“Peak Oil” morphing into “Peak Food”
Posted by ecoshift on February 9, 2008
Why the price of ‘peak oil’ is famine – Telegraph
By Ambrose Evans-Pritchard International Business Editor
Last Updated: 2:54am GMT 09/02/2008
Vulnerable regions of the world face the risk of famine over the next three years as rising energy costs spill over into a food crunch, according to US investment bank Goldman Sachs.
“We’ve never been at a point in commodities where we are today,” said Jeff Currie, the bank’s commodity chief and closely watched oil guru.
Global oil output has been stagnant for four years, failing to keep up with rampant demand from Asia and the Mid-East. China’s imports rose 14pc last year. Biofuels from grain, oil seed and sugar are plugging the gap, but drawing away food supplies at a time when the world is adding more than 70m mouths to feed a year.
“Markets are as tight as a drum and now the US has hit the stimulus button,” said Mr Currie in his 2008 outlook. “We have never seen this before when commodity prices were already at record highs. Over the next 18 to 36 months we are probably going into crisis mode across the commodity complex.
“The key is going to be agriculture. China is terrified of the current situation. It has real physical shortages,” he said, referencing China still having memories of starvation in the 1960s seared in its collective mind.
While the US housing crash poses some threat to the price of metals and energy, the effect has largely occurred already. The slide in crude prices over the past month may have been caused by funds liquidating derivatives contracts to cover other demands rather than by recession fears. Goldman Sachs forecasts that oil will be priced at $105 a barrel by the end of 2008.
The current “supercycle” is a break with history because energy and food have “converged” in price and can increasingly be switched from one use to another.
Corn can be used for ethanol in cars and power plants, for plastics, as well as in baking tortillas. Natural gas can be made into fertiliser for food output. “Peak Oil” is morphing into “Peak Food”.