265. WILL FOOD GET EXPENSIVE AS OIL PRICES INCREASE?
Some of these peak oil myths are like Dracula. You can shoot them dead, but they just keep getting up out of the coffin. Believers continue to insist the groupthink is true, even in the face of unequivocal quantitative evidence to contrary.
Here's one from today's doomer puff piece in Salon:
"As energy gets more expensive, food will get more expensive."
This is totally superficial and misleading. The important question is: HOW MUCH more expensive will food get as energy gets more expensive? Actual data and analysis shows that rising oil prices have almost no effect at all on food prices. From an in-depth study by the USDA:
The empirical results presented above suggest energy prices will have a relatively small but positive impact on the average price that consumers pay for food. The simulations suggest that a doubling of crude oil prices would raise average food prices in competitive food markets by as much as 1.82 percent in the short run, and by 0.27 percent in the long run.SourceMore data demonstrating the same point:
Average corn and petroleum product prices moved in parallel until about 1974. However, petroleum prices jumped dramatically thereafter, while corn prices did not. The real price of corn has trended downwards since 1974. This is not true for petroleum prices. The results of statistical analyses show that the average corn price has declined at an average annual rate of about 11 cents/bu, since 1956, in 1994 currency. The average petroleum price index (adjusted to 1994 values of the consumer price index) has increased at an average annual rate of 1.45.SourceIsn't that data above amazing? From 1956 to 1994, real oil prices went up while real corn prices went down. Hmm... Seems common sense isn't all its cracked up to be.
In the period from late 1998 to April 2004, the price of crude oil increased from about $10 to $55. That's an increase of 5.5x.
So did food prices go up by 5.5x?
Let's take a look:
Wheat prices... Steady
Soybean prices... Steady
Sugar prices... Steady
-- by JD