179. FOUR REASONS WHY WE WON'T RUN OUT OF FOOD
I've already established that oil will not peak without warning. But assuming it did, or that we were still completely unprepared for some reason, let's see why the scenario of starving to death because of oil shortages is simply not going to happen.
- Demand is controlled by prices. The 0.15 worldwide elasticity of oil prices means that a 5% reduction in supply each year will cause an annual price increase of 33%. This is not unprecedented … in fact it's only slightly higher than the price rises we're experiencing now. It will cut away demand and make alternatives like shale, tar, gas, biofuel, coal and grid-powered cars more profitable. These technologies are far more advanced and far more ready for implementation than they were back in the 70s. You would also expect to see efficiency improvements for trucks just like we're now seeing for cars.
- If the food supply is really at risk, the government can take steps to protect it with fuel rationing and driving restrictions. The IEA "Saving Oil in a Hurry" report lists measures that, if all used simultaneously, could restrict automobile use 30%. That alone offsets the effects of Peak Oil for at least six years. On top of this, if worldwide oil shortages are a real problem, it is likely that some kind of international body will coordinate measures to ration oil and ensure that there is enough for the most vital uses. Contrary to what you might think, leaders are generally neither incompetent nor evil. They just need to be convinced that there is a certain and immediate threat, which there isn't at the moment.
- Who says that oil shortages have to demolish the economy in the longer term? Peak Oil could actually have a positive effect, creating new jobs and industries in a headlong rush to develop alternatives. In some ways I can't think of anything better for the car industry than replacing every car in the country with a fuel cell vehicle.
- Oil production doesn't have to follow the Bell Curve exactly. Production will actually increase some years, just as it has fluctuated in the past. This will give the economy a respite and buy more time for adjustments to the new economy.
As a further note, GM is aiming to sell a commercial fuel-cell vehicle as early as 2010, and no later than 2020 (Source). Next year you will be able to buy the zippy ENV Fuel-Cell Motorbike for around $6000 AUD, or $4500 US.
-- by Roland
posted by JD @ 4:57 PM
25 comments
25 Comments:
JD:
You have to realize right at this moment many people in the world are starving to death because they do not have sufficient food. Any reduction or shortage of food will cause more of the poor people to die off. For rich countries, it's a matter of paying 33% more for food, for poor countries it's a matter of life or death.
Now, let me not dispute your 5% reduction and 33% price increase figures. But please note those are year by year number. Each year it is depleted 5% further from the already depleted level a year ago. And each year the price increase of 33% is from the prior year level that's already increased. Therefore the year by year figure looks like this:
Year Supply Price
0th : 100% 100%
1st : (95%)^1 (133%)^1
2nd : (95%)^2 (133%)^2
3rd : (95%)^3 (133%)^3
As you can see it is an exponential decay and exponential growth. By the 5th year the supply is only (95%)^5 = 77%, and the price will be (133%)^5 = 416%. And by the 10th year the supply is (95%)^10 = 60%, and the price will be 1732%.
Assume your current monthly grocery cost is $400 and your monthly after tax income is $4000. By the 8th year you would have to spend 100% of your money on food and have nothing left for anything else, so you will die off on the 8th year, if massive die-off and demand destruction has not already occured in the rest of the world to reduce demand.
Quantoken
Also I feel you get the causual relationship between supply/demand/price completely wrong. Demand is NOT controled by price. It's the other way around.
First you have a supply which is not very flexible to price change, when you are already pumping at full speed.
Second, your demand level is controled by the supply. You can not consume anything more than you produce. It's physically impossible to consume something you do not produce. It's also unlikely you consume less than what's available when there is a shortage. So the demand will be forced to always equal to supply.
Next, the demand level, which is distated by supply, then decides the price. The price is set by the market high enough so just enough people can afford the purchase and so the consumption is exactly what's being produced. Those people who can not afford to buy, we call demand destruction.
So, keep in mind, the demand is suppressed by the physics law that you can't consume more than what's available, not suppressed by price. The price simply responds passively to the supply shortage. And however the price is set, a shortage is a shortage and is a shortage. Less food produced is less food available and less food for eat. It's not a matter of price, it's a matter of not having enough.
