It would help us tremendously if we did the adjusting quickly.
Until about 1800, our species had no safety margin and lived, like other animals, up to the limit of the food supply, ebbing and flowing in population. Cultures rose and fell with the rotation of arable land and crops.
From about 1800 the use of hydrocarbons (oil & gas) & engineering know how allowed for an explosion in energy use, in food supply, and, through the creation of surpluses, a dramatic increase in wealth and scientific progress.
Since 1800, the population has surged from 800 million to 7 billion, on its way to an estimated 8 billion, at minimum.
The rise in population, the ten-fold increase in wealth in developed countries, and the current explosive growth in developing countries have eaten rapidly into our finite resources of hydrocarbons and metals, fertilizer, available land, and water.
Now, despite a massive increase in fertilizer use, the growth in crop yields per acre has declined from 3.5% in the 1960s to 1.2% today. There is little productive new land to bring on and, as people get richer, they eat more grain-intensive meat. Policy based attempts to increase wealth by directing food production into bio gas (corn ,wheat, etc) exacerbates our current problems.
Because the population continues to grow at over 1%, there is little safety margin. The problems of compounding growth in the face of finite resources are not easily understood by optimistic, short-term-oriented, and relatively innumerate humans (especially the political variety).
The fact is that no compound growth is sustainable. ( Compound growth here means doubling and tripling of the base figures every 12 months).If we maintain our desperate focus on growth, we will run out of everything and crash. We must substitute quantitative growth for qualitative growth.
But the market is helping, and right now she is sending us the Mother of all price signals. The prices of all important commodities except oil declined for 100 years until 2002, by an average of 70%. From 2002 until now, this entire decline was erased by a bigger price surge than occurred during World War II.
Statistically, most commodities are now so far away from their former downward trend that it makes it very probable that the old trend has changed – that there is in fact a Paradigm Shift – perhaps the most important economic event since the Industrial Revolution.
On the other hand, our scientists say that climate change is associated with weather instability, and that, last year was exceptionally bad. Near term it will surely get less bad.
Excellent long-term investment opportunities in resources and resource efficiency are compromised by the high chance of an improvement in weather next year and by the possibility that China may stumble.
From now on, price pressure and shortages of resources will be a permanent feature of our lives. This will increasingly slow down the growth rate of the developed and developing world and put a severe burden on poor countries.
We all need to develop serious resource plans, particularly energy policies. There is little time to waste.
A few days ago the BBC highlighted previously unseen footage of the start of the Libyan riots which it said were initially about food shortages but Gaddafi suppressed them with such force that it turned it into the political situation it is today.
Beijing’s former envoy to the Middle East, Sun Bigan warned in a report published by the State Council Development Research Centre “The US has always sought to control the faucet of global oil supplies. There is cooperation between China and the US, but there is also a struggle, and the US has always seen us as a potential foe….Bilateral quarrels and clashes are unavoidable. We cannot lower vigilance against hostility in the Middle East over energy interests and security”.
He said “Both now and in the future, the Middle East should be our first choice in importing oil and developing oil cooperation”. He said “Obama’s new Middle East policy is merely a tactical adjustment, and the United States will not and cannot alter its global goals and dominance”.
Today’s reality is that the Middle East’s oil is of growing importance to both China and the United States, and indeed to the world as a whole. OPEC controls 73.9% of stated world oil reserves but only accounts for 44.9% of world production. With RoW oil production falling, the Middle East is the political prize. The cost of that prize is however rising all the time.
Read more: http://www.businessinsider.com/food-riots-worldwide-2011-1#in-response-to-rising-prices-the-indonesian-government-has-urged-people-to-grow-their-own-food-10#ixzz1Kb1wxeTz
Domestically, the soaring populations and declining supplies of water and food have meant the inequitable distribution of oil wealth is no longer sustainable, resulting in local uprisings, terrorism and increased government hand-outs, as well as speculation about regional influence and power bases.
With the US economically challenged, lacking political leadership and under constant speculation that its power is on the wane there is also an element of uncertainty which both regional and global powers are exploiting. Clearly there is a massive political game of chess happening.
Once you accept the reality of the above, the logic of historic support for autocratic rulers makes perfect sense. Keeping a few individuals in extreme wealth has meant a far lower oil price for the West than would have been the case under democratic rule.
The oil importers balanced their oil imports with arms exports which allowed the Middle East to maintain the domestic and regional status quo. The developed world has a massive stake in the survival of the regimes. So what is going wrong?
Peak oil is what. Outside of Saudi Arabia, oil production is declining throughout the Middle East. This means that, in a region where population growth is vast, higher oil prices are an inflation tax on citizens via food and energy rather than a benefit via increased state wealth and subsidies.
Read more: http://www.creditwritedowns.com/2011/03/on-food-riots-peak-oil-and-military-force.html#ixzz1KazE6Mct
Picture & Read more at: http://www.businessinsider.com/food-riots-worldwide-2011-1#high-food-prices-spark-protests-in-india-where-food-inflation-was-1832-percent-last-month-6#ixzz1Kb1Bb2Wh
At the time it was the worst protests in the country since the 1977 Egyptian riots, also over bread prices. Egypt’s oil production peaked in 1996, but it is now changing from an oil exporting nation to an importing nation – (http://www.theoildrum.com/node/7425) – which means that higher oil prices are suddenly a tax on the local economy whereas previously they had been a subsidy.
With gas production unchanged since 2005 and the oil minister declaring in 2008 that no new gas export contracts would be made, Egypt has similarly not benefitted from the growth in global LNG. The CIA World Fact Book suggests that Egypt’s government debt was 80.5% GDP last year. http://mid-east-today.blogspot.com/2010/07/population-growth-and-its-impact-on.htmlhighlights a UNICEF report reflecting that “the unemployment rates have reached 83% among young people between the ages of 15 & 29 years.
This group constitutes 20% of the Egyptian population. Another UN report also noted that 41% of the Egyptian population is living below the poverty index level which is USD2 per day per person”. The unemployment rates in the Arab world are among the highest in the world. Chances for improvement seem bleak. In the African world Morocco has been maintaining its budget deficit at 4% GDP by offsetting increasing food subsidies with cuts elsewhere but with oil prices also on the rise, something else has to give. Mozambique saw multiple deaths last year in food riots.
Analysts have concluded that Yemen will be the first capital city to run out of ground water. Wells are dropping at 65 feet a year. The shortages pose a special challenge in an impoverished nation that is already fighting 2 insurgencies and al Qaeda. “The problem is not in the future…We are suffering now”. Girls now drop out of school to collect water. The country is collapsing. Oil revenues accounting for 70% - 75% of government revenues and 90% of exports have collapsed in recent years as production has fallen by 32% since 2001.
It is rapidly becoming a failed state. The Middle East crisis, whilst again being hijacked by political extremism, is fundamentally about poor standards of living, food and water shortages and inflation.
Even the Iranian Revolution 30 years earlier, was fundamentally a backlash against social injustice as the puppet Shah’s regime suffered economic bottlenecks, shortages and inflation, although it was hijacked by Islamists.
These are the issues that will be very much in focus in the 21st century. A world in which basic natural resources are neither cheap nor abundant and in which the debt levels in leading economies are very high is one prone to geopolitical instability.
The Middle East will be a large part of that equation. So will military force.
Excerpt from : Time to Wake Up: Days of Abundant Resources and Falling Prices Are Over Forever – Jeremy Grantham & http://www.creditwritedowns.com/2011/03/on-food-riots-peak-oil-and-military-force.html
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