Saturday, January 19, 2008

Oil For Food

Gee, no one could see this coming! What happens when the price of oil and gas really start to take off?
Rising prices for cooking oil are forcing residents of Asia’s largest slum, in Mumbai, India, to ration every drop. Bakeries in the United States are fretting over higher shortening costs. And here in Malaysia, brand-new factories built to convert vegetable oil into diesel sit idle, their owners unable to afford the raw material.

This is the other oil shock. From India to Indiana, shortages and soaring prices for palm oil, soybean oil and many other types of vegetable oils are the latest, most striking example of a developing global problem: costly food.

The food price index of the Food and Agriculture Organization of the United Nations, based on export prices for 60 internationally traded foodstuffs, climbed 37 percent last year. That was on top of a 14 percent increase in 2006, and the trend has accelerated this winter.
So the price of food has gone up by half already and the rate of increase is accelerating. I probably should have added starvation, potentially even in the US, as one of the stories to follow this year.

American grain production is at all time highs, yet this is not due to getting more food to market, but an effort to replace crude fossil fuels with ethanol-based production. God forbid we should put people ahead of our cars!

Eleven countries, including China & Mexico, have had to either impose food rationing or tamp down food riots. Think illegal immigration was a problem when it was just disparate incomes? Imagine the wave of immigrants coming over once the food runs out!

And how can we say no to them?

Ironically, part of the problem we're seeing with food production can be laid at the feet of the American consumer: we've helped create a middle class in places like China, Australia, and India, and those families want higher protein diets. Higher protein diets need more energy to be produced than further-down-the-food-chain diets of grains and vegetables. And of course, all this increased economic activity to service our Xboxs and SUVs has created a climate change that makes it darn near impossible to grow food in places that were best suited for it, like many of the former Soviet Union republics. Even the American breadbasket is in danger of droughts that could kill production for whole years.

This will not be pretty.