More on the oil-fired, grain-fed global food crisis

[GliderGuider]

In a previous thread, I made the claim that because of our industrial food system, oil, food and population are inextricably linked. I also claimed that a contraction in the world oil supply would cause a similar contraction in the world food supply, threatening the human population. This post fleshes out those claims a little more, based on some work I did today.

Food Systems

According to Wikipedia, a food system includes all processes and infrastructure involved in feeding a population: the growing, harvesting, processing, packaging, transporting, marketing, consumption, and disposal of food and food-related items.

Another article gives the percentage of various countries’ total energy consumption that is used by the food system. The estimates range from 10% to 14%. This gives a good starting point for investigating how vulnerable food systems are to oil supply disruptions. Of course, the estimates are for "total energy". The interesting question for our purposes is, what proportion of the energy used in the food system comes from oil?

After thinking about it for a while I’m reasonably confident in saying that about two thirds of the energy used in the average food system likely comes from oil. The reason is that the heavy energy consumption in the food system comes from the mechanization of production and the transportation of raw materials, raw food, finished food products and waste. Natural gas is used for fertilizer and crop drying, but that only consumes a percent or two of the total energy supply. The rest is electricity for lighting, processing the food and some production processes like irrigation. Estimating that two thirds of the energy used comes from oil seems reasonable to me.

So by picking the middle of that 10% to 14% range and multiplying 12% by 2/3, I conclude that 8% of the world’s primary energy supply is used in the global food system as oil. This is not terribly accurate, but I think it’s in the right ballpark.

However, that 8% isn't drawn from the complete pool of primary energy, because it only comes from oil. That means that our 8% comes out of the world's oil supply, not from the total pool of primary energy. The oil supply constitutes only 35% of the world’s primary energy. The necessary arithmetic shows us that the operation of the world’s food supply consumes about 23% of the world’s oil. Almost a quarter of our oil is used to feed us. Or, in Dale Pfeiffer’s language, we eat a quarter of our oil. It seems unbelievable, but there it is.

Global Markets

The problems in global markets with national boundaries are always found at the borders – with imports and exports. Both the oil and food markets are heavily globalized. Over half the world’s oil moves on the international market, as does 13% of all grain (FAO numbers). This difference implies that most countries use the grain they grow for domestic consumption, but that many grain growing nations are dependent on oil imports to run their food systems.

The world oil market currently moves about 2,300 MT of oil per year (45 mbpd). The biggest oil buyers are the USA, Japan, China, Germany, India, South Korea, France, Spain, Italy, Netherlands, Belgium/Luxembourg, Turkey, Thailand, Poland, South Africa and Greece. Together those fifteen nations buy 75% of the oil on the world market (1,750 MT per year). These imports also constitute 75% of their aggregate oil consumption. With that oil they produce 57% of the world’s grain (again from FAO numbers). Given that they have exactly half the world’s population, that list contains some significant grain exporters, including the Netherlands, France and of course the USA.

The State of the World's Oil Market

There is emerging evidence that we are heading into a decline in net oil exports, which is a way of saying the market supply of oil has begun to dwindle. The following graphs form the basis for that claim:

First, the evidence that we have hit Peak Oil:



Second, an example of how a country's net exports can go to zero due to a combination of declining production and rising internal consumption:



Third, evidence that the world as a whole has entered a regime of declining net oil exports, due to the combination of the production plateau and rising global consumption:



The red line projecting the decline in the last graph hints that the world oil market could be empty by 2022 or so. I think this purely mathematical projection is overly pessimistic. I think we will probably have about 25 years before that happens, perhaps around 2035. As the market shrinks, the importing nations will be at the greatest disadvantage. The greater their reliance on imported oil, the worse their problems will be.

The Impact of a Shrinking Oil Market

As the world oil market shrinks, many of the importers’ economic sectors will be affected, including their food systems. The fact that food systems consume a quarter of all oil indicates why it will not be a simple matter to reprioritize consumption from other sectors to ensure that the food supply isn’t threatened. Especially in a free market, those consumers who can afford to pay for oil will get it, whether they are business travelers, recreational travelers, airlines or farmers. Expect higher prices for everything including food, along with world-wide economic and social turbulence.