You have to realize right at this moment many people in the world are starving to death because they do not have sufficient food.
How many is "many"? I want to know the breakdown, with the exact numbers. How many people are starving to death per day, right now, and where exactly are they?
Quantoken - your responses presume "business as usual" with no change in farming methods, etc. There is no way that food will increase at 33% every year indefinitely, even without demand destruction, there would be massive effort expounded to find alternate ways of producing it that didn't cost as much. There would be HUGE financial incentives to be the first to figure it out so you could get a monopoly on whatever new methods were produced and beat out the competitors with cheaper prices. I trust people to try and make money, and I doubt they'd sit around for more than a few years trying to figure this out.
As for the amount being spent for food, MOST AMERICANS at least buy way more than they need, I heard something like 50% of food produced goes to waste, AND there's no reason why people can't survive on things other than jell-o pudding snacks and big macs besides. There would have to be a ridiculous drop in the amount of food available and the prices involved making it before there was mass starvation. I'm not saying it's impossible or that there won't be any rough years here, but the idea that any significant amount of the (I'm american so I always am implying American) population will die off from starvation is pretty unlikely imo.
Wankerness:
You don't get it. The food price goes up 33% NOT solely because of the cost to produce them, BUT more importantly because of the shortage!!! Just like the $60-$70 per barrel oil. Is it because it cost anything neat that much to extract oil from underground? NO. The price surge is due to shortage.
Food is not produced by technology. Food is produced by physics/biochemical and photo synthesis processes. When you don't have enough fertilizer, you don't produce enough food, period. It doesn't matter how good Microsoft OS or any technology becomes. Food is produced by sun light, water, air, soil and fertilizer.
At least JD won't starve. He has managed to create another straw man out of gaseous nitrogen, hydrogen, H20, and oxygen. Being a vegetarian he can eat the resulting carbohydrates or ferment them into biofuel and charge off after another doomer.
I think we are treating this issue too simply. Food production has many factors involved, not just oil. Take a look at American biofuel production. The shift from agriculture to food and biofuels will mean that America will export less and less food towards other countries. This means that nations dependent on food aid will have increased problems to combat hunger.This is also true of food surpluses, in Europe they are rapidly dwindling. Grain for example, is burnt to heat houses because it is cheaper than other fuels.
Then there are geopolitic factors that make the issue more complex, the world is not ideal but turbulent. THat means that some oil exporting countries will have conflict causing rapid drops in oil exports which affects the oil market.
Another point is the elasticity calculations done. They are usually based on a rise from 30 to 40 dollars per barrel and then this rise is extrapolated. As if a rise from 30 to 40 is the same as a rise to 60 to 70. Number wise it is, but psychologically it is not. This is due to the nature of the economy. The economy will change as oil prices change which will affect the elasticity. It may become more elastic (due to consumers having an idea of the problem and realising more energy or oil saving). Or less elastic, (consumers have done all the energy saving they can at a certain point and are not willing to infringe further on the status quo of energy consumption).
Such factors above will mean that some regions and countries will prosper if they manage their food / biofuel production carefully. And other countries/regions will likely degrade further into poverty and misery.
For the American case this will probably be a case of management. If the farmers and scientist manage to come to a good division between biofuels and food production in time. With sustainable farming at its centre instead of non-sustainable, no food crises will occur. If the Americans keep lingering on and are not pro-active enough, there will be a shortage at a certain point. That shortage will probably not be very severe, but if we do not make changes to our food management it can become quite severe.
You have to realize right at this moment many people in the world are starving to death because they do not have sufficient food.
Very true. An important question, however, is why they don't have sufficient food? Is it because the world doesn't have enough food to feed them?
AlbertusMagnus: Not as long as we in the US throw out 50% of our production, and pay farmers not to produce. This is the crux of the issue. What Quantoken doesn't realize is (a bit ironically) that economics is not destiny - even if food price DID actually go up at the same rate as oil price, as long as it is physically possible to produce enough food few people in the First World would starve, because people and governments are not going to be completely idiotic.
