With the price of oil-compatible fuels way past $US100 and not coming back down, probably ever, an increasing number of cross-form economic links were ultimately inevitable.
While temporary price shocks can do temporary harm, they often don't create fundamental changes in markets.
A permanent increase in prices, especially for something as critical as energy, naturally has far more dangerous effects, because it can result in new technology that permanently link prices in markets that people are not used to fluctuating in those ways.
The individual steps, of course, are just the accumulation of short-sighted self-interest, because most people, policy makers and companies struggle to see past current market prices.
I truly wonder if people who go into ventures like bio-diesel or ethanol (which leverage the price gradient between low food prices and high oil prices) assume that their operation is too small to make a substantial change to the world prices.
Do they consider the fact that when 100 other people have the same idea, one or two business cycles down the road all of that price advantage will be gone, except for a margin that represents the costs + market-average profits for the most efficient operator in that market.
And of course, once technology has headed far enough in the direction of linking two markets together (the current cycle being a link between food and oil) nothing in the world is going to stop it.
Even prohibitions on that economic activity will create a false market for other activities that work around the prohibitions.
And so we reach the situation where now food and oil are now irrecoverably linked together.
Having realised the problem exists, at least at a "food gets more expensive, oops" level, that industry is moving on to converting non-edible feed stock instead.
But what sorts of feedstock?
Again, people seem to be looking at just the next step, not what the end result it. And it's not necessarily going to help the problem of food supply either.
The zeitgeist currently seems to think that we get commercially-efficient technology for converting cellulose to ethanol, and then start harvesting "Switch Grass" from currently non-viable farming land, which will help fix the food price problem.
This is naive at best.
If we truly do get cellulosic ethanol up and running, that will just be the beginning.
Switch grass may be drought-tolerant, but it still grows better in fertile soil. If a corn farmer currently diverting production away from food into the (subsidised false-economy) ethanol market can change to switch grass and feed that into ethanol instead, then of course they are going to do so.
Every single time we come up with technology to feed the robots that can make more profitable use of farmland than any current food crop (whether or not it's also profitable elsewhere) then farmers will shift their efforts to that crop instead, until food prices go up AGAIN to catch up.
It's basic economic optimisation of one of the few limited resources we have, solar-exposed surface area.
And of course, switch grass is just the beginning, because it's obvious and in front of the media. In the energy stakes, it's an amateur.
If you want to see a truly competitive grass, then you want to take a look at Gamba Grass.
Evolved to suck up the least traces of nutrients anywhere it can get it, and survive continuous grazing by Wilderbeast and other African grazers, Gamba Grass grows to a height of 4 metres in a year. It contains such high energy density that when it burns, fire fighters can't get close enough to it to fight the fire, so hot that it kills off the "fire-loving" Australian natives and converts forest into grassland.
It was stupidly imported to Australia by Northern Territory graziers because it supports a whopping 40 times more cattle than native grasses anywhere it can get enough moisture to grow. Except that once it matures into the 4 metre tall super-fire height, nothing eats it.
If I was looking for cellulose feedstock, this stuff or something like it would have to look pretty damned attractive.
But the rolling effects will spread in other ways.
Feed lot producers are already putting more pressure on grass supplies, devastating the recreational horse industry. Expect more to follow, and owning a pony to be a nearly unattainable luxury even in rich countries (even more so than now).
So far, cattle/sheep/etc ranchers are not badly impacted by the current price cycle, because grazing land is often much less fertile than crop land.
But if all of a sudden a rancher can plant something from the "Monsanto Ethanol Grass" catalogue, harvest the stuff like sugar cane into an ethanol plant, and make a bunch more than for the cattle or sheep currently on that land, expect the prices of meat to potentially skyrocket, because unlike feed lot producers so far the ranchers haven't had to deal with inflated prices for inputs very much, so the price increase of meat has been somewhat muted in comparison to basic stables.
If we move to cellulose ethanol, that equation and a bunch of other equations, move again.
The only technologies that can truly save us, at least for a while, will be those that don't see any improved performance on farm land compared to barren desert (such as some notional 50% efficient solar panels) or that can co-exist on top of farm land (such as wind power).
Of course, even wind power isn't a particularly brilliant power source.
It may be low-emmision, and given a smart enough grid the variability isn't a problem, but like hydro it can only exist profitably on a relatively small subset of the planet surface.
Of course, once the mass-market pure-electric cars start arriving in 2010-2012 and starts chewing up immense amounts of grid power, linking electricity markets to oil markets more directly, the resulting blackouts and price spikes in the electricity market should make a lot more surface area viable for wind...
Re:I don't think it is that devastating
Alias on 2008-06-03T06:26:35
> First of all the ethanol thing is not because it makes economic sense. It is because the US government subsidizes ethanol.