At some point outright oil shortages will begin to develop, varying in severity between nations and national regions depending on local circumstances. Unfortunately, unlike our past experiences, these shortages will not be temporary. Some will be alleviated by robbing Peter to pay Paul (i.e. by bidding the less fortunate out of the market), but the dynamics of the underlying physical situation will be inexorable. Ultimately governments may have to step in, nationalizing oil supplies and creating command systems to ensure that their use is prioritized for the food systems.

What about the substitution of other forms of energy for oil? There will be a lot of activity in that area – natural gas powered transport vehicles and electrified rail systems are obvious candidates, and the development of electric personal vehicles is an utmost priority. Perhaps we can reorganize our food system to become less oil-dependent, but it’s a BIG food system, and for the last 60 or more years its structure been developed on the assumption of readily available oil, cheap or not. There are aspects of the system, especially in the distribution of both raw and processed food that are now totally dependent on oil.

The Effect on the Food Supply

The fact that we currently need a quarter of our oil for the food system makes any threat to oil imports a threat to life itself. As oil imports decline, food production will go along for the ride. How severe the slide in food production will be depends in large measure on the amount of oil a country produces compared to what it imports. And those 15 countries I named above are right at the top of the risk list. By the time the world oil market has lost half its volume, say in 12 years, they will have lost 40% of their current oil requirements. Unless they make unprecedented changes to their food systems, they stand to lose 25% to 35% of their food supply in the next 12 years. It sounds apocalyptic, but it’s what the numbers show.

The reason for such a drastic loss is embedded in the following graph:



On average, our existing food system yields 0.6 tonnes of grain for every tonne of oil we consume. This is the average across all grain producing nations (which vary significantly from one to the next), but it has held true for the last 45 years.

One reason for this consistency is that the rate of industrialization over that time has affected all oil-using sectors of the economy pretty well equally. Since 1965 the world population has grown 1.8x, oil consumption has grown 1.8x, the amount of oil used in cars has grown about 2.5x and grain production has grown 2.1x. World GDP in constant dollars has climbed 3.3x over that period, which gives evidence of both the improved energy intensity and increased human efficiency of economic activity (as well as the possibility that more non-productive activities are being factored into GDP calculations).

This consistency implies that unless the system changes, to shift resource allocations or change the way things are done, we should expect that food/oil ratio of approximately 0.6 to hold true in a declining oil supply as it did in a growing one. The loss of 1 billion tonnes of oil a year (about half the current oil market flow) could result in the loss of 600 million tonnes of grain per year, give or take - a full quarter of the world's food supply.

Do we have enough time to make the changes we need? If my scenario is even close to being valid, we may have just five years left before food price spikes and shortages become a world-wide epidemic. By then the decline in the oil market will be accelerating, and it will become progressively harder to offset the ongoing loss of oil. It would be a good idea if we knew within the next five years exactly how we need to reorganize our food systems, and to have made some serious progress towards that goal.

If you thought climate change was dangerous and urgent, meet its fellow Horseman.

[Newest Reality]

1. It is good to see this kind of information presented here!

I, and some friends, have been following it and discussing the implications for a few years now. The economic, social and political ramifications of Peak Oil are staring us squarely in the face now -- though you won't hear much from the corporate media about such a looming crises.

Knowing about the details means people will understand more about what is happening to them as a result of this.

While it is simply not profitable for corporations to kick-start a major response to this until, perhaps, prices and demand give them incentives, waiting too long to make drastic changes in all of our systems may bring about changes that are far too late. What would and should be averted is the overall impact on vast numbers of people living in this world and that includes a form of stochastic culling if the crises is left to profit-motivation alone.

While some may think of third-world results with nameless, starving people dropping dead in vast numbers, it should be clear that the data suggests that the countries that are importing are not at all immune to the impact on food availability, etc. We will feel it here and so, it is certainly a problem we share.

[OKIsItJustMe]

3. "… changes that are far too late …"

Well, I fear that’s already true.

Personally, I’m just hoping we can soften the blow a bit.

[GliderGuider]

10. Thanks, but

Even here there seems to be a profound lack of interest in (and even some outright rejection of) the implications of the linkage between oil, food and population. All we can hope is that the growing grassroots awareness that there is indeed a problem out there will trickle into the Zeitgeist and trigger a cascade of individual responses.

