Quotes of the day

"What it comes down to: the North plans to steal food from the South to feed the North's cars, lawn mowers, ATVs, jetskis, snowmobiles, speedboats, gokarts etc. the various euphemisms of "comparative advantage" and the definition of food, soil and water as fungible commodities dispersed in the corrosive solution of transnational money camouflage this bottomline reality: a car eats more than a human being."

- Deanander, from EuroTribune, recommended reading [emphasis added]

"A lot of governments, especially in Europe, the United States, and Japan, are encouraging use of agricultural fuels. Some of these policies are not founded in solid economic rationality : biofuels will continue to be very expensive to produce. But even if these policies were carried through with, we think the share of biofuels in world fuel production in 2030 will only be 7%. To reach those 7%, it will be necessary to use a farmland surface equivalent to the combined total areas of Australia, Japan, Korea, and New Zealand combined..."

- Dr Fatih Birol, IEA chief economist, in an interview with Le Monde (6/2007, emphasis added)

Food vs. Fuel war brewing

Many people and institutions have warned about the coming fight between biofuels and food for arable land.

Even the mainstream media in Europe and USA have been hammering the message in lately: first generation biofuels from edible crops is brain dead idea. Further, even non-food biofuel crops may compete with food crops for the same acreage.



When biofuels compete with food production, what happens?

• Price of wheat goes up => bread and other basic food items increase in price
  
• Price of corn goes up => processed food prices increase
  
• Price of soybean goes up => beef becomes more expensive
  
• Price of barley increased => Price of beer goes up
  

At this point the astute reader has understood the underlying reason why the price of food and energy has been cleaned from the most common inflation index, even though those represent a major inelastic part of everyday consumption.

When you combine this with the fact that per capita global food production has already hit a peak and is at is currently lowest in 50 years, there is a possibility of a big political storm brewing.

Again, the poorest nations will take a hit first: when oil is too expensive and critical for infrastructure (incl. electricity production) and price of bio-fuel crops go up, then edible crops are abandoned for more lucrative crops.

Fortunately, some developing nations have already understood the precarious balance between food and fuels. China's ban on use of corn for biofuel could be a sign of things to come elsewhere.

However, the ever inventive market is now showing signs of turning to other sources, like fruit. This does not solve the problem, merely shifts it around.

Food into fuel drives up the world prices of most major food crops, making it increasingly more difficult for poor nations to solve the edible crop shortage through costlier imports.



So, what happens? People starve. Nothing new there.

And in the end, we accept it, because it calms the markets and lets us think we can compensate for the plateauing crude oil production with biofuels, which in turn enables us to keep running our economies, planes and cars.

So, we keep on producing unsustainable biofuel types, even if it reduces edible crops on the market and drives up the food prices.



However, if the situation gets dire enough, through an added shock to the system, like a massive serious of world wide droughts for example, then even biofuels could become too expensive for us, while food prices remain high.

What drives this apparently risky development?

Sane or not, the advance of biofuels is driven by various forces:

1. Our relentless and growing consumption of oil
   
2. Urgent need for greenhouse gas emission reduction
   
3. Strong lobbying for subsidies and associated (American) political alignment
4. Increased insecurity about energy (read:oil) security: not enough production is local
   
5. Growing nervousness about supply of oil refinery products
   
6. Still expanding green tech & biofuel business boom

So, it looks like biofuels we will get and food less so.

Will this tension between fuel and food production result in a crisis or local political instability as predicted?

Let's look at what the magic 8-ball says:



Ah well, till the next time

Intermission

PO Summary - Got the Lingo?

Trying to understand energy crisis related discussions can be daunting: abbreviations, technical concepts and lots of background data is often assumed to be understood by each participant.

Let's look at an example.

Many people believe in PO, due to multiple modeling techniques showing a Hubbert Peak within the next 10-13 years for total liquids in the world. Yes, there has even been peer-reviewed scientific papers on the subject.

In plain English: We can't grow our daily oil production rate indefinitely. Daily oil production rate will likely peak before the year 2020. When production peaks, demand will exceed supply. Many engineers and scientist have studied this. A lot of them agree on the time of peaking.

Now, why is that a problem? According to the Hirsch Report, the minimum mitigation time before peak is 20 years. It is highly probable we have less time available than that. According to most grim estimates, only one fourth of that. There are oil industry insiders and energy bankers who have claimed we may be at peak now. Supply-demand gap is incredibly thin, cushions are gone. Demand has already exceeded supply in poorer areas.

Plain English: Changing cars, trucks, planes, boats and generators to run on electricity takes 20 years or more. Demand for oil may greatly exceed oil supply well before that. Many experts say we can't increase our daily oil production anymore. This means we are at production peak now. Some countries are already experiencing oil shortages. In Africa, oil shortages are happening today.

What would we do, if we had 20 years? Many say "biofuels".

A lot of scientists are increasingly weary of bio-fuels, due to EROEI being proven very low and sustainability of fuels being in doubt (mp3). Also, there's a significant scaling challenge as well in production of bio-fuels.

Bio-fuels may take more energy to make than what they give. Making bio-fuels will not help us supplant fossil oil. Also, bio-fuels may not cut greenhouse gases. Further, bio-fuels may not be available in as huge volumes as we use fossil oil.

CTL and GTL fuels have their own scaling issues and the GHG impact is considerable. Also, there's that nasty issue of overall hydrocarbon resource depletion.

So, even if successful, alt-fuels will only provide a small wedge, not a replacement for fossil oil.

That means, PO is mostly a liquid fuel crisis.

We can only make a bit of oil from coal or gas. This will not be sufficient to cover our oil demand. Also, coal and gas based alternative fuels cause additional greenhouse gas emissions. Further, the amount of natural gas and coal reserves we have left is uncertain. We will need lots of different new liquid fuels to replace diminishing oil. We face a shortage of liquid fuels. A crisis of energy in liquid form.

