15. FOOD VS. PETROLEUM PRICES
PEAK OIL MYTH: Increasing fuel prices make food prices go through the roof.
REALITY: Here's a graph which should help clear things up for you folks (click on the image for a clearer picture):
This graph shows corn prices (red), and an index of average refinery product prices, obtained from Statistics Canada (green). Currency values are adjusted for inflation, and given in Canadian dollars.
As you can clearly see, rising petroleum prices do not make corn more expensive.
From the report:
"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."
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 grain prices go up by 5.5x?
Let's take a look:
Wheat prices... Steady
Soybean prices... Steady
Sugar prices... Steady
Why don't you try and chart a commodity that is more closely related to oil prices. Throw a Sugar chart up on an Oil chart smart guy. Also corn and wheat is heavily subsidized so thier price is not a true reflection of the cost to produce them. Boohya.
You mean "petroleum prices to the consumer", right? This is an important distinction as it clearly costs more to deliver a barrell of petroleum when the tanker is escorted by a pair of F-16's to protect it's contents than it did before. Even if we aren't paying it at the pump, you can't say the true price isn't going up. You're picking a bunch of subsidized products whose true cost is never truly known. Please keep this in mind when trying to use logical arguments to win people over so that you aren't guilty of the same emotional arguments you accuse the other side of using.
Give the current record prices of both oil and grain worldwide, the sudden decidions of many of the worlds top grain exporters to stop exporting so as to lower local prices, and so on... what is your response? Still unrelated?
i suppose the USDA could just be spinning this in some sort of USDA dreamed up conspiracy theory.
Or it could be because the world has become much more dependant on cheap american food as their fuel costs rise and ours are (were) kept artificially low.
Combine that with increased food production thanks to petrolium based fertilizers, pesticides, and equipment and suddenly we can help support a MUCH larger world population by meeting it's food need easier and cheaper than ever before.
Now, take away the petrolium we use to do it, or just make it start nearing what the rest of hte world is paying for it, add in some incresed demand for our "cheap" food since the rest of the world is feeling increased petrolium prices, and you have a food system who'se prices are increasing with the prices of the fuel system.
This guy is an idiot. Anybody notice his grafts run up to 2005?
In 2005 oil was nowhere near $118 a barrel.
"The UN's special rapporteur on the right to food, Jean Ziegler, earlier blamed the [food] crisis on biofuels, speculation on commodities markets, and EU export subsidies."
"A freakish cocktail of factors, including poor global crop yields, increased demand from the likes of China and India, and a weak U.S. dollar have made food prices soar. Yet many farmers and commodities buyers suggested yesterday that another factor has exacerbated these price increases, and incited unpredictable gyrations in the futures market: the growing clout of financial speculators, like large index funds and hedge funds."
If oil prices are the primary factor, why are farmers griping about speculators instead of oil prices? I think we can trust farmers to know what's driving the price up, considering that they actually burn the diesel and produce the food.
Oil prices are a minor factor, as the post demonstrates. The dot commodity bubble is far more important.
If you look at how food crops compared with oil in the last commodity bull market in the 70s, you see a correlation, but not nearly the strong one between say nat gas and oil or gold and oil. Maybe the subsidies and other government meddling mess with the free market inflation factors and such. Oil, nat gas, gold, and silver seem to be hinged at the hips in commodity bulls with everything else dancing more freely behind them.
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