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  • From: "Tradingpost" <tradingpost@lobo.net>
  • To: livingontheland@lists.ibiblio.org
  • Subject: [Livingontheland] Soaring Oil And Food Prices Threaten Affordable Food Supply
  • Date: Wed, 14 Dec 2011 13:04:43 -0700


Soaring Oil And Food Prices Threaten Affordable Food Supply By Richard
Heinberg
http://www.postcarbon.org/article/619300-soaring-oil-and-food-prices-threaten
Posted Dec 14, 2011
Advance version, for publication in UNCTAD Trade and Environment Review
2011/2012 (February 2012).

Abstract

The current global food system is highly fuel- and transport-dependent.
Fuels will almost certainly become less affordable in the near and medium
term, making the current, highly fuel-dependent agricultural production
system less secure and food less affordable. It is therefore necessary to
promote food self-sufficiency and reduce the need for fuel inputs to the food
system at all levels.


The connection between food and oil is systemic, and the prices of both food
and fuel have risen and fallen more or less in tandem in recent years (figure
1). Modern agriculture uses oil products to fuel farm machinery, to transport
other inputs to the farm, and to transport farm output to the ultimate
consumer. Oil is often also used as input in agricultural chemicals. Oil
price increases therefore put pressure on all these aspects of commercial
food systems.

Evolution of food and fuel prices
Figure 1: Evolution of food and fuel prices, 2000 to 2009
Sources: US Energy Information Administration and FAO.

Thus there is concern that high and volatile prices of crude oil may cause
food prices to continue to increase (Bloomberg, 2011).

Moreover, as oil prices rise, so does demand for biofuels, which are the only
non-fossil liquid fuels able to replace petroleum products in existing
combustion engines and motor vehicles. But biofuels are often made from corn
and other agricultural products. As demand for these alternative fuels
increases, crop prices are forced upwards, making food even less affordable.

Export-led agricultural strategies also increase the world’s vulnerability to
high oil prices. Most donor agencies have encouraged the less industrialized
countries to focus on the production of cash crops at the expense of staples
for local consumption. As a result, people in these countries are forced to
rely increasingly on imports of often subsidized cereals or those funded by
food aid programmes. However, rising transport costs contribute to rising
prices of food imports, making them ever less affordable. Fuel costs
represent as much as 50 to 60 per cent of total ship operating costs.[1] From
early 2007 to mid-2008, as fuel prices soared, the cost of shipping food aid
climbed by about $50 per ton – a nearly 30 per cent increase, according to
the United States Agency for International Development (Garber, 2008).

Meanwhile, many poor farmers who cannot afford machinery, fuels and
commercial farm inputs find themselves at a disadvantage in the global food
economy. Compounding this are agricultural policies in industrialized
food-exporting countries that subsidize domestic producers and dump surpluses
onto developing countries, thus adding to the economic disadvantages of the
smallholder farmers in those countries. As a result, millions of those
farmers are being driven out of business annually, those countries are giving
increasing priority to production for export and they are witnessing a
burgeoning landless poor urban class (whose immediate ancestors were
subsistence farmers) that is chronically malnourished and hungry.

Soaring food and fuel prices have a disproportionate impact on developing
countries and on poor people in developed countries. Americans, who, on
average, spend less than one tenth of their income on food, are able to
absorb the higher food prices more easily than the world’s poorest 2 billion
people, who spend 50 to 70 per cent of their income on food.

Why are oil prices so high? Speculative investment in commodities plays a
role, though there is a persuasive case to be made that oil prices would be
rising even if oil futures speculation were entirely curtailed. The oil
industry is changing, and rapidly. As Jeremy Gilbert, former chief petroleum
engineer for BP, has put it, “The current fields we are chasing we’ve known
about for a long time in many cases, but they were too complex, too
fractured, too difficult to chase. Now our technology and understanding [are]
better, which is a good thing, because these difficult fields are all that we
have left” (Gilbert, 2011).

