look at this:
http://www.tickerforum.org/cgi-ticker/akcs-www?post=28354
As the days roll on, I am becoming convinced of a simple truth: biofuels = bad. Putting fuel and food in competition will result in a standard “follow the money” exercise, and food will be the loser.
February 12th, 2008 at 1:34 pm
“It is not neccessary to condone the monopoly of Public Credit, or to acquiese in it, in order to agree that inflation is the very core of evil. There is almost nothing to be said for a policy of deflation, as defined by the average banker, except that it provides a breathing space in which to consider what to do; the real argument against it is not that it reduces prices, but that it only does so at the expense of the producer; but a policy of inflation, that is to say, a policy of increasing issues of money or credit in such a manner that it can only reach the general public through the medium of costs, and must therefore, be reflected in prices, has one thing and one thing only to be said for it at this time; that it is absolutely and mathematically certain to reduce any financial and economic system to ruins. It is in fact a Capital Levy of the meanest and most one-sided description, since it taxes the purchasing-power of those who obained it by work for the benefit of those who obtain it by financial manipulation.”
C H Douglas.
DSC 08.
Meanwhile, back on the slave farm, round and round we go..
February 12th, 2008 at 1:54 pm
I am not sure I should thank you dbuckley. That wheat link scares the hell out of me! Thanks anyway!
February 12th, 2008 at 3:27 pm
The deep concerns about oil/bio-fuel/food production is, tragically, something in the nature of environmental prophecy coming true.
Long have I bleated that ultimately, we get down to the basics of water, food, shelter, and the ability to produce or acquire food.
When I read an article that propounds the goal of increasing wealth/economic growth, I feel a cold horror. As a people, a nation, we need to be mindful of the basics, for our own communities and endeavour to help promote healthy global policies.
February 12th, 2008 at 3:49 pm
Bah humbug. Grain prices in the US and Europe, and thus the world at large, are mostly determined by 1st world subsidy levels, which in turn set worldwide prices for most other food products. It’s the industry struggling to redistribute the new subsidies amongst interested parties that is pushing prices.
It is, after all, trivial to turn one large American beef farm the consumes a thousand tonnes of grain to make 5 tonne of beef into a farm that produces a couple thousand tonnes of wheat, all it takes is sufficient price shifts and small shifts in the distribution of wheat subsidies.
NB: these are international prices, and farmers in poorer nations are making large sums of money for the first time ever by producing a stable supply of grains, rather than the usual issue of having surplus US stocks dumped on their markets every time things should be in their favour.
February 12th, 2008 at 5:11 pm
Not too sure what this post has got to do with Peak Oil?
I suppose if you keep mentioning it enough then we’ll all start to believe it and have something else to worry about, and of course with election year now here the Greens will want as many people as possible concerned, rightly or wrongly, over environmental issues to get them the votes to keep them represented in Parliament.
February 12th, 2008 at 5:44 pm
Hey frog, you missed the most interesting item in that ASPO bulletin.
If it wasn’t so serious it would be hilarious. Are there clowns asleep at the wheel, or is there some ulterior motive behind the reckless disregard ?.
February 12th, 2008 at 8:02 pm
- “With global oil production relatively stagnant as the demand for more oil from Asia and the Middle East continues to grow, biofuels production has been plugging some of the gap.”
That’s entirely incorrect. Biofuels have had such an impact purely and simply because of the subsidies thrown at them by politicians. No subsidies, no biofuel humanitarian disaster.
Joy,
- “As a people, a nation, we need to be mindful of the basics, for our own communities and endeavour to help promote healthy global policies.”
The problem is that biofuels was touted as just the sort of initiative you describe.
February 12th, 2008 at 8:16 pm
Moulwarp said: No subsidies, no biofuel humanitarian disaster.
Mouldy, first sensible thing based on ereal evidence I can recall you ever saying on this blog. Keep it up!
February 12th, 2008 at 11:03 pm
I guess we are talking cropping biofuels, on productive land?
What about recycling and non-rural biofuel, like landfill waste, algal and so on. They may not be cost-effective yet (?) but they don’t pose the same competitive risk.
February 13th, 2008 at 2:38 am
“What about recycling and non-rural biofuel, like landfill waste, algal and so on.”
Two words:
- scalability
- yield
February 13th, 2008 at 4:48 am
fastbike, “It is all a question of dollars and cents, this gasoline or oats proposition.” A century ago a similar debate was raging. Could cities be freed from disease by replacing the horse with the motortruck and motor omnibuses? Pessimists argued that motors were too expensive and too unreliable to ever challenge the dominance of proven horse-drawn vehicles. Optimists argued that it would only be a matter of time before the cost and reliability of the motor would become superior to that of the horse. Within a decade and a half the optimists were proved right.
I’d put my money on algae if I was an investor.
February 14th, 2008 at 12:03 am
Can anyone tell me if natural gas a.k.a. methane a.k.a. CNG is covered by the BioFuels Sales Obligation, or does that only cover liquid fuels?
Trevor.
February 14th, 2008 at 3:15 am
Kevyn said
A strawman’s argument and you know it. Why ?
Over the last 100 years we’ve had 4x population, 40x economic growth. We can’t go back, but if we go forward we hit the progress trap.
Algae, show me the oil ? All the figures I’ve seen to date show it being useful but it won’t scale to replace what we get for “free” at the moment.
At the moment all the smart money is actually on oil as there’s many years of super profits to be made at anything over $40 per barrel.
February 14th, 2008 at 5:07 am
Nothing strawman about it at all. A simple historical parallel. 110 years ago motorcars were rich mens toys. It would have taken a brave man to assert that these could be scaled up to be successful replacements for commercial horsedrawn vehicles. This didn’t really happen until the deisel engine came into common use in the 1920s and 1930s.
It was the mindset that I was attempting to draw attention to, not the actual problem of the day that elicited the comment about gasoline or oats. Trying to revert to horsedrawn transport would create even more of a biofuels crises precisely because of that 40x growth.
Perhaps I should have provided this link to clarify -
http://www.all-creatures.org/nyca/ch-hist-19711000.html
Your last comment is certainly true for the governments earning the royalties and the companies paying those royalties. But most investors are simply gambling on the future price being higher than the current price. Investors need the price to keep rising to make a profit. At $40 barrel it would be raining investors on Wall St. Algae seems to be the only viable alternative for jet fuel at the moment. I’m not sure what alternatives are are being considered for plastics and fertilisers.
February 15th, 2008 at 2:05 am
fastbike,
I like your description of oil as “free”. That’s half the problem, and half the solution. Because oil has been virtually free we have used it like there’s no tomorrow. Half the solution to coping without “free” oil is summed up in the adage “waste not want not”.
The other half of the solution is to go back to a very basic fact then think forward from that. One of the most basic facts about crude oil is that it is a useless product until it is cooked. Once it has been cooked the vapours can be condensed at various temperatures to create various useful products which can be used in various ways. It follows logically that the replacement for oil wont be a single this or that.
The replacements for heating oil already include electricity and geothermal and solar energy.
The replacements for petrol already include diesel and public transport. Diesel only because the greater fuel efficiency of diesel engines extends the life of oil resources till a more permanent alternative can be productionised.
Algae fuels seem to be targetting the jet engine, possibly because the necessary volumes of fuel are smaller than for internal combustion engines.
To drag out another old adage - horses for courses.