22. MORE ON OIL AND FOOD PRICES
QUESTION: Won't increasing energy costs for food processing and transport cause food prices to go through the roof?
ANSWER: No. Economists have been carefully analyzing this issue for years. An in-depth report on the subject from the Economic Research Service (USDA) concludes:
"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."
So let's calculate shall we? Crude is now about $65. When it goes up to $130 during the "super spike", I'm going to have to pay a whole $2 extra on every $100 of groceries. That is scary, and cataclysmic. I'm sure people will be breeding goats and farming their back yards in terror, rather than not buying a pack of gum for their kid at the register.
Oh, and by the way, processed food isn't good for you. Yes, Cheetos may be delicious, but they are very fossil fuel intensive, and will definitely cost a few cents more per bag in the post-peak period. It's probably better to just stick with the ol' reliables like corn and beans and potatoes.
posted by JD @ 4:00 PM
5 comments
5 Comments:
Of course, there's always the problem of getting to the grocery store in the first place. But fuel efficiency will help in that end to some degree, and moving to walkable urban environments will greatly the need for a car for this task.
Food miles have increased a great deal over the last 40 years or so. Out of season vegetables are now the norm as are air freight lifted low-calorific produce, such as lettuce. Meanwhile domestic farmers have a lot of ‘set-aside’ where they are paid subsidies to grow nothing. To consider this trend cannot be reversed is intellectually vacuous. Even so, the actual cost to move food per unit and the corresponding oil input is relatively low, which anyone that has bothered to research it (Thanks for the link btw) knows. Moreover, the supermarkets are masters at switching suppliers and logistics to make the best possible use or resources, so the supply side of food production can and does change very quickly in real life thanks to customer preferences and costs.
Nevertheless, this is one area Peakoilers and elements of the road haulage lobby groups, whose interests involve protecting inefficient or surplus capacity, try to make the most gain with scare mongering and finger pointing. The facts are however somewhat different, certainly eating the mother-in-law is not going to be a necessity for even the most die-hard Peakoiler as a result of oil alone, however appetizing the idea is to some.
Lies, money is oil so without oil food will be free? wait that makes no sense...
I guess the argument is that transportation will be *unavailable*, it seems to me earmarking oil for transportation of food and goods would be the most obvious government enforced measure, but we'll see.
The report referenced in this post is 10 years old and highly questionable in its methodology (just read it--if you have any training in model building, it is very obvious). The estimated increase in food prices (in the short run) due to a DOUBLING of crude oil prices is supposed to be around 1.8%. Check out the most recent update on food prices on the USDA-ERS website (located at: http://www.ers.usda.gov/Briefing/CPIFoodAndExpenditures/). Here's their quote:
"The Consumer Price Index (CPI) for all food increased at an annual rate of 2.4 percent in 2005 and is forecast to increase 2.0 to 3.0 percent in 2006 as retailers pass on higher energy and transportation costs to consumers in the form of slightly higher retail prices."
An increase of 2-3%? That's DOUBLE what their earlier report suggested would happen if oil prices DOUBLED. Also of importance is the timeframe of the cited publication--they were not talking about a doubling of current crude oil prices ($67/b), but were talking about 1997 prices ($23/b in 2005 dollars). I think there is a lot of talk within the Peak Oil community about the apocalyptic collapse of food production that might be unwarranted, but the article cited is definitely not evidence that they are wrong--if anything, it shows that we need to have a much more robust systems model of the impact of energy inputs on food prices (the publication does not factor in natural gas....a big problem since NG is the stock used for fertilizer production).
It is now 2009. I think you want to reconsider this post.
There is masses of evidence that the primary cause of last year's food crisis was the oil price. It is estimated that 5 million people died, and it led to riots in 60 countries.
It isn't over. The number of the hungry has increased by a quarter.
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