free html hit counter Peak Oil Debunked: 265. WILL FOOD GET EXPENSIVE AS OIL PRICES INCREASE?

Wednesday, March 22, 2006

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.Source
More 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.Source
Isn'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

23 Comments:

At Wednesday, March 22, 2006 at 9:59:00 AM PST, Blogger JDDEBUNKED said...

The statistical information cited here implies that there is no relationship between the price of oil and food prices. This disingenuous little piece of reporting is typical of this blog.

Rising oil prices have not been reflected in a correspondent rise in corn prices (to use one of JD's examples) due largely to US government farm subsidies, of which corn growers are amongst the highest recipients (1). These subsides help keep the "farm value" (i.e. price of corn at the farm gate) artificially low.

But this is not the point. Most of us don't drag our gunny sacks to the farm gate and fill them with corn. We purchase and consume corn in other ways, either fresh, frozen, or canned, or most often in the form of beef. As stated in the U.S. Grains Council – Importer Manual: "The principle use of corn, in both the United States and the rest of the world, is in livestock feed."(2)

Getting the corn from the farm to the cow (or can) and ultimately into our mouths costs far more than just growing it. This farm-to-mouth process is the marketing cost and entails processing, packaging, transporting, and selling the corn (or corn-based product) at the supermarket. It is this cost that impacts price the most. And while the price of oil does not correspond directly to the price of corn (or beef), since every step of the current marketing process requires energy from oil, one has to be really stupid to ignore the relationship.(3)

EX.
Choice beef prices rose from about $2.60/lb. in 1997 to the current price of about $4.90/lb. The current price would be even higher if not for the loss of markets in Korea and Japan that would have increased demand. (FYI, the price of oil in January of 1997 was about $22/barrel as opposed to current oil prices of $60/barrel.)

(1) www.ewg.org/farm/whatstheplan.php
(2) www.grains.org/galleries/importer_manual/chapter1.pdf
(3) http://www.cattletoday.com/archive/2005/October/CT421.shtml

 
At Wednesday, March 22, 2006 at 2:24:00 PM PST, Blogger Roland said...

Most of us don't drag our gunny sacks to the farm gate and fill them with corn. As stated in the U.S. Grains Council – Importer Manual: "The principle use of corn, in both the United States and the rest of the world, is in livestock feed."(2)

Actually, JD has already that out in this post. Well then the answer is simple - eat less beef! Get your protein from soybeans instead. The price is steady.

Processing, packaging and refrigeration? You know, I don't think we're going to die from eating a bit more quality fresh produce. It might actually be good for us. At least until Peak Olive Oil.

Actually, the fact that most fertilizer is wasted feeding livestock, and most food comes in five layers of colourful plastic packaging, and most oil is wasted powering cars, actually supports the optimistic argument. You're going to have to do better than that.

 
At Wednesday, March 22, 2006 at 2:29:00 PM PST, Blogger Dom said...

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.

 
At Wednesday, March 22, 2006 at 2:47:00 PM PST, Blogger nukeengineer said...

JD,

You got served.

NE

 
At Wednesday, March 22, 2006 at 7:47:00 PM PST, Blogger t2k said...

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...)

 
At Wednesday, March 22, 2006 at 7:56:00 PM PST, Blogger Omnitir said...


Most of us don't drag our gunny sacks to the farm gate and fill them with corn.
[…]
This farm-to-mouth process is the marketing cost and entails processing, packaging, transporting, and selling the corn (or corn-based product) at the supermarket.


Once again we see the single-minded approach of the doomer (or is it American?) mentality. “This is how we travel and when we can’t do it this way anymore we are screwed”. “This is how we heat our homes, and when we can’t do it like that anymore, we will all freeze to death”. Or “this is how we feed ourselves and when the supermarket model begins to fail we will all starve to death”. Just as there are more efficient alternatives to the American way of travelling and heating (and many other things), there is an energy efficient alternative to supermarket produce. It’s called a market.

In my area (a major Australian city) there is a growing trend of making available wholesale fresh produce direct from the farms. Once a week thousands of suburbanite consumers converge at various locations to purchase fresh fruit and vegetables at prices substantially lower then the supermarkets can offer. This produce is mostly locally grown and transported minimal distances. The farmers get tidy profits for minimal effort, the consumers save money, the product is always superior to the crap in supermarkets, and oil plays very little part in the process.

JD’s post is perfectly correct. The price of oil has little effect on the price of food. The problem isn’t dependence on oil, but dependence on an inefficient system. As these inefficient systems that we currently rely on become ever more impractical with rising oil prices, society will be forced to adapt to new more efficient way’s of functioning.

Doomers, or perhaps Americans, need to stop thinking that the way they currently do things is the only way and any alternative means the end of civilisation. ‘Dragging our gunny sacks to the farm gate’ (or to wholesale outlets) for fresh produce isn’t as impractical as supermarket-loving people initially think. Neither are space heaters or public transport.