Subsidies like this are normally (and legitimately) meant to bootstrap industries or counteract temporary imbalances.
You might subsidise ethanol to boot up an ethanol industry quickly, and you can gradually remove the subsidies later, once industry has improved their methods and can support itself.
Other examples in a number of countries are subsidies for solar panels or wind generators and so on, to help stimulate the development of and roll out of that thing.
While it may be effective at $60 to mine tar sands, that figure may not include carbon taxes, or the tar sands simply may not be able to produce oil at the kinds of rates that the Saudis churn out oil.
Just because it's profitable to start mining it doesn't mean it's profitable at all arbitrary scales.
> Do you think the wild gamba grass would get cut down?
Not necessarily. That wild gamba grass is way out in the middle of nowhere, whereas the alternative is to plant all new fields of the stuff next door to the ethanol refinery.
Why bother to go all the way out to the bush until you've planted everywhere else that is closer and more affordable.Re:I don't think it is that devastating
Ovid on 2008-06-03T08:36:54
Subsidies like this are normally (and legitimately) meant to bootstrap industries or counteract temporary imbalances.Thank god that some people still realize this. All those people out there beating free trade drums and getting erections every time they hear "Adam Smith" like to ignore history. The US still has plenty of industries which have become the size they are due to protectionism (witness the rise and fall of the US steel industry). And anyone who naively thinks that tiny and immature African economies can blithely adopt "free trade" on a level footing with major Western powers needs to pay a little more attention to the real world than to ideologies. David Ricardo's "comparative advantage" is only worth the paper it's printed on.
Re:I don't think it is that devastating
btilly on 2008-06-03T17:18:21
While I agree there can be legitimate reasons for subsidies, I really think that the ethanol subsidy is because of the strength of the agricultural lobby in the government, and not for any nobler policy reason.
On the rest of it, I see there being two alternatives. In one the cost of oil drops. In which case the gamba grass is not cut by people, but some of the other bad things don't happen. In the other the cost of oil stays high in which case it will be worth someone's while to cut that grass. Either alternative is better than the present in some way.
Of course, even wind power isn't a particularly brilliant power source.
When was the last time (when was the first time?!) you saw anyone ask how harvesting the energy from atmospheric pressure differentials will affect downwind weather systems?
Re:Wind
Alias on 2008-06-04T03:41:05
It would be interesting to see some research work on that, but I would hazard a guess that the reducing the energy of surface winds in the first 100m of atmosphere would not make a sufficiently large difference to the other 100km of atmosphere.
When we start erecting wind capture arrays a kilometre high, that could all change.Re:Wind
chromatic on 2008-06-04T04:26:52
I would hazard a guess that the reducing the energy of surface winds in the first 100m of atmosphere would not make a sufficiently large difference to the other 100km of atmosphere.Plenty of living things really like the first 100m of atmosphere -- many more than like the other 100km of atmosphere.
Re:Wind
Alias on 2008-06-04T07:23:48
Huh? Living things? You were talking about weather patterns...Re:Wind
chromatic on 2008-06-04T17:26:49
That's the thing. I don't know if enervating the kinetic energy of the densest 100m of the atmosphere will have any effect on living things or weather patterns or both. I'm not a climatologist, and I've never read or heard a climatologist's expert opinion on the subject.
Then again, I don't call telephone psychics either.
Re:Wind
pudge on 2008-06-04T21:22:12
I asked that once. But then I realized that if it were a real problem, surely THEY would have thought of it already.Of course, even wind power isn't a particularly brilliant power source.When was the last time (when was the first time?!) you saw anyone ask how harvesting the energy from atmospheric pressure differentials will affect downwind weather systems?
some notional 50% efficient solar panels
I read something similar about to what you are saying about five years ago regarding the real estate market. The big push there was for yurts and housing abodes built into the earth to save cost on construction. Now the yurts are too expensive, and the housing is almost affordable again after the bubble popped.
I'm not saying oil is the same type of bubble, but it wouldn't surprise me. Things never turn out the way one would expect.
getting worse
RogelioA on 2009-01-12T10:22:39
As day passes by economic crisis is getting worse that some of us seem like want to give up. With this, business industry such as real estate suffer also the same thing, profits have becoming worse. There actually are some industries are clamoring for in the wake of the current recession. Whilst the automotive and housing industries have begun nose diving and asking for hand outs, the discount, retail, and food industries are still staying strong, especially those restaurants with a dollar menu. Some of the things in this article on the payday loans blog about industries that do not need emergency cash is somewhat surprising though.
Re:petrochemicals and food linkage
Alias on 2008-06-04T11:18:27
Indeed, but the conversation to this point has traditionally only been in one direction, oil to food. That helps keep the food prices lower...
Going both directions is a new development.
