Saturday, January 19, 2008

The Other Looming Oil Shortage and Consequences

It happens to be cooking oil and if this continues we can chalk up another in a long line of crises which are underway.
Rising prices for cooking oil are forcing residents of Asia’s largest slum, in Mumbai, India, to ration every drop. Bakeries in the United States are fretting over higher shortening costs. And here in Malaysia, brand-new factories built to convert vegetable oil into diesel sit idle, their owners unable to afford the raw material.

This is the other oil shock. From India to Indiana, shortages and soaring prices for palm oil, soