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
posted by JD @ 5:29 AM
10 comments
10 Comments:
I guess I'll have to take jd's side on this one, at least pertaining to prices. There is little direct correlation between oil prices and food prices. There is little fuel used directly in grain production. Of course, in the periferal activities and transportation, the amount of fuel increases.
Just like the rising price of gasoline hardly makes transportation to work in the morning more expensive. Car, insurance, taxes, etc.. play a much larger role in the cost of driving. The expensive part of driving is simply having a car. I don't have a car. Instead, I have a lot of money at the end of the month to pay for the house, wife and kids - and an hour less time to spend with my wife and kids per day because of the lengthy commute.
But I wouldn't jump to a conclusion too fast, because peak oil does not have to do with the price of oil. It has to do with the availability. The real question is, what happens when oil is simply NOT AVAILABLE? Are we even ABLE to produce the food we need? If not, its price will certainly skyrocket - in comparison. What happens to the price of heating your house once Putin shuts off the gas line? All the money in the world won't make gas more abundunt.
Remember, as far as we all know, we are still on the upside. A graph til 1994 (or even '06) just don't cut it. Although I think Dreyfes is right in his calculation that we have reached peak, we need to make the analysis in a world where oil is scarce, not abundant, like it is at the moment. Let's just hope the downside is gradual, so that we have time to DEVELOP ways and infrastructure for substitution.
If not, the doomers won't be laughing either.
It's my first visit here but most likely the last one too - this 'piece' clearly shows that the quality I can expect here is a pretty far cry from the average pro-PO sites. I came here without prejudice but such a ridiculously exaggerated post like this destroys the credibility of this site immediately.
What a pathetic "debunking"... since when we buy soybeans and such, pal, instead of *FOOD* (let alone the gov'tal influence on those prices)?
FYI: food != seeds and beans (it's probably pre-HS level...)
my fam gets almost half of our food delivered via a local service. it's all organic produce and some meat and breads and stuff from local producers. many people in our neighborhood are receiving that "big green boxes" the food comes in meaning the drivers make many stops along their route. it seems very efficient.
things is i doubt this business was designed to combat peak oil. it's a much better version of "webvan" and the folks running it are making good money (win) and have extremely efficient distribution, the farmers are making money (win) as they don't have to compete so directly with produce shipped in from half a country away, and the consumers get much better food (win) - i mean, you should see these radishes i'm munching on now! wow. and most importantly the consumers are not all driving to the supermarket, the food is delivered to them efficiently.
anyway, this service will survive quite nicely as oil prices go up. the delivery charge may go up but the model could easily use diesel, gas, or EVs (they're all fedex style vans).
i'm mentioning it because it shows how there are so many models that are alternatives to the supermarket stocked with items from all over the country. hell, even the supermarkets would simply adjust and get more local product.
btw, was there a post 265??? i don't see one.
So just what is the breakdown in costs for corn and beans? How much of the cost is seed, how much is labor, how much is diesel fuel, how much is capital equipment, how much is farm maintenance, how much is fertilizer, how much is pesticides, how much is irrigation? What is the proportion of fossil fuels in each of these costs? If there is significant cost proportions attributable to fossil fuels then the lack of correlation must be down to higher productivity. How high can that go, especially as fossil fuels become scarcer?
Most oil isn't wasted powering cars. That's a silly assertion, Roland. I don't think any well-informed Peak Oilist DoomyGloomy or even any well informed Optimist would think that. Most oil is wasted in extracting raw materials, refining raw materials, manufacturing those refined raw materials into items a consumer somewhere can use.
Prove it. We're not going to take your word for it. Let's see the stats.
No common sense? Someone needs a couse in basic ag. As early ago as 1977, we only produced 50 bushels of corn per acre. Now, special breeds or corn yield up to 250 bushels per acre. You are not comparing apples to apples when you relate the price of oil to the price of food over time. Also, we get high yields because of perto based fertilizers. Last year, the price of oil went up 33%, and the inflation rate for food went from 3% to 6%. I say they are VERY MUCH RELATED, AND THERE WILL BE HELL TO PAY WHEN THE OIL IS DEPLETED. Remember, the boy who cried "wolf" did in fact meet his fate with the wolf at the end of the story!
Lets assume for a moment that peak oil will not have dire affects for most of the world. For instance Japan and Australia with their markets. Now lets assume in this rosy outlook that the U.S. is in dire straights because they did not plan or prepare or whatever. Now take the most powerful military in the world, with a suffering country that can't go to the drive in anymore or drive to work or to generally maintain their indulgent way of life...Can anybody say WWIII?
We may see rising food prices now because the dipshits in congress and the whitehouse have decided to back ethanol due to the Iowa farming lobby.
That, however, is a political issue. It's easier right now to produce ethanol to put into vehicles than it is to replace vehicles en masse with hybrid electrics. But soon it won't be and substitution of the substitute will take place. i.e. ethanol from corn will disappear because it has serious externality problems.
But the veggies growing in my backyard are free (grown from second generation seeds) and use no oil whatsoever so I hardly see them getting expensive!!
JD's lack of intellectual honesty again on display. "Oil prices have no affect on food prices." This is false on it's face. Oil is involved in virtually everything we produce at one time or another along the supply chain. Oil goes up, prices go up. The relationship is not immediate as retail attempts to keep prices down, oil is somewhat volatile so retailers and producers don't respond to every price change, etc. But any long-term rise in prices WILL filter through the economy. This is simple, except for THE idiot, apparently.
Next, oil prices are not the only force. What about production? It is clearly shown that the move to corn-based ethanol has pushed grain prices across the board skyrocketing: 50 - 100%.
Etc.
I am not surprised that you have not revised this post or done an update.
You are the Exxonsecrets-style ghost warrior of Peak Oil.
I am not surprised that you have not revised this post or done an update.
Actually, I'm doing regular updates on this topic -- in particular, the terrifying story of how I personally am starving to death due to the skyrocketing cost of food. See 315. MY GRUESOME STARVATION DIARY.
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