"As a further note, GM is aiming to sell a commercial fuel-cell vehicle as early as 2010..."
And also a self-driving vehicle in 2008.
http://www.autoblog.com/entry/1234000677056081/
"as long as it is physically possible to produce enough food few people in the First World would starve, because people and governments are not going to be completely idiotic."
Clearly, the person who wrote this lives under a rock.
Roland:
You keep coming back to price. But price is NOT the issue. Price is an issue for individuals. But for society as a whole, price doesn't matter since it only signify how money flow from one pocket to another and how fortunes are re-distributed. For the whole society the only thing that matters is the supply/demand. And it further simplify into just supply, since demand will always equal supply.
In an ideal and fair society. If the supply of fuel is reduced by half, then everything will likely be slashed by half, too. Half of fertilizers will be produced and half of good will needs to be trucked and transported. Half of food will be produced and the grocery store is half full. Of course each person will eat half the amount of food.
Of course, the human society is not fair. More likely rich countries and people will consume 5% less and eat 5% less, and poor countries and people will consume 90% less and eat 90% less, (thus massive die off).
Or, as you suggest, we can concentrate resource on food production. So fertilizer and other food production related utilization of fuel will remain at 90% level, while we slash other "none-essential" utilizations by 90%. Police should patrol the roads 90% less and utility repair worker should spend 90% less time on on-site services. And shools should send 90% kids home. Mean while 90% of workers on none-essential industries can stay at home and do not need to drive to work.
It doesn't work that way! In any short term emergency you can identify what is critical and essential, and what is not. On a long term or permanent basis you can not.
Is some one who cleans restrooms for minimum wage an essential or none-essential job? If the restrooms are not cleaned, people are more likely become sick, and bird flu etc are more likely spread. So it is essential that restrooms get cleaned.
Is a lawyer an essential job or not? A patent lawyer is essential in protecting patent rights of inventers of technologies. Such protection is important to encourage researches of new technologies, including research and inventions of alternative energy source, and who would not support alternative energy? So even a lawyer is essential.
On a long term/permanent basis, every profession is essential and you really can not decide which should be eliminated or be deprived resource usage. It's like a vehicle. You may begin to save some fuel by reducing some none-essential weights off the vehicle. But when you are beginning to take parts off and leave only the engine and wheels in, the vehicle no longer works safely.
Roland,
Yeah all that is going to happen.
Oh, btw, wannta take a bet that whoever the Yankees starting pitcher is on Opening Day 2005 will throw a perfect game?
Roland,
You make it sound like massive (and swift) major changes in a globalized industrial economy is as simple as moving legos around:
"Of course, this situation cannot continue forever, and if oil kept declining eventually people will start dying. But it won't, because the use of alternative fuels will grow and cities will redesign themselves to cope with scarce oil. Farmers can switch from corn to soybeans and fuel their machinery with the husks; the government can subsidize biofuel or liquefied coal for farmers; trucks can be replaced with trains; people can grow veggie gardens and buy organic food; there can be less consumption of junk food and soft drinks, and less waste; people can get on electric cars."
Roland,
You wrote:
"Their jobs will still be there."
Talk to anybody at GM lately? Anybody at the 10 other jobs every job in the automotive industry creates?
Note to JD: if you want to debunk the hype about Peak Oil, you need to find some authors with a bit more intelligence and insight into the complexity of our sitation than Roland.
Right now, between your ridicuosuly off base posts (like the one on the banking system) and horribly simplistic notions like those put forth by Roland, your blog is doing more to make the doomers credible than it is to debunk them.
Any semi-intelligent person is going to read through this stuff and see how juvenile it is.
"Roland,
You make it sound like massive (and swift) major changes in a globalized industrial economy is as simple as moving legos around:
"Of course, this situation cannot continue forever, and if oil kept declining eventually people will start dying. But it won't, because the use of alternative fuels will grow and cities will redesign themselves to cope with scarce oil. Farmers can switch from corn to soybeans and fuel their machinery with the husks; the government can subsidize biofuel or liquefied coal for farmers; trucks can be replaced with trains; people can grow veggie gardens and buy organic food; there can be less consumption of junk food and soft drinks, and less waste; people can get on electric cars."
