Once again, oil prices are "surging," and once again the primary discussion focuses on the cost of gasoline. While the price of gasoline is the most direct visible aspect for individuals, it is certainly not the only one. Increasing fuel costs are a concern, but there are other costs and related crises that erode people's ability to survive. These are largely "indirect" costs only because they are media-framed as such.
As oil jumps around the $100 a barrel price and is expected to go higher, gas prices are expected to go up to at least $3.50. While that may or may not affect individual driving habits, it also effects the cost of everything moved by, and produced with oil. At the immediate top of the crisis list are heating oil and diesel. In the United States, awareness of the heating oil issue is in part regional. For example, the Northeast is more impacted that the Southwest. However, many older homes across the country rely on heating oil. The price of heating oil is directly impacted by rising oil costs.
Likewise, in the U.S., most private autos run on gasoline so the assumption is that skyrocketing fuel costs don't impact us. However, diesel makes up 28% of daily consumption. Much of that is in the form of transporting goods (big trucks and rail), public transportation (mass transit systems), construction (earth movers, graders, etc.), and agriculture (tractors, cultivators, etc). Increasing oil costs directly impact those sectors, and those costs pass through to end point consumers.
These end point costs are concentrated most heavily in the cost of food because food needs to be grown (cultivation equipment and fertilizer), harvested (harvesting equipment and transportation to processors or storage), processed and transported to market. At each point along the way, increasing costs of petroleum prices impact final cost. Therefore it is not surprising that we are hearing more and more about rising food costs and an advancing global food crisis.
The oil "crisis," which the corporate media refuse to call "peak oil," is having multiple effects. First, there is the direct effects of cost increases of oil as noted above. However, the growing gap between supply and demand, and the high cost of what is available, is driving the bio-fuels "revolution." This has placed the global food supply in direct competition with the global food supply, and the consequences are dire. Aside from the environmental destruction caused by tactics (such trying to increase agriculturally productive land, or the destruction of palm forests for bio-fuel production), cooking oils are equally sources for bio-fuel as noted in this from Reuters:
From Russia to China to the United States, consumers will be feeling the pinch of higher food prices in 2008, with cooking oil now joining corn, wheat, and milk on the growing list of food inflation culprits.
Rising food prices will hurt more in developing nations, where a larger share of incomes are spent on food, and analysts have warned of likely food shortages and political upheaval in impoverished areas.
Consumers were already paying more for cooking oils. But prices of processed and fried foods and those made from edible oils such as salad dressings and condiments will also be rising in the months ahead, economists said.
The rising cost of oil combined with the increasing demand on grain crops and food oil sources for bio-fuels, are further aggravated by global warming impacts. For example, the US gets much of its wheat from Australia which has been hit by an ongoing devastating drought. These increasing costs are only accelerating as noted in the above article:
Sara Lee Corp. has raised prices three times, for a total of 15 percent, since December 2006. The most recent increase, 5 percent, was announced last week but may not show up on grocery goods until next year, said Mark Goldman, spokesman for the company based in Downers Grove, Ill.
"We're talking about prices (for wheat products) that are double, in some cases triple a year and a half ago," Goldman said. Inflation is hitting the whole-grain breads that health-conscious consumers have been favoring.
Meanwhile, the price of oils, especially soybean oil, is expected to climb 5 percent to 6 percent as soybean farmers, seeking ample waves of gain, switch to corn.
So we have rising fuel prices, crops going to bio-fuel rather than food, and global warming, all pressing food prices higher. Two other issues are also driving up the cost of food. One is a U.S. energy policy that is subsidizing farmers for ethanol production, and the other is a dietary switch to meat.