Now, what is a likely scenario in this crisis?

Short term, one must factor in two important issues, on physical, another economical:

1. Falling net energy of oil production, due to diminishing API and increasing sulfur ratio, not to mention increased discovery, drilling and pumping energy costs. This results in a compound upward price pressure on top of the normal resource shortage.
2. ELM. Available exports fall faster than production. This may result in shortages and certainly raises the prices even further.

The rest of the oil we have left is of increasingly worse quality. It takes more energy to pump it out of ground. It takes even more energy to make it usable diesel and gasoline. Rising energy costs will raise the price of remaining oil, even if demand stayed steady. However, demand is rising, not staying steady, so it also adds to rising energy prices.

Export Land Model (ELM) studies how much oil is exported. Majority of oil production in the world is in the hands of less than a dozen producers. With most of them, their domestic oil consumption is growing faster than their oil production. When their oil production starts to peak, they will need more of the oil for domestic production. As a result, producers will export less oil. This exported oil is what dictates the price of oil on the world market. It also dictates whether people in oil consuming countries have oil to use at all. If producers do not export, consumers cannot buy. Whatever the price.

What could these issues lead to? Nobody knows, but several obvious causalities have been suggested by various authors:

• Resource wars, continuous wars
  
• Food vs Fuel
  
• Blackouts, rationing, shortages
• Increase NatGas, coal and electricity consumption => increases in pricing
• Nuclear renaissance
  
• Increased inflation (due to both food and energy price increases)
• Car fleet transition: hybrids, PHEV and flex-fuel cars.
• Renewed interest in light-rail and mass transit in general
  
• Green tech IPO boom
• U308 world spot price set to explode
  

A lot of things are already taking place and it is likely that the trends will intensify for the foreseeable future.

Some argue that as oil demand greatly exceeds supply: countries will go to war for oil. More food will be turned into bio-fuels. This will result in food shortages in poorer countries. Oil dependent African and Asian countries will experience electricity blackouts. Purchase of oil will be rationed. Oil may unexpectedly run out for a while. Natural gas, coal and electricity will be used more to help with oil shortage. Prices of coal, gas and electricity will rise. Countries will start to build more nuclear power plants. Not enough nuclear power plant makers exist to make plants for all who want them. Price of uranium will continue to rise.

Of course, there would be ways to solve supply-demand gap.

Let's first look at the options that are unlikely to work other than as minor temporal mitigation wedges:

• Techno-fixes
• Bio-fuels
  
• Energy efficiency and conservation
• Hydrogen economy
• Oil shale or other low quality unconventional oil
  

Technology breakthroughs do not create energy out of nothing. When oil starts to run out, more energy is needed. Available energies include nuclear, wind, solar, tide and geo-thermal. These can supplant some of the needed oil. However, there is no single technological fix or alternative source will make the problem go away quickly. Transition to alternative energy sources will take time. Some of the alternatives are likely to fail (e.g. 1st and 2nd generation biofuels). Some alternatives are just too expensive in terms of price (2nd and 3rd generation biofuels). Some just do not make any physical sense (e.g. hydrogen production via electrolysis).

Energy efficiency increases are useful in the short run. On the long run efficiency savings are lost in increased energy use. It is difficult to conserve oneself out of the liquid fuel crisis problem. At least, it is impossible to do it without harming economic growth and current global trade.

Other, more systemic solutions have been proposed, such as CJP's Oil Depletion Protocol also known as the Rimini Protocol, which is these days promoted by RH, who also advocated powerdown.

However, due to the pessimistic mode of many of PO thinkers (doomers), ODP is not seen as a very realistic option.

Oil depletion protocol states makes countries to reduce their oil consumption at the same rate that world oil production diminishes. Protocol requires that the countries sign and abide by it. Currently no large oil using country has written the Oil depletion protocol. Many believe that nation states are more likely to price bid or go to war for oil. States are unlikely to voluntarily reduce their consumption. Doomer is a person who thinks that the current economic status quo and wellbeing of the world is not sustainable. A doomer thinks that oil production peak will result in a doom of the civilization. In the diminished version, doomer thinks that oil peak a radically restructures the world society.

Many, in fact (yours truly excluded) believe in some sort of a cataclysmic overshoot collapse, like forecast by th Olduvai Theory. Some even believe the thermo/gene collision is the inescapable future of mankind.

Some people Peak oil will result in the collapse of the known civilization. Arguments are based on exceeding the carrying capacity of earth. Only stored energy (such as oil) has enabled humans to exceed carrying capacity temporarily. When that energy is used up (non-renewable), carrying capacity limits will be met.

But let's take a deep breath. No need to skip peak oil stages.

Don't paralyze yourself. Nobody has a crystal ball. Forecasters have been wrong before. No need for doomer-porn.

Malthus was already wrong over a hundred years ago. Or at least he was off with his timing, because he didn't factor in hydrocarbon resources, such as oil, coal and natural gas. Those postponed the peak at least a hundred years. People who love to think pessimistically about peak oil, will often indulge in scenarios of dystopia. Consuming such scenarios in large doses may not be healthy for one's mental state.

So, what is there to do?

ELP, is one option. Permaculture another. Relocalization a third one.

Economize, Localize and Produce. Make do with what you really need. Start acting and consuming locally to conserve energy. Become less dependent on things from afar, whether food, services or work. Start producing things basic things that are needed and valuable. Permaculture guides one in sustainable living. Relocalization is an effort to start up and develop local community actions.

Oh, why are techno-fixes unlikely to work? In the old tradition of Finnish math books, the proof is left as an exercise for the reader.