The global economy is in a constant state of change and flux. Massive changes are taking place all the time, swiftly. In a global energy emergency, it is not unreasonable to postulate that many of these changes will take place even more quickly than they do now. In many cases, they will be driven by necessity and profit motive by the private sectors. Others will be led by governments.
You're arguments are only credible in a situation with very large sustained annual depletion rates that demand destruction and alternative switches can't compensate for. A possible scenario, but not one you can argue is inevitable.
Roland said:
"Quantoken, you seem to have yourself debunked the idea of a sudden dieoff in the developed world because of peak oil."
Sorry you modified what I said. I said "rich" countries and individuals, those are not necessarily the developed and high industrialized countries. Currently developed equals rich. But as the oil crisis unfolds and there is a huge paradigm shift, it may no longer be true. Rich countries could become poor and poor countries could become rich.
At the end of day, it will be those countries that are rich in resources that will actually be rich and powerful. Resource poor but industralized countries will actually become poor and powerless.
Let's compare Saudis and USA. Once the oil price goes up 10 fold, Sandis would have 10 times higher GDP and the USA will be 10 times more in debt in trade imbalance. So at the end of day who will be more rich and powerful.
Granted we are currently most powerful military wise. But also note we are 8 trillion dollars in debt. Our powerfulness if funded by other countries who lend us, who could withdrew the loan at any time. Sure we have some technology that others don't have. But as we become more desperate in acquiring oil as our lifeblood, we will be willing to sell Saudis EVRYTHING we have in order to be able to buy oil from them. Even if we don't, others will do. Britain will be willing to sell nuclear bombs to Sandis, if that's what it takes to get Sandis sell oil to them for them to survive. So at the end of day we also lose any military advantage over any country.
Technologies can be transfered and purchased. And technologies are not depletable resources, once you have it, you always have it and it never runs out. But resources can be exhausted. So at the end of days, only countries which have preserved a significant amount of resources, will survive. Countries that have advanced technology but poor in resource will not survive.
I am dreaded for the day when oil exporting countries all suddenly realize the need to preserve resources for themselves, and decide to reduce, or cut off altogether any exports. It's a natural logical response that any one will do the same when the situation becomes clear. So it's only a matter of time before that happens. What do we do? Conquer and occupy using military might? That's hardly realistic. With the power of their resource in hand Saudis could instantly buy any defence means from any one, including the unthinkable of buying nukes from Isreal!!!
"Our powerfulness if funded by other countries who lend us, who could withdrew the loan at any time."
Not so simple. This is the "collapsing dollar" paranoid scenario. Western financial markets are the only ones liquid enough to absorb such a large amount of money. That's why they keep the dollars here in the first place. They have no where else to put them. It is the West that is holding the Saudi and Chinese assets hostage, not vice a versa. In a panic environment, we can freeze the assets anyway as a last resort.
"Britain will be willing to sell nuclear bombs to Sandis, if that's what it takes to get Sandis sell oil to them for them to survive."
So what?
"I am dreaded for the day when oil exporting countries all suddenly realize the need to preserve resources for themselves".
Not an insane concept. Merits discussion. Not sure what the Saudis need their oil for. Its only value is due to foreign demand. (maybe NASCAR could move over there?) Might be kind of a risky decision to make on their part, with what real benefit?
This line of thinking always comes up in doomer argumentation. According to Peak Oil theory, at some point the supply of inexpensive oil begins to gradually decline. Most people involved in these discussions agree on that. But when doomers discuss the impact of this phenomonon, suddenly nobody has enough oil to even lube their cars. If you suggest a course of action they say that is impossible because it requires oil. Suddenly the Saudis don't have enough oil to fill up their Rolls Royces, so they won't export it to us. We can't build nuclear power plants or electric cars. Why? You need oil to build them. Is oil going to magically disappear in one day? That's not what I took out of Hubbert.