The corporate governments that are currently setting the global agenda do not have our best interests at heart (because they don't actually have hearts, despite their fictive personhood). We should not expect corporate governments to resolve this situation. This one is up to us.

[cutlassmama]

2. Five years is a more realistic number. I've read lately that is will happen

by this spring/summer here. That means there is plenty of time for people in the U.S. to get some land and start gardening. Every garden will help. Also, getting a few animals for protein wouldn't hurt either. It's time for everyone to start thinking along these lines.

[OKIsItJustMe]

5. Or perhaps 5 years ago…

http://www.fastcompany.com/1702570/international-energy-agency-peak-oil-has-already-passed

International Energy Agency: Peak Oil Has Already Passed

BY Ariel Schwartz Mon Nov 15, 2010

The imminent arrival of http://en.wikipedia.org/wiki/Peak_oil">peak oil, or the point in time when the maximum rate of worldwide petroleum extraction has been reached and enters into a continuous decline, has long been regarded as a fringe theory. As oil prices have crept up in recent years, the concept has gradually entered the mainstream--and now the http://www.worldenergyoutlook.org/">International Energy Agency, an intergovernmental organization that offers energy analysis to 28 countries, has announced that peak oil passed us by in 2006. There is nowhere for our oil supply to go but down. So what do we do?



The IEA, which has been http://www.guardian.co.uk/environment/2009/nov/09/peak-oil-international-energy-agency">accused in the past of downplaying the risks of peak oil, explained in the 2010 edition of the annual http://www.worldenergyoutlook.org/">World Energy Outlook (WEO) that production of conventional crude oil peaked in 2006 with a production rate of 70 million barrels each day. That doesn't mean crude oil will disappear entirely. The IEA explains:

Globally, fossil fuels remain dominant over the Outlook period in the New Policies Scenario, though their share of the overall energy mix falls in favour of renewable energy sources and nuclear power. Oil nonetheless remains the leading fuel in the energy mix by 2035, followed by coal. Of the three fossil fuels, gas consumption grows most rapidly, its share of total energy use almost reaching that of coal.

Oil prices will, according to the IEA, creep up to $135 per barrel by 2035, but oil supply will remain steady for the next 25 years thanks to new oil field discoveries. The bad news is, of course, that CO2 emissions will continue to rise as long as long as oil and coal are readily available--a fact that the IEA readily acknowledges in its report.

…

[Nederland]

4. I think you have the situation backwards

As the market shrinks, the importing nations will be at the greatest disadvantage. The greater their reliance on imported oil, the worse their problems will be.

In a world where oil is in decline, it is the exporters of oil that will be at the greatest disadvantage (except perhaps in the very short term). In the medium to long run I would much rather be an importer of oil and an exporter of food than an importer of food and exporter of oil (yes, obviously it's best to be an importer of neither). The reason is simple: if I'm a food exporter I have more options. Oil is simply one of many possible energy sources--it is replaceable by natural gas, coal, nuclear and renewable energy. Food however, is food--there is no substitute. A country the imports its oil and uses only 23% of it to grow food can choose to import less if it wants to. A country that imports its food has no choice--it's people have to eat or starve. The fact that is may be "difficult" for an importer of oil to change its economy to use less oil or develop alternatives is irrelevant when compared to the fact that it is "impossible" for an importer of food to do anything but import food (assuming they haven't voluntarily stopped farming perfectly productive land for some reason).

As the world begins to run out of oil, oil exporters will face a double edged sword. One, all of their customers will be scrambling to figure out a way to use less of their product. Two, they themselves will be running out of oil. Certainly in the short run oil exporters can increase their prices, but all that will serve to do is make the alternatives to oil more competitive and speed the day of oils irrelevance. Food is a renewable resource that has no substitute. Oil is a non-renewable resource that has numerous alternatives. In the long run this means countries that produce food will be much better off than countries that produce oil.

[Nederland]

6. You still have not addressed the issue of demand

By the time the world oil market has lost half its volume, say in 12 years, they will have lost 40% of their current oil requirements. Unless they make unprecedented changes to their food systems, they stand to lose 25% to 35% of their food supply in the next 12 years. It sounds apocalyptic, but it’s what the numbers show.

