Food and Oil

The sudden rise of food prices, especially of basic grains such as rice, wheat, and corn, has precipitated what one official in the UN’s food program has termed “a virtual tsunami” that is critically impacting over 100,000,000 people in at least one hundred and twenty-one countries around the world. When one considers that most of these people earn less than $1.00 a day per capita and have to spend at least 75¢ worth of that for just their food so day, even just a slight rise in the price one of these basic grains can lead to starvation in just a few months time.

However, the cause or causes of this situation is very complex. It is not that there is not enough grain being grown. Nor does it seem that it is merely, as has long been the case, one of distribution. People are starving even countries where the market places have large piles of rice or wheat for sale. It’s simply that the poorest of the poor can no longer afford the price. So what has driven up the prices so much?

According to a feature article in Newsweek (May 5, 2008) causes range from bad weather—probably exacerbated by global warming—to commodity futures trading speculation, itself based on the bet that the situation will become even worse! Stock-piling and hoarding seem to be also happening as well. Also, consumption of these grains has also increased with farmers being able to get higher prices for these products when they are sold to fatten up animals for meat production for the tables of the well-off instead of being sold more cheaply to feed the poor. The three billion or so people around the world (almost half the world’s population) who live on less than $2.00 per day rarely eat meat unless, as is happening now, they are being forced to slaughter their domestic stock which they can no longer afford to feed.

The saddest part of this story is that all this has happened despite the hopes that the so-called “globalization” of commerce would result in cheaper food prices. It seems that it has in some cases, but the lower prices are, in many cases, the result of government subsidies and in some cases, tariffs, that are still being used, especially by the more wealthy countries, to protect their own farmers from the competition that globalization was designed to promote. As a result, things have happened like at cheap U.S.-produced corn replacing home-grown maize on the Mexican market followed by a steep rise in this same grain’s price not only in Mexico but also at home as corn-ethanol production plants (also federally subsidized) come on to line.

By far and large, the major problem which has triggered this crisis right now seems to be the steep price of petroleum, which in turn has caused huge surge in the price, not only of diesel fuel and gasoline, but even fertilizers and other products involved in the production of grain. This would seem to suggest that if anything can be done to alleviate this situation (other than massive amounts of direct aid to the most threatened segments of the world’s population) the next step, short of driving the speculators out of business, or imposing government controls on grain prices, must be to do something about the price of oil. And the only way to do that, again, short of government-imposed rationing and price limits, is simply to reduce the demand. But the problem with that is, of course, as soon as the price drops, at least if the rest of the world thinks like Americans do, consumption will pick up again!

So how can we reduce oil consumption and the serious situation that our over-dependence on this and other fossil fuels has produced? If rationing is unacceptable to Americans and, on the other hand, price controls would have just the opposite effect, it would seem that disincentives, like much higher taxes on gasoline, which seem to have at least some benefits in Europe—such as helping to finance superlative public transit and railway systems—would be the most logical next step. If it did not cut back on Americans’ excessive reliance on the automobile, at least it might introduce some common-sense concern to scale down the massive inefficiency the vehicles they drive.

Instead we see some politicians in the USA promising a “gas tax holiday”, which is just about the most irresponsible thing one could imagine, considering that America’s costly “war” on the terrorism which to a large extent has occurred as a reaction to European and US meddling in the Middle East. Although I do not entirely agree with him (I believe that the Israeli-Palestinian conflict also is a major cause of the conflict) nevertheless according to no less an authority on economics than Alan Greenspan, the principal incentive driving the whole mess over there has been our obsession to exploit and secure what still remains the world’s major supply of oil. Instead, any really responsible politician would see increased gasoline and fuel oil tax as not only an incentive to reduce this dependence on foreign oil, but also as a vitally necessary means of helping pay for the war that this dependence has to a large part caused to begin with.

But in any case, a major component of any solution has to be to greatly reduce our excessively high dependence on foreign oil. This, of course, leads to finding substitutes, such as ethanol. But as we have already seen, ethanol produced from corn is a growing part of the world food crisis—as we as being, as seen by most economic and agriculture analysts, not a very efficient way of producing ethanol to begin with. Ethanol produced from woody fibers (including the left-over corn stalks and cobs from corn for food and feed production), switch-grass, and the bark and other “slash” by-products of lumbering, while technically more complicated, promises much more efficiency, as well as much less disruption of the world’s food supply. Likewise, various biofuel substitutes are available to replace diesel fuel refined from crude oil.

Yet just providing agricultural-based substitutes for petroleum hardly gets to the root of the problem that leaves nearly half of the world’s population so vulnerable to disruptions such as the present one to the world’s food supply. Nor does it do much to slow down the process of global warming. Cutting down forests to increase the production of ethanol or other biofuels in some ways makes the overall problem worse. Mature forests sequestrate carbon dioxide better than croplands or grasslands, so much so that the US government is already paying Native American tribes to preserve mature forests as much as possible rather than clear-cut them for short term gain.

However, when all is said and done, I think the solution of this problem will have to go back to a reexamination of our core values. While many Americans like to think of themselves as generous, even religious persons, the fact is that when push comes to shove, our rather extravagant life-style (which amounts to approximately one-fifth of the world’s total of consuming and polluting while we remain only one-twentieth of the world’s population) continues to trump all other appeals to world-wide needs or interests. Despite the gospel warning that we cannot love both God and “mammon”—that is, money or profits—we continue to place our own “national interests” and standard of living above most all other considerations. So should we now complain that the demands of distributive justice (the obligation to share the world’s resources fairly) has finally begun to exact its price?

R W Kropf 5/16/08 Food&Oil.doc 08-05-16.htm