Anonymous:
Freezing foreign assets can not be a last resort action. It serves the exact opposite consequence than you intended, and cause a total collapse of US dollars. Just as all the foreign entities hold the US dollars and wonder what they can do with it and doubting what their real worth is, you are simply trying to confirm their suspicion by providing real example that the US dollars is not credible and not trust worthy. The damage is irreparable.
The collapse of US dollars will mean we will not be able to import any good any more. NO that does NOT mean we will have a trade balance. Not even close. Even worse, we will no longer be able to buy oil using dollars.
The significance of oil producing countries being able to acquire nuclear technology and other defence technology, using their oil as lure, is not that they will become a threat to world peace. But rather that they will be able to utilize their oil riches to equalize their defence capability against other powers. So that no one can hope to obtain their oil resource by military force, if they can't obtain them by peaceful purchase.
You are not sure why Saudis need their oil for???? You are joking! Look at all their oil money. And what else do they have besides oil? Nothing. Any sane mind in Saudi when facing inevitable depletion, would be to try to prolong their oil based prosperity! Why do they have to pump at full speed and deplete their only resource at the earliest date possible? You would want to pump less. Any barrel not pumped today will be pumped 10 or 20 years later to fetch a much higher return on the open market.
So why pump at full speed?
Meanwhile, every one now suddenly realized the need to build up their own Strategic Petroleum Reserve. This adds a huge demand on top of regular consumption, speed up the coming of the oil crisis.
Foreign entities might be wondering what they can do with all the US dollars they are holding, facing the prospect of a US dollar collapse. They might as well spend them and buy oil to fill up their SPR. You can't live on SPR for long. But hopefully you can live a little bit longer so other countries die off first, giving you a chance to survive. So SPR is still very important.
Mean while the Saudis has got to wonder why they should exchange their precious oil for dollars. What use does it do to hold a whole bag of dollars. They don't want to be the bag holder of the world. You know what it means to be a bag holder in stock trades. It sucks to be bag holder. The truth is no one wants to be a bag holder of US dollars when it finally collapse. Will Sandis be willing to be such a bag holder, or will it prefer rather to hold their oil back?
So why are they pumping so much oil now? Do you think they just aren't as smart as you? Or do you think they are just biding their time until they get a nuke? Why doesn't the US just import all its oil now and keep the domestic stuff in the ground for later consumption?
I appreciate your imagination, but maybe you should be working in Hollywood. Reality rarely matches its melodrama.
the reason the Saudi's need their oil so much is that Saudi Arabia is a poor country with no industry or agriculture to speak of. It has a population of 22 million and the average age is under 25. These young people are angry wahabanists who are quiet only because they are paid off with a little oil-money.
I am visually-impaired (I lost my eyes in a hunting accident) and I really don't think the word verification is fair. It is very difficult to read those scripty words because they all run together. Besides, who are you trying to keep out anyway. people who don't agree that the "World is Coming to an End." scenerio like you
He's trying to keep out spammers, who were previously a major problem.
"Previously a major problem?" The guy claims to have lost his eyes in a hunting accident. Give me a break. I don't believe that one at all. And then he says that JD is keeping out cornucopeans? This is a cornucopean site. This is not a doomer place. Sounds like a spammer to me. We need better security here. I would suggest making new people who want the privledge of contributing at this site take an anti-doomer oath.
1. "I will be hate all people who have a bad attitude and want to take JD toys away"
2. "Unless mathetmatically proven otherwise, any attempt at calling into question JD's personal lifestyle will be hounded into manure"
3. "Doomers must hold their little finger to their nose and whistle dixie"
"Contrary to what you might think, leaders are generally neither incompetent nor evil. They just need to be convinced that there is a certain and immediate threat, which there isn't at the moment."
"Need to be convinced...certain and immediate threat" - that is my definition of incompetence in a leader. Leaders are supposed to look farther ahead than the immediate, and to have contingency plans for unexpected or undesired events.
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