Friday, April 11, 2008

Price of Oil and Food Soars.

The price of crude oil has now hit above $112 a barrel, which is more than five times that of five or six years ago, while the price of rice has risen by up to 70% from last year. It is debatable what exactly is the reason for such a huge hike in oil prices, but the general costs of extracting it, including exploration, have increased markedly, as it becomes ever more difficult to secure enough oil to meet world demand of 30 billion barrels a year for it. All the major oil companies have needed to invest substantially in infrastructure and are angling in more costly regions e.g. in deep-sea locations and potentially the Arctic.

A new elephant field has not been found since the early 1980's, and it is thought that once the Middle East giants, especially Ghawar in Saudi, begin to decline, we are all in big trouble, living in a world utterly dependent on cheap oil. I doubt the price of conventional crude oil will ever come down, and unconventional sources even if fully exploited, will also become increasingly expensive to produce from, in the wake of the increasing costs of other resources of energy and water required to get oil from heavy crude and bitumen - for example in tar-sands. To exploit significant amounts of such resources, and if coal-to-liquids etc. are to be employed appreciably, will need massive new engineering, and I question just how much can be brought on-line within the crucial next decade, during which peak-oil and its consequences must be met head-on.

Some estimates of total conventional plus unconventional oil amount to 3.7 trillion barrels, but success in supplying the annual 30 billion barrels currently demanded, let alone satisfying projected requirements in a model of untrammelled economic growth, depends not on how big the resource is, but how quickly it can be extracted and processed. Providing enough platinum to fabricate hundreds of millions of fuel cells poses a similar dilemma, since while there is more than enough of the metal in the Earth per se, producing pure Pt is a very exacting process which limits its rate of production dramatically. A shortfall in oil, which I expect will prove the reality, means a deep decline in the world's transportation and a relocalisation of societies into small communities. It is indeed the issue of keeping transportation running, as conventional oil supplies fail to meet our urging for them, that is the linchpin of the human mechanism, and if this fails in an abrupt and unmanaged way, so will civilization.

Rice is the staple food for half the world's population of 6.7 billion; however, the price of rice has increased by up to 70% during the past year. In part, this is blamed on poor harvests in consequence of "extreme weather", rising populations and hence demand for food in countries that import rice from world markets, an expectation that things can only get worse leading to hoarding, and depleting stockpiles and insufficient investment in agriculture. In fact, the increasing cost of rice is but one example of an increase in world food prices overall. In an effort to protect their own internal food-provision and to curb inflation, main rice-producing nations, e.g. India, China and Vietnam, have imposed restrictions on exports. On the other side of the coin, net rice-importers such as Bangladesh, Afghanistan and the Philippines are suffering the consequences of an unstable and costly supply.

Rapid economic development in Asia has led to a more prosperous and more numerous middle class who eat more food, while land formerly used to grow rice is now used to host new housing developments, factories and in some regions, golf courses. The biofuels market has grown since 2006 providing a greater incentive for farmers to grow corn for ethanol than to produce rice, bringing global stockpiles to their lowest level for twenty years. Particular local factors have also contributed to the situation, such as the cyclone which destroyed much of Bangladesh's autumn rice crop last November, a total of almost one million tonnes. As a consequence of this, the country has imported 2.4 million tonnes of rice to avert a famine. Vietnamese rice-crops have also have suffered from a combination of adverse weather and infestations of pests.

There are fears that food-rioting may result, causing unrest and destabilisation across Asia and Africa, where half the world lives. The escalating price of rice and a weak US dollar has strained food-aid programmes, for example to feed the Myanmar refuges who are heading in large numbers toward the Thai border. I am reminded of the Hubbert analysis I have alluded to recently, that rather than the world population rising unchecked to 9 billion by 2050, it will instead peak at around 7.3 billion, somewhere close to the year 2025, and then decline to around 2.5 billion by the end of this century (2100). Possibly, we are beginning to glimpse the mechanisms by which this may occur, and that the greatest incidence of a population "die-off" will occur in the developing nations, i.e. Africa, Asia and South America, where the population growth has been greatest, especially during the past century.

Since most of this growth has been fed by mechanised agriculture, which only exists as underpinned by cheap oil and natural gas, it follows that the present number of people on Earth cannot be maintained during the imminent oil-dearth era. What other conclusion can be drawn?

Related Reading.
[1] "Food riots fear after rice price hits a high." By Peter Beaumont.
[2] "Asian states feel rice pinch."
[3] "Crude oil hits record price." By Loong Tse Min.


jody said...

are you one of those peak oil doomers?

there isn't going to be a die off. but global population growth might slow down a good amount in the future.

energybalance said...

Not at all! I am trying to maintain optimism regarding post peak oil (The Oil-Dearth Era). If there isn't a die-off we will all be an awful lot poorer, since there is a common denominator of resources.

So, do you think we're going to reach 9 billion by 2050, or do you agree with a peak-population at some stage?

What I am saying is the world needs to plan for the inevitable and not just crash into it. This is the only way to avoid a full "doomers'" die-off scenario.

I remain hopeful that sense will prevail but human nature will probably decide on conflict instead. The main problem I can see is that even if a society based on smaller self-sustaining (largely so) communities might be envisaged, so deconstructing cities, say the size of London (8 - 10 million population depending on where you draw the borders) may prove impossible.

Meanwhile I hope you and I can look forward to a viable human race for the foreseeable future and beyond.

jody said...

well i am a technology centric person. i have a science degree, and am not religious. i'm also not very politically correct.

the planet does not need 7 billion third world brown people - but technology is sending things in that direction.

talk about "sustaining" or "planning for" a huge human population, really boils down to talk about smart white people continuing to solve technology challenges so that third world brown people have enough food, water, energy, and medicine to continue to multiply.

this is the population "problem" summarized in a paragraph. i always chuckle when science and engineering leaders in the US talk about this stuff, as if they do not realize that every technology hurdle they clear only sets them up for another, bigger hurdle in the future.

energybalance said...

Irrespective of PC, as I note, it is in the developing world (Asia, South America and Africa) that the world population has grown most (by a factor of 3 or 4 compared to Europe and North America) since 1900.

I am not making any political statement, just quoting from a mathematical analysis, and the decline in population will occur mainly where it has expanded most.

If that Hubbert type analysis is correct, a reduction from 7.3 billion to 2.5 billion by the end of the century (i.e. over 2 or 3 generations) will mean a reduced birthrate in the third world - hopefully there will not be out and out wars that effectively "cull" populations.