The trends in the oil industry are clear and undisputed: exploration and
production are becoming more costly, and are giving rise to greater
environmental risks, while competition for access to new prospective regions
is generating increasing geopolitical tensions. According to the
International Energy Agency, the rate of world crude oil production reached
its peak in 2006.[IEA 2010a) The IMF has joined a chorus of energy industry
analysts in concluding that scarcity and high prices are here to stay.[IMF
2011a, 2011b]

A collapse in demand for oil resulting from sharply declining global economic
activity could cause oil prices to fall, as happened in late 2008. Indeed,
this is a fairly likely possibility. But while it would make oil cheaper, it
would not make fuel more affordable to most people. It is theoretically
possible for the world to curb oil demand through policies that limit
consumption, and it is also conceivable that some unexpected technological
breakthrough could rapidly result in a cheap, effective alternative to
petroleum. However, these latter two developments are rather improbable. Thus
there is no likely scenario in which the services provided by oil will become
more affordable within the context of a stable global economy at any time in
the foreseeable future.

While wealthy consumers are able to absorb incremental increases in food
prices, a sudden interruption in the availability of fuel (due to
geopolitical events) or a significant gradual curtailment of fossil fuel
production (due to the continuing depletion of world hydrocarbon reserves)
could lead to a breakdown of the food system at every level, from farmer to
processor to distributor to retailer and finally to consumer.

To summarize, high oil prices contribute to soaring food prices. Our modern
global food system is highly oil-dependent, but petroleum is becoming less
and less affordable. Extreme weather events also contribute to high food
prices, and, to the extent that such events result from anthropogenic global
warming, they are also ultimately fuel-related. Thus there is no solution for
the world’s worsening food crisis within current energy and agricultural
systems.

What is needed is a major redesigning of both food and energy systems. The
goal of managers of the global food system should be to reduce its dependence
on fossil energy inputs while also reducing GHG emissions from land-use
activities. Achieving this goal will require increasing local food
self-sufficiency and promoting less fuel- and petrochemical-intensive methods
of production.

Given the degree to which the modern food system has become dependent on
fossil fuels, many proposals for delinking food and fossil fuels may seem
radical. However, efforts to this end must be judged not by the degree to
which they support the existing imperatives of the global food system, but by
their ability to solve the fundamental challenge that faces us – the need to
feed a global population of seven billion (and counting) with a diminishing
supply of fuels available to fertilize, plough and irrigate fields, and to
harvest and transport crops. Farmers need to reduce their dependence on
fossil fuels in order to build resilience against future resource scarcity
and price volatility.

In general, farmers can no longer assume that products derived from petroleum
and natural gas (chiefly diesel, gasoline, synthetic fertilizers, and
synthetic pesticides) will remain affordable in the future, and they should
therefore change their business plans accordingly. While many approaches
could be explored, which in any case would depend on specific geographic
locations, the necessary outlines of a general transition strategy are
already clear.


Farmers should move towards regenerative fertility systems that build
humus and sequester carbon in soils, thus contributing to solving climate
change rather than exacerbating it.
Farmers should reduce their use of pesticides in favour of integrated
pest management systems that rely primarily on biological, cultural and
physical controls.
More of the renewable energy that will power farming activities can and
must be generated on farms. Wind and biomass production, in particular, can
provide farmers with added income while also powering farm operations.
Countries and regions must undertake proactive steps to reduce the energy
needed to transport food by reorganizing their food production systems. This
will entail support for local producers and for local networks that bring
producers and consumers closer together. More efficient modes of
transportation, such as ships and trains, must replace less efficient modes,
such as trucks and planes.
The end of the fossil fuel era should also be reflected in changes in
dietary and consumption patterns among the general population, with a
preference for foods that are grown locally, that are in season, and that
undergo less processing. Also, a shift away from energy- and meat-intensive,
diets should be encouraged.
With less fuel available to power agricultural machinery, the world will
need many more farmers. But for farmers to succeed, current agricultural
policies that favour larger-scale production and production for export will
need to change in favour of support to small-scale subsistence farming,
gardening and agricultural cooperatives. Such policies should be formulated
and put in place both by international institutions, such as the FAO and the
World Bank, and also by national and regional governments.