 
At Wednesday, March 22, 2006 at 7:57:00 PM PST, Blogger Omnitir said...

Nukeengineer;
You got served.
Yes, served a nice healthy pile of locally grown fresh fruit and vege’s which are always cheap regardless of oil costs. Meanwhile you’re paying top dollar for Styrofoam wrapped garbage that was grown thousands of miles away. Dipshit.

 
At Wednesday, March 22, 2006 at 8:10:00 PM PST, Blogger Omnitir said...

T2k, so your non-prejudice argument is that food crops do not count because they are not food?

The doomer argument is that rising oil prices will cause rising prices in agriculture. The evidence suggests otherwise. Yes, the cost of processing foods with oil dependent systems (systems which incidentally have plenty of room of increases in efficiency) will rise as oil costs rise, but the food grain themselves will not, contrary to doomer arguments.

 
At Wednesday, March 22, 2006 at 10:04:00 PM PST, Blogger Roland said...

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.

Since when does a 3-5% decline a year mean oil is unavailable? Not for half a century at least.

Of course, there is the possibility of terrorist attacks causing disruptions, or oil producing countries withholding exports, or whatever, causing sudden shortages. But that's a political issue which is just as likely to happen before the peak as after it (see the 1970s).

If you believe that technology will remain stationary for 30 years then supply issues like that could become common. But who serirously expects that there will be no advances in alternative energy sources, or even the efficiency of our system, after 30 years of expensive oil? I'll tell you who: doomers like Kunstler wearing elitist no-solution narrow-worldview beer goggles.

So the question remains, how do doomers make this glib connection of Peak Oil = more price volatility = possible political changes = EVERY SINGLE PERSON IN THE WORLD IS GOING TO DIE BECAUSE THERE WILL BE NO OIL ANYWHERE!!!!!! BUY GUNS AND HORDE GOLD!!!!! ?

Doomer: It's an issue of availability, not price.
Non-doomer: Why would oil be unavailable?
Doomer: Because it would be incredibly expensive.
Non-doomer: But that's an issue of price, not availability.
Doomer: ...

Anyway, it's time to cook some fresh organic dinner. I haven't eaten packaged food for weeks, and I'm still alive!! Maybe I should write to the Guinness Book of Records.

 
At Thursday, March 23, 2006 at 12:36:00 AM PST, Blogger popmonkey said...

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.

 
At Thursday, March 23, 2006 at 2:59:00 AM PST, Blogger Roland said...

I have exactly the same thing here in Sydney, home-delivered organic food delivered every week. Sometimes they deliver something a bit unexpected — I just ordered a bag of carrots and they delivered basically an industrial-sized sack of carrots almost a meter high. So I'm eating a lot of carrot cake. But otherwise it's an awesome idea, very efficient, and phenomenally tasty. You wouldn't believe the fruit toast I had for breakfast this morning! The only problem is how are we going to order after Peak-faxpaper, or Peak Internet? The bells of doom are ringing again.

 
At Thursday, March 23, 2006 at 3:32:00 AM PST, Blogger Freak said...

Omnitir Said:

"The problem isn’t dependence on oil, but dependence on an inefficient system"

Well said.

Americans don't need to eat as much fatty beef, and pesticide ridden food as I admit that I do now.

To be honest, in the part of America
I live in and it's probably nationwide, It is actually more expensive to eat healthy simply because the availibility isn't there.
The Supermarket produce is the crappiest of the cheapest to grow and distribute produce you can get.

I hate fast food, but it's cheap and it's simple to get on my hurried way to work, if oil prices changed this paradigm would that be bad?

I wonder why Doomers think they're apocolytic fantasies are the only means by which we can live more simply? What if there is a shift in perception and a simpler more effecient lifestyle becomes desirable in the face of high energy costs, common sense sways people to change before any disaster? What if others share and talk about their higher quality of life and the idea spreads and we transition to a technological academic agrarian enviromentalist lifestyle without a collapse, the catalyst being that there isn't much more that can be gained from a throw away debt based cut throat society. no doom...

 
At Thursday, March 23, 2006 at 4:04:00 AM PST, Blogger Omnitir said...


What if there is a shift in perception and a simpler more effecient lifestyle becomes desirable…
…higher quality of life and the idea spreads and we transition to a technological academic agrarian enviromentalist lifestyle without a collapse…


Insightful and inspirational. And I think, probable. When finally faced with absolutely no alternative but to adapt to a less wasteful society, it will be in everyone’s interest to strive to make it happen.

And while the doomers will eventually be proven wrong, they will no doubt smugly take credit for the changes; “see what all our fear mongering has done for society?” lol

 
At Thursday, March 23, 2006 at 9:45:00 AM PST, Blogger half said...

Wow! Nuke Engineers, Leemings and DebunkerDebumk!.