This is simply not true. Your numbers assume that reduced supplies and higher prices for oil will hit food, transportation and heating sectors of the economy equally. This assertion smacks in the face of the reality that those three sectors have vastly different demand curves for their products.

The demand for oil used in food production is simply not the same as the demand for oil used for other purposes. Demand for food is fairly inelastic, people need to consume a certain amount of it regardless of the price. Demand for (non food related) transportation and heat is far more elastic. In a free market where oil is purchased by whoever can afford to pay the most, people in the food production and distribution industries will win out every time. They will win because they know that regardless of how much they have to pay for that oil they can always pass along that cost to their customers, because their customers have to eat. People in the transportation and heating industries have no such assurances. When it comes to transportation and heat, people have lots of options. They can drive less, use mass transport more, bike more, or simply walk places. They can switch from heating with oil to something else, insulate their homes better, or simply turn down the thermostat and put on a sweater.

I'm not saying that food production will be completely unaffected by rising oil prices. Obviously in many of the countries you listed people consume much more food than they actually need--particularly in the obese United States of America. Also, rising prices for food will likely result in changing diets and eating out less, which will in some way affect the demand for food. That being said, my main point is that whatever impact rising oil prices has on the food industry, the impact on the transportation and oil heating sectors of the economy will be far, far greater. Your assumption that reduced oil supplies will be shared equally by these three sectors is simply not realistic.

[cutlassmama]

7. The obese are obese from eating unhealthy food, not from too

much food being available.

[Nederland]

8. True, but that doesn't detract from my argument (nt)

[joshcryer]

15. I disagree.

You will become obese eating the best most nutritious food available if you eat a lot of it.

[GliderGuider]

9. Yes, other uses of transportation will drop.

A lot depends on the local situation, though. Like how much discretionary driving there is that can be cut out of the system easily.

In this situation we're probably looking at long-term price elasticities of demand rather than short-term, since this is going to be by definition a Long Emergency. Long-term PEDs tend to be higher than short-term ones as people have more time rearrange their lives to work around long-term price rises. There's also the question of PED of food. Economists usually think in terms of income elasticity rather than price elasticity for food, but in this case I think price changes will predominate, though incomes will probably go down too. What we'll see is a lot of movement away from high-value, high-cost foods like meat, to food lower on the chain like grains and tubers. Maybe eventually all the way to mud cookies, bark and grass soup in some places.

Like energy conservation or efficiency programs, though, such shifts down the food chain tend to be one-time events. If the new situation stays the same or keeps getting worse there's nowhere much to go once you're living on 2000 kcal/day of potatoes, onions, cabbage and bread.

I really don't know how this will play out, I'm just musing over the potential significance of factoids I've discovered. Like the food system taking a quarter of the oil, and that 45-year-long correlation of oil consumption to grain production. I like poking my nose into unexpected places, because I think that the common wisdom has missed an awful lot that's important about our current situation.

[WatsonT]

11. The trend predicted in the third graph

seems awfully pessimistic. The real trend is mostly upwards with a slight downward tilt right around the time the world economy collapsed. And they take that and extrapolate a 20 year trend from that.

Likewise we could predict that the stock market will drop to zero within a few years if we use the wrong day to predict the trend.

That's fear mongering though, not science.

[GliderGuider]

12. You could be right.

But I think you're dead wrong, and don't understand the significance of graphs 1 and 2.

Nobody's listening, everybody's going to have somebody else to blame when the shit hits the fan.

[WatsonT]

13. If you stretch the timeline out a bit

it doesn't look nearly as dire:


People are predicting the downward slope of a bellcurve simply because the production seems to fit the upward slope of a bellcurve. Even though there hasn't been any significant sustained downward trends that can't be explained by other factors.

[GliderGuider]

14. Nope.

There is no downtrend yet, but the trend has been flat for 6 years in the face of rising prices (which should indicate rising demand). We're at the peak, and the world as a whole is going to behave much like Egypt's oil picture did.

The thing about a peak is that a moment before you hit it, everything looks just hunky-dory. There has never been a plateau like this on the curve before, and the downturns we saw all had well recognized above-ground causes. Not this time. I've been watching this closely for seven years now. I've never said it definitively before, but now I will. This is the peak.