If such a transition is undertaken proactively and intelligently, there could
be many additional benefits, with more employment in farming, more
environmental protection, less soil erosion, a revitalization of rural
culture and significant improvements in public health. Some of this
transformation will inevitably be driven by market forces, led by the rising
price of fossil fuels. However, without planning, the transition may prove
destructive, since market forces acting alone could bankrupt farmers while
leaving consumers with few, if any, options for securing food supplies.
Removing fossil fuels from the food system too quickly, before alternative
systems are in place, would be catastrophic. Thus the transition process
requires careful consideration and planning.

There are reasons for hope. A recent report on African agriculture by UNCTAD
and UNEP (2008) suggests that organic, small-scale farming can deliver the
amount of increased yields thought to be possible only through industrial
farming, and without the environmental and social damages caused by the
latter. Recent research by Badgley et al. (2007) also concludes that organic
and low-input methods can increase yields in developing countries while
maintaining yields in industrialized countries.

Generally, smaller farms have greater biodiversity (Hole et al., 2005), place
greater emphasis on soil-building (D’Souza and Ikerd, 1996) and display
greater land-use efficiency than large farms (Rosset, 1999).

Nevertheless, despite these promising trends and findings, it is axiomatic
that no food system tied to the earth’s finite soil and water resources can
support an ever-expanding and ever more resource-demanding population. The
prudent path towards reforming the global food system must therefore
coordinate agricultural policy with appropriate population, education,
economic, transport and energy policies. The transition to a post-petroleum
food system will need to be comprehensive. In its scale and required speed it
promises to be one of the greatest challenges in human history. But the
challenge will only grow the longer it is postponed.


References
Badgley C et al. (2007). Organic agriculture and the global food supply.
Renewable Agriculture and Food Systems, 22: 86–108.
Bloomberg (2011). Food Prices may extend gains on volatile oil costs, FAO
says. 12 May
Chen Rui (2009). Analysis on “new fundaments” and range of oil price trend.
London, World Energy Council.
D’Souza G and Ikerd J (1996). Small farms and sustainable development: Is
small more sustainable? Journal of Agricultural and Applied Economics, 28:
73–83.
Garber K. (2008). Fuel costs cut deeply into food aid. US News and World
Reports, 7 July.
Gilbert J (2011). No we can’t: Uncertainty, technology and risk. Lecture at
the ASPO-USA Conference, Washington, DC, 9 October 2010 (cited in Richard
Heinberg R, 2011, The End of Growth. Gabriola Island, BC, New Society
Publishers).
Hole D et al. (2005). Does organic farming benefit biodiversity? Biological
Conservation, 122: 113–130.
International Energy Agency (2010a). Executive summary. World Energy Outlook
2010. Paris, OECD/IEA
International Energy Agency (2010b). Key graphs: World oil production by type
in the new policies scenario. In: World Energy Outlook 2010, at:
www.worldenergyoutlook.org/docs/weo2010/key_graphs.pdf.
International Monetary Fund (IMF) (2011a), “Impact of High Food and Fuel
Prices on Developing Countries—Frequently Asked Questions.”. Last Updated:
September 30, 2011
IMF, “IMF Sees Oil Prices Staying High.” (2011b), April 7, 2011.
Rosset PM (1999). The multiple functions and benefits of small farm
agriculture. Paper presented at the FAO/Netherlands conference on Cultivating
Our Futures, Maastricht, 12–17 September 1999.
UNCTAD/UNEP (2008). Organic agriculture and food security in Africa. Study
for the UNEP-UNCTAD Capacity-building Task Force on Trade, Environment and
Development, UNCTAD/DITC/TED/2007/15. Geneva.


[1] World Shipping Council, Record fuel prices place stress on ocean
shipping,at: www.worldshipping.org/pdf/WSC_fuel_statement_final.pdf , 2 May
2008.




  • [Livingontheland] Soaring Oil And Food Prices Threaten Affordable Food Supply, Tradingpost, 12/14/2011

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