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Rajiv
01-09-08, 11:56 PM
Three Billion Dead: The Future of Biofuels and the Future of Resistance (http://casaubonsbook.blogspot.com/2008/01/three-billion-dead-future-of-biofuels.html) by Sharon Astyk (http://casaubonsbook.blogspot.com)


I'm going to be asking all of you to do some hard work today - this is not going to be a short post, or an easy one, particularly if you read the referenced piece and the hundred or more relevant comments. We all have limited time and energy, and I'm not necessarily famous for my brevity, so I understand if this looks overwhelming to you, but I'd like people to try and get through it, because this is damned important.

The one time I saw Stuart Staniford speak, at ASPO Boston in the fall of 2006, he ended his analysis of oil peak data with something along the lines of "Peak Oil isn't the end of the world, folks." I'd tend to guess he may actually have changed his mind on this one. He's a guy who tends to be conservative in his estimates, and, as far as I can tell (I don't know him at all) someone who doesn't believe things until he's figured them out to his satisfaction. Since he's a brilliant data analyst, to his satisfaction is quite a high standard. But becuase he's not someone who leaps to conclusions, I tend to trust Staniford's thinking. That is, when he gets worried, I worry. When he says, as he does here, that he was "floored" - I sit up and pay attention. And in fact, I was too.

This is a very long, difficult and important piece, on the impact of biofuels on the food supply, world hunger and the future. I've been arguing intuitively from the perspective of someone whose interest is not in data analysis, that peak oil's first and deepest effects will appear in world hunger, but Staniford has pushed it further. http://www.theoildrum.com/node/2431. I strongly urge you to read the whole thing when you can, but his conclusion is this:

http://www.theoildrum.com/files/low_income_cdf.png

Here the value for the lower-income 2/3 of the world's population is about +0.7. What this means is that a 10% reduction in income has about the same effect on food consumption as a 10% increase in food prices. This suggests that we can use the global income distribution (shown above) to roughly estimate the impact of a doubling or quadrupling of food prices. We noted earlier that according to the UN about 800 million people are unable to meet minimal dietary energy requirements. That is 12% of the world population. On the income distribution (one graph back), the 12% mark corresponds to $1020/year in income (shown as the lowermost green dot). By looking at the $2040 level (36% of the global population - second green dot up), and the $4080 level (61% of the global population - third green dot up), we can estimate that a doubling in food prices over 2000 levels might bring 30% or so of the global population below the level of minimal dietary energy requirements, and a quadrupling of food prices over 2000 levels might bring 60% or so of the global population into that situation.

These estimates should be regarded as quite uncertain. Still, it seems hard to make a case that food price increases will cause a cessation of biofuel profitability before a significant fraction of the global population is in serious trouble. The poor will not be able to bid up food prices by factors of two and four and keep eating. In contrast, the quadrupling of global oil prices, and tripling of US gasoline prices, over the last five years has had very minimal impact (http://www.theoildrum.com/story/2006/12/5/17243/2556) on driving behavior by the middle classes.

The core problem is that gasoline price elasticity (http://www.econ.ucdavis.edu/faculty/knittel/papers/gas_demand_083006.pdf) in the US is about -0.05, versus the -0.7 price elasticity for food consumption by poor consumers. This makes clear who is going to win the bidding war for food versus biofuels in a free market.
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This is a serious discussion topic, coupled with two other pieces

The Failure of Networked Systems (http://anz.theoildrum.com/node/3377)

and

Peak Oil and the Financial Markets: A Forecast for 2008 (http://www.theoildrum.com/node/3382)



At this time of year, we read many financial forecasts for the year ahead. Nearly all of these are written with the "filter" assumption of infinite growth. "Oil production problems are a temporary issue; after a short dip, the economy is likely to continue growing rapidly again. We may have a short recession, but we will soon be back to business as usual." Etc.


I think this filter is fundamentally in error, and leads to a mistaken impression with respect to where the world is headed. The world is changing in a very major way. Oil is in short supply, and this shortage is likely to get larger in the future. The pressure of short supply and rising prices adds a systematic bias that the financial community is not recognizing. This bias has as its basis the fact that it is becoming more and more difficult for both people and businesses to pay back loans, because of the rising costs of oil and food. This situation cannot be expected to go away. In fact, it is certain to get worse in years ahead, as oil supplies become tighter.