Great Post JD. Let's talk about peak nits.

 
At Saturday, April 1, 2006 at 12:42:00 PM PST, Blogger Tony said...

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?

 
At Friday, April 7, 2006 at 6:01:00 AM PDT, Blogger 2:Ø>4:Ø said...

Short term i.e. within 50 years (your lifetime) all of these commodities just might remain "steady." Certainly eating more fresh fruits, vegetables and even fresh beef will be healthier. Driving less, consuming less, etc are all good by-products of the discussions Peak Oil (assuming it exists) has opened. Can you deny the hardship that will come as oil changes from cheap energy to unaffordable energy?

Personally, the Peak Oil theory doesn't represent the end of the world to me. It represents the end of the world economy as it stands currently. It represents the need for mankind to reevaluate himself. As we know, change doesn't come easily on this little rock. Civil unrest has already reared its ugly head. Panic in the streets over a 2% drop in production in the 1970s, violence at the pumps just last summer after the Katrina related pipeline failures...probably a few more.

Assuming that all the Peak Oil proponents are Chicken Littles is a little narrow-minded.
Other ideas that were met with ridicule and violent opposition:

The world is round.

The Sun doesn't revolve around the Earth.

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. Then we put them on a truck or train that was built by an oil-based infrastructure and runs on oil to bring them to said consumer.
That's a lot of oil in that line from ground to hand or mouth, no? The involvement of oil in the industrial complex's operation is undeniable. It may not run out in our lifetime. I hope we wise up and divert our energies away from things similar to 200 MPH billboard racing (NASCAR)(around 50 barrels of oil consumed to just build one), stretch Hummers and the like. How sad to have looked back and realize this vast reserve of energy was squandered on such extravagance.
The dollar will become meaningless without oil to back it. Imagine the worst does happen (suspend your disbelief for a moment) and you have to get the things you need to survive blackouts, civil unrest, etc. Do you think someone will take meaningless, worthless pieces of paper in return for food, shelter, clean water, ammunition or anything else that has a concrete value?

I want to see the day when I can trade a survival manual for some poor, helpless investment banker's house. Not that I think I will. Delusions are what they are. ;)

 
At Friday, April 7, 2006 at 6:33:00 AM PDT, Blogger JD said...

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.

 
At Friday, April 7, 2006 at 7:45:00 AM PDT, Blogger 2:Ø>4:Ø said...

Certainly you know that "stats" can be manipulated for either side's gain. Allow me to demonstrate:
1. The construction of an average car consumes the energy equivalent of approximately 20 barrels of oil , which equates to 840 gallons, of oil. Ultimately, the construction of a car will consume an amount of fossil fuels equivalent to twice the car’s final weight.

If you factor that 840 gallons to build the car, add to it the fuel needed to transport the car to market -- let's say it travels a conservative 2000 miles to market (it's an American car *shrug*) on a truck that it took 50 barrels of oil to produce and that gets six miles to the gallon, on a highway that it took a few million barrels of oil to produce, ad nauseum.

I probably misspoke when I said that most oil is "wasted" extracting raw materials, etc. I suppose the industrial complex doesn't waste oil at all. So long as they are busy bringing us a marketable product, it isn't waste.

How many barrels of oil does it take to equal the energy consumed during 10% of a car’s lifetime? Let's see:
In the US, the average car has a median lifetime of 17 years. (Source: Matt Creenson, Associated Press: "Is This the Beginning of the End?" )
On average, a car will consume 750 gallons of gas per year.
17 years x 750 gallons of gas per year = 12,750 gallons of gas consumed during the median lifetime of an American car;
1 gallon of gas = 125,000 BTUs;
12,750 gallons consumed x 125,000 BTUs per gallon = 1,593,750,000 BTU’s consumed during the median lifetime of an American car.
1,593,750,000 x 10% = 15,9375,000 BTUs consumed during the car’s construction;
159,375,000 BTUs consumed during construction divided by 5,800,000 BTU’s in one barrel of oil = slightly more than 27 barrels of oil. Twenty seven barrels of oil (42 gallons of oil per barrel) contain 1,142 gallon of oil.

This post ignores all other industry and demands for oil including food production, manufacturing (of anything but cars), maintenance of inftrastructure, development of infrastructure, etc, etc.




All quite subjective. Hooray for the industrial revolution!

 
At Friday, June 29, 2007 at 11:26:00 AM PDT, Blogger obewan said...

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!

 
At Friday, November 30, 2007 at 5:45:00 PM PST, Anonymous George said...

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?

 
At Thursday, January 10, 2008 at 12:37:00 PM PST, Anonymous Anonymous said...

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!!

 
At Sunday, February 3, 2008 at 6:26:00 PM PST, Blogger ccpo said...

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.

 
At Sunday, February 3, 2008 at 10:10:00 PM PST, Blogger JD said...

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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