by Alex Evans | May 20, 2008 | Climate and resource scarcity
For all the media comment criticising biofuels lately, you might have thought that the tide had clearly turned against the increasing trend of using crops for fuel. But you’d be wrong. In fact, as Javier Blas repoted in the FT last week, the proportion of American corn going to biofuels is going up: from 22 per cent of the crop last year to a third this time around.
The reason why is simple: oil price. With oil now at $126 – that’s up $10 just since the start of the month – and lots of analysts pondering $200 by year end, biofuels look like part of a route that leads towards energy independence. And even though corn-based ethanol is about the most idiotic substitute for oil imaginable (on a climate change as well as an energy independence basis), the truth is that in its messed-up way, it kind of works.
The proof: look at the front of today’s FT, where the headline is “US begins to break foreign oil ‘addiction’“. Foreign oil made up 57.9 per cent of imports in the first quarter of this year – as opposed to 58.2 last year. A small drop, you might think, but the Department of Energy is already forecasting a fall to 50 per cent by 2015. And here’s the grim bit:
Although the reduction in oil demand growth is partly because of slower economic growth and a projected 1m-barrel-a-day rise in output from the US’s Gulf of Mexico oil fields by 2012, experts also believe that legislation will accelerate the trend. The Energy Information Administration expects the energy act to help boost biofuel production from 8bn gallons this year to at least 32bn by 2030…
And that’s not all: even as the US starts the long hike towards weaning itself, the oil price is expected to keep on going up, as demand in China continues its ascent skywards. In the background, the International Energy Agency is warning that “the world can not easily afford to retreat from bio-fuels in spite of their possible role in driving up food prices”:
Biofuels already make up about 50 per cent of the extra fuel coming to the market from sources from outside of the Opec oil cartel this year. This explains why fears of a retreat this week helped drive oil prices to record levels. William Ramsey, deputy executive director of the IEA, said: “If we didn’t have those barrels, I am not sure where we would be getting those half a million barrels.”
Bottom line: we must not kid ourselves that we can deal with the food security issue separately from the energy security issue. They’re fundamentally intertwined in over a dozen ways – and the fact that hardly any multilateral institutions cover both energy and food is something that should worry us a lot…
by Mark Weston | May 1, 2008 | Global system
A typically forthright and sensible article from former WTO head Mike Moore in the New Zealand Herald argues that we need more globalisation, not less, in response to the food crisis. He berates rich countries’ wrongheaded fuel subsitution policies – biofuels – as “a populist Green response to global warming that does the opposite of what was intended,” and argues that, while food aid to the poorest will be needed in the short term, the medium and long-term solution is more trade liberalisation and fewer subsidies.
And then, to really ram his point home, Moore adds a startling factoid, which recalls the equally memorable cartoon posted by Alex a while back: “Filling a Range Rover with subsidised ethanol takes as much “grain” as would feed an African family for a year.” Yikes. Anyone for a ban on Range Rovers?
by Alex Evans | Mar 18, 2008 | Climate and resource scarcity, Global system
As the dollar, together with US equity and bond markets, continue an apparently inexorable slide downards, everyone’s been piling into safety – and especially into commodities. But as David Roche comments, “With global equity market capitalisation almost 10 times the notional value of commodity derivatives, the rush to commodities by investors has been like squeezing a quart into a pint pot.”
Opinion has been split on how much of the buoyancy in commodity prices is due to this short term price bubble; Martin Wolf, for instance, argued a couple of weeks ago that “Speculation seems not to be that important. If it were, inventories would be soaring. But they are not.” Still, that was then, and this is now – after the collapse of Bear Stearns, when the flight to safety looks more like a panic rush.
David Roche’s argument, though, is that the commodities bubble will prove short term because global recession will take the heat out of demand for commodities – for “contrary to received wisdom, economic decoupling [between the US and emerging economies] is unlikely.” Well, he may well be right about the decoupling, at any rate; Nouriel Roubini has also been saying so for a while, and he’s been pretty accurate so far.
So if the world does hit a serious downturn, and if commodity prices do take a tumble as a result, does that mean we can all relax about food prices? Not for long. Here’s why.
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by Alex Evans | Mar 12, 2008 | Climate and resource scarcity
Our friends at Avaaz have a new campaign on biofuels (full text below the fold). Biofuels are already absorbing 20 per cent of the US corn crop, and that figure’s expected to rise to 32 per cent by 2016. As Avaaz’s email puts it,
Each day, 820 million people in the developing world do not have enough food to eat. Food prices around the world are shooting up, sparking food riots from Mexico to Morocco. And the World Food Program warned last week that rapidly rising costs are endangering emergency food supplies for the world’s worst-off. How are the wealthiest countries responding? They’re burning food.
Go sign the petition to G20 leaders in advance of this weekend’s summit…
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