Besides the systematic bias, there is also a systemic risk, arising from the interconnectedness of all of the parts of the economy. This was well described in a post a few days ago called The Failure of Networked Systems (http://anz.theoildrum.com/node/3377#more). One of the issues in systemic risk relates to the financial system itself. If one party in the financial system fails, it increases the likelihood that other parties in the economic system will fail as well.


Another aspect of systemic risk is the close ties of the financial system to the rest of the economy. One example is the higher oil and food prices mentioned above that lead to a systematic bias toward higher defaults. Another is the fact that the lack of oil can be expected to impede economic growth, making the infinite growth model underlying the current economic system less sustainable, based on the economic model (http://www.iea.org/Textbase/work/2004/eewp/Ayres-paper1.pdf) of Robert Ayres and Benjamin Warr. Another linkage is that of oil with ethanol. Higher oil prices leads to increased pressure to produce more ethanol, which further raises food prices, as demonstrated by Stuart Staniford in Fermenting the Food Supply (http://www.theoildrum.com/node/2431#more).

Contemptuous
01-10-08, 12:12 AM
The present state of iTulip's comment on this issue is that the marketplace will regulate and balance this transition, although it "may be bumpy".

Rajiv
01-10-08, 12:19 AM
My response is best stated in the above quoted article


For those of my readers who don't spend a lot of time reading scholarly papers, let me translate a little bit. What Staniford is saying is that there will be strong economic incentives to continue biofuels growth at the expense of the world's poor, and that mass starvation could occur quite rapidly, even as he states early on in the paper, as soon as 5 years from now and under existing policies. That is, if we don't act now, we may "accidentally" starve billions of people in our quest for oil substitutes. Staniford says,

"I will use a mixture of existing data,[..] to demonstrate that there are reasonably plausible scenarios for biofuel production growth to cause mass starvation of the global poor, and that this could happen fairly quickly - quite possibly within five years, and certainly well within the life of the existing policy regimes."

Contemptuous
01-10-08, 12:47 AM
My response is best stated in the above quoted article

There is a lot of apathy and disbelief on this topic here. I never in my life have been one of those who was greatly motivated to help others, sort of a good humoredly cynical guy who preferred to shrug and say "it's a screwed up world, and I'm not about to try to save it".

But I think some part of what this article describes is "almost certain" in the next decade. Therefore it ratchets the moral cost of apathy up several notches for Joe Average, not just here in North America, but in all developed nations. At a certain point you become like some free individual who happens to be taking a stroll past the barbed wire of a concentration camp, and muttering to yourself, "hell, they're not MY problem!".

Here are two quotes from the QUOTE OF THE DAY section of the Special Announcements:

Everyone has to pick the philosophical stance that is most decent and appropriate for the above described approaching events. Each has to use his or her own best judgement - even at the risk of employing too feverish terms, "to save their own soul and conscience" so to speak, as well as attempting to stave off the ugliest consequences for those far weaker than oneself.

Take for example the illiterate (a large part of the 800 million referred to in this article - who cannot even send out an SOS to the world when the trouble arrives.

Everyone needs to STOP - and search for some inner scruple, understand it is not possible as humans not to have some real concern to meet these extraordinary approaching events.

QUOTE:

The mission is "economic altruism"...trying to help people. When they desperately want to buy things, be happy to sell, and when they want to sell, buy! - Sir John Templeton - Investor -

QUOTE:

“People who shut their eyes to reality invite their own destruction, and anyone who insists on remaining in a state of innocence long after that innocence is dead turns himself into a monster.” -- James Baldwin Biography - Fiction Writer, Essayist, Social Critic - 1924-1987

Rajiv
01-10-08, 06:58 PM
Some more data and information on this

From Severe food shortages, price spikes threaten world population (http://www.wsws.org/articles/2007/dec2007/food-d22.shtml)


Worldwide food prices have risen sharply and supplies have dropped this year, according to the latest food outlook of the United Nations Food and Agriculture Organization. The agency warned December 17 that the changes represent an “unforeseen and unprecedented” shift in the global food system, threatening billions with hunger and decreased access to food.

The FAO’s food price index rose by 40 percent this year, on top of the already high 9 percent increase the year before, and the poorest countries spent 25 percent more this year on imported food. The prices for staple crops, including wheat, rice, corn and soybeans, all rose drastically in 2007, pushing up prices for grain-fed meat, eggs and dairy products and spurring inflation throughout the consumer food market.

