Thursday, October 25, 2007

Growing Global Export Crisis not restricted to Oil

It is only recently that people have started to wake up to the realization that peak oil - the point where global oil production reaches a peak and goes into a terminal decline - will be preceded by a global oil export peak. Until recently those in the developed nations of the first world had blithely assumed that all oil production in producing countries outside their own borders was available for export and available on the market for their import and purchase.

This, of course, failed to take into account the domestic needs for that oil in those producing/exporting countries. Domestic oil demand and consumption in those producing countries, such as those in OPEC - largely a function of increased affluence because of those very oil revenues - is growing faster than the growth in the rate of production. This means that not only will their exports decline as a result of peak oil, when they reach it, but also as a result of their rapidly increasing domestic consumption.

Internal demand, needless to say, will not diminish with declining production. Not only has the level of affluence in those producing/exporting nations risen but so has the population as citizens feel more confident about their children's futures as the level of affluence and job security rise. In many of those producing/exporting nations over 50 percent of the population is now under twenty years of age. This sets those nations up for a serious demand crunch just at the time their oil production and exports begin to diminish.

The steepness of the oil supply downslope on the other side of peak-oil/peak-exports will, in fact, be significantly greater than previously considered - as many presenters at the recent ASPO-USA conference in Houston stressed - and greater than the rate built into the majority of the oil depletion models. The rate of decline of oil availability will be a combination of the rate of production decline plus the rate of increased consumption in exporting countries. In the end, of course, it means that oil could cease to be available for purchase by major oil consuming nations long before the eventual point of oil depletion. The potential for wars to ensure a greater proportion of the remaining oil for importing nations increases markedly with this scenario.

But oil is not the only resource traded on the global market that will, in the near-term, experience an export crisis and serve as a potential source of conflict and wars. We live in an increasingly globalized society where there is a growing geographical separation between producer and consumer. Every tradeable commodity is ceaselessly moved around the globe, millions of tons of goods on the high seas and in the air and moving over land by rail and road transport every day. Sooner rather than later, as the global transportation/distribution system begins to break down for lack of fuel, that globalized movement of goods will run into serious problems. Demand will cease to be the driver of trade. Nor will it be driven by the rate at which production can be managed. Trade will be limited by the ability to get goods from producer to consumer, a limitation that will grow as fossil fuel supplies, particularly oil, go into decline and highly-indebted global shipping companies begin to collapse under the burden of fuel costs and shortages of fuel.

Relatively speaking, how big a problem is Peak Oil? Minor really, when you consider the implications of global Peak Food. Of the 194 food producing countries on the planet all but about fifteen are past or at Peak Food. Over 95-percent of all food producing countries are now net importers of food. In reality there is not one among the 194 nations on the planet that internally produces all of the food that its citizens consume. The citizens of net food importing nations are dependent for much of their primary nutritional needs on the dwindling agricultural excesses of that minuscule handful of fifteen net food exporters. This is particularly the case with global grain production and reserves. Grain and seeds are, after all, the most nutritionally-concentrated form of food that we eat.

Over the past several years the global emergency food grain reserves - established as part of the Green Revolution in the last century - have shrunk from a marginal 120-day supply to a critically low level of just 57 days. This level of reserve is deficient for offsetting any significant and widespread grain crop loss in areas such as Africa, South Asia, Eastern Europe and South America. All of these areas are not only the location of the largest proportion of food importing countries but also the areas where the earliest and most extreme impact of global warming will occur. Their risk of widespread local crop losses is extreme and getting moreso with each passing year. It is also not sufficient to cover any surge in demand from natural or man-made disasters during the Northern Hemisphere dormant season, the Northern Hemisphere being the source of the bulk of the world's food grains.

There is, however, an additional complication for the bulk of these food importing countries. Many, perhaps most of them, are net agricultural exporters. This may seem like a paradox but is not. The primary use of agricultural land in most of these countries is for the production of non-food cash crops. The land those nations need to produce their own food is tied up - usually by wealthy multi-national corporations, either directly or indirectly - producing cash crops like cotton, coffee, tea, rubber, cocoa, sugar, etc., or for the support of food animals for the production of export meat and dairy products. Much of the food agriculture in those nations is also committed for export (e.g. rice, nuts, dates, figs, wheat, corn and other grains, etc.), often under the control of or under contract to those same multinational food companies. Many of those nations are simultaneously agriculture rich and food poor. Despite a large base of agricultural land they cannot and do not produce enough food to feed their own people.

There is, of course, a strong an unbreakable link between peak oil, peak natural gas and peak food. And they will all occur at the same time. The artificial fertilizers that have allowed us to push our food production towards a peak, that we started climbing with the Green Revolution, is produced from natural gas. The herbicides and pesticides that have allowed us to protect our food crops from weeds, insect pests, and other plant diseases, are produced from oil. And the whole global food production and distribution system that transfers those food crop surpluses from the fifteen net food exporters to the 180 net food importers is critically dependent on the fuels produced from oil.

Many people take comfort in the belief and expectation that when things begin to deteriorate the government's first priority will focus on feeding it's citizens. That comfort may be misplaced as it does not bear out in the historical record. The majority of the worst famines of the twentieth century in which many millions of people have died, including current and recent ones such as that in Darfur, have been as much or more a function of government policy and geopolitics as they have been a matter of food shortages and crop losses. Food, unfortunately, is one of the first and preferred weapons of war, particularly internal and civil wars. Far more likely than a focus on ensuring food supplies, in fact, is that a government's first priority in hard times is security, particularly its own security and that of its elite and business leaders.

The fact that many of the agriculture exporting nations of the third and developing world have large proportions of their land under cultivation for exportable cash crops is, of course, a double edge sword. On the surface that would seem to suggest that those nations have large tracts of land that, when the global food distribution system begins to break down, can be turned to the production of food for the citizens of those nations. But those land holdings are in the hands of multinational companies or wealthy land owners. Without a focused program of nationalization and redistribution of those lands there is little likelihood that it will be voluntarily converted to local food production. But that land has generally been raped of its natural soil fertility by being bombarded with an annual systematic application of toxic agrochemicals and through consistent overproduction, and been subjected to a build up of soil salts through over irrigation. Turning it into productive food-producing soil will be a long-term process, too long to respond to a food emergency exacerbated by poor planning. In addition, the seeds and root stocks from which to produce the needed food will probably not be locally available and difficult to obtain externally with a faltering global distribution system.

If governments continue to bury their heads in the sand about peak oil and the implications for global transport and distribution the greatest crisis on our near term horizon will, in my opinion, be the reduction in the export of food and the inability to move food from producer to a growing mass of starving and malnourished people throughout the world. This is not and will not be a problem restricted to the third world. In developed nations like ours the grocery and food distribution system is built on just-in-time (JIT) principles. Our food travels an average of over 1500 miles from producer to consumer. Any serious disruption of the food distribution system could see our well-stocked supermarket shelves bare within a matter of days. We are, at the same time, in no better position than third world countries to gear up localized food production in response to a global food distribution emergency. We are, in general, even less skilled in producing food than those in third world nations and will, in fact, have a longer ramp up time than they will.

Politicians do not like publicly talking about problems unless they can offer solutions, especially problems that may not arise in the current election cycle. But the time and effort that will be needed to respond to a global food production and distribution crisis doesn't fit nicely into an election cycle. Our politicians, if they are to be of any use at all, must be prepared and have the courage to take a longer view, must be prepared to head off future crises rather than wait until they happen and respond to them. Unfortunately they see far more votes from fixing a problem than preventing it.


Anonymous said...

and what do you propose be done about it?

Richard Embleton said...

I already have. How about you?