Some analysts estimate that as much as 30 percent of the US grain crop will go toward producing ethanol this year, a doubling from 2006. IFPRI forecasts that if the world sticks to current biofuel expansion plans, the price of corn will go up 26 percent by 2020, and the price of oilseeds (such as soybean, sunflower, rapeseed) by 18 percent. If governments double efforts to produce this alternative fuel source, corn prices are expected to go up 72 percent and oilseeds by 44 percent in 12 years' time. (Why the era of cheap food is over)
As many of the world's poor are already spending a significant amount of their income on food, even a marginal increase in food costs can be devastating. For example:
A family in Bangladesh, for example, living on $5 a day, typically spends $3 of that on food. The 50 percent rise in food prices the world has seen in recent years takes a $1.50 chunk - nearly 30 percent - out of the family budget. (CSM)
At first, when you mentioned the 'surge' in oil prices I thought that you were hinting that our continued presence in Iraq was part of the problem. I'd have agreed with you there. Then you started in on 'peak oil' as if THAT'S got any validity. If oil prices were $27 in mid 2002 when we weren't all geared up for war in the mideast, and if oil went all the way up to the $80s in mid 2006 and then came back down in the the high $40s on January 18, 2007, at about the time the Dems were prepared to convene in Congress, isn't it more logical to say that, instead of there being a 'peak oil' phenomenon and there was merely a temporary break due to an unexpectedly warm winter, that instead, we thought perhaps the Dems would do something about the war, and when by the end of February it was obvious that they either couldn't or wouldn't, that oil prices continued to 'surge' upwards, especially since it was in late February that 'the surge' passed and in April, May, and June we had triple digit casualties three months in a row? Indeed, even once Betray-us finally got smart and realized that 'more boots on the ground' were like MORE FISH IN THE BARREL, and tried a truce in mid-June with most of the insurgents and then using the newly tamed insurgents to have better counterinsurgency against recalcitrants like Al Qaeda (and it appears to be working - while July always goes down in casualties, and August goes up, and did so this year, September through December have been a steady decline in our casualties and Iraqi casualties, with ours not even 25 in December), we still had what's called the 'political' problem remaining of getting the Iraqi government to accept insurgent factions in the government, not to mention the Armenian resolution in Congress, almost designed to set off tensions between Turkey and northern Iraq's Kurds - ALL of which pushed prices even FURTHER up into the 90s and even touching $100 a couple of times this week (though closing in the 90s fortunately).
Once you remember that oil just five years ago was $27, that it went back into the forties briefly not even a year ago, and that all the usual Mideast tension explanations which have pushed up oil in the past (e.g., 1973, 1978-1979, and the mid 1980s) are still at work, the notion that the entire purpose of the war was to get the price up and keep it there for a while (since without the bugaboo of the infidel, OPEC's partners usually can't hold their coalition together and end up stabbing each other in the back like the GOP candidates on ABC last night) seems more likely than peak oil. You don't have to be a Mike Moore leftie to realize OPEC, esp. the Saudis, control Bush and our government, and that Bush's mistress Conartista Rice was on the board of Chevron and that Cheney is in oil also. So why are high oil prices surprising in light of the 'continued tensions in the Mideast'?
A major reason to distrust the 'peak oil' explanation is also that I personally was taught this theory by its most renowned promulgator, Kenneth Deffeyes, in 1975, and he's still pushing it today. A stopped clock is right, twice a day, and it 'looked right' at the time he was teaching it in 1975, but looked really stupid by 1978 and lower real prices were the order of the day, but looked not-so-stupid again in a matter of months, but once again, only because of the Ayatollah Khomeini. Peak oil looked really stupid in a few years, only to look good again in the mid 1980s with the Iran- Iraq war (devious question - since Rummy was in on that deal, and the War in Iraq, could it be that he was at least the tool, or even the engine, of deliberately driving up oil prices?).
I agree with you, however, that the biofuels deal is a SCAM made even worse by high oil prices, whatever their cause, and ironically, only Ron Paul and John McCain had the stuff to tell all the folks in Iowa that ethanol is a welfare racket for them against the rest of us. It's also the case that the price of certain kinds of grocery items such as milk or orange juice (due to the high energy cost of refrigeration) are now much more expensive, as well as feed being made more expensive by the biofuels racket you described.
by
Robert Johnson (0 articles, 0 quicklinks, 1 diaries, 11 comments)
on Sunday, January 6, 2008 at 11:23:57 AM
2 comments
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