Driving these increases are a complex range of developments, including rapid urbanization of populations and growing demand for food stuffs in key developing countries such as China and India, speculation in the commodities markets, increased diversion of feedstock crops into the production of biofuels, and extreme weather conditions and other natural disasters associated with climate change.

Because of the long-term and compounding nature of all of these factors, the problems of rising prices and decreasing supplies in the food system are not temporary or one-time occurrences, and cannot be understood as cyclical fluctuations in supply and demand.

The world reserves of cereals are dwindling. In the past year, wheat stores declined 11 percent. The FAO notes that this is the lowest level since the UN began keeping records in 1980, while the US Department of Agriculture (USDA) has reported that world wheat stocks may have fallen to 47-year lows. By FAO figures, the falloff in wheat stores equals about 12 weeks worth of global consumption.

The USDA has cautioned that wheat exporters in the US have already sold more than 90 percent of what the department had expected to be exported during the fiscal year ending June 2008. This has dire consequences for the world’s poor, whose diets consist largely of cereal grains imported from the United States and other major producers.

More than 850 million people around the world suffer from chronic hunger and other associated miseries of extreme poverty. According to the FAO, 37 countries—20 in Africa, 9 in Asia, 6 in Latin America, and 2 in Eastern Europe—currently face exceptional shortfalls in food production and supplies.

Those most affected live in countries dependent on imports. The poorest people, whose diets consist heavily of cereal grains, are most vulnerable. Already the poor spend the majority of their income on staple foods—up to 80 percent in some regions, according to the FAO. Ever-rising prices will lead to a distinct deterioration in the diets of these sections of the population.

The food crisis is intensifying social discontent and raising the likelihood of social upheavals. The FAO notes that political unrest “directly linked to food markets” has developed in Morocco, Uzbekistan, Yemen, Guinea, Mauritania and Senegal. In the past year, cereal prices have triggered riots in several other countries, including Mexico, where tortilla prices were pushed up 60 percent. In Italy, the rising cost of pasta prompted nationwide protests. Unrest in China has also been linked to cooking oil shortages.

In addition to the cost of imports, war and civil strife, multiple years of drought and other disasters, and the impact of HIV/AIDS have crippled countries’ food supply mechanisms.

Iraq and Afghanistan both suffer severe shortfalls because of the US invasion and ongoing occupation. North African countries are hard hit by the soaring wheat prices because many staple foods require imported wheat.

Countries of the former Soviet Union are facing wheat shortages. People there spend upwards of 70 percent of their incomes on food; the price of bread in Kyrgyzstan has risen by 50 percent this year and the government released emergency reserves of wheat in the poorest areas to temporarily ease the crisis.

In Bangladesh, food prices have spiraled up 11 percent every month since July; rice prices have risen by nearly 50 percent in the past year.

FRED
01-10-08, 11:33 PM
Everyone has their own threshold. War in the Middle East for oil? Ok. Destroying Candian Boreal forests for shale? No way.

Starving a poor population for another is not without precedent.

The Turks haven't learned the British way of denying past atrocities (http://books.guardian.co.uk/comment/story/0,,1674478,00.html)

n his book Late Victorian Holocausts, published in 2001, Mike Davis tells the story of famines that killed between 12 and 29 million Indians. These people were, he demonstrates, murdered by British state policy. When an El Niño drought destituted the farmers of the Deccan plateau in 1876 there was a net surplus of rice and wheat in India. But the viceroy, Lord Lytton, insisted that nothing should prevent its export to England. In 1877 and 1878, at the height of the famine, grain merchants exported a record 6.4m hundredweight of wheat. As the peasants began to starve, officials were ordered "to discourage relief works in every possible way". The Anti-Charitable Contributions Act of 1877 prohibited "at the pain of imprisonment private relief donations that potentially interfered with the market fixing of grain prices". The only relief permitted in most districts was hard labour, from which anyone in an advanced state of starvation was turned away. In the labour camps, the workers were given less food than inmates of Buchenwald. In 1877, monthly mortality in the camps equated to an annual death rate of 94%.

Hard to imagine this happening today, but the power of denial is strong.

Contemptuous
01-10-08, 11:50 PM
Excellent post Fred. Point well taken. My education is ongoing.

Rajiv
01-14-08, 12:31 PM
Some more on this from Stuart Staniford at the Oil Drum

Death Rates and Food Prices (http://www.theoildrum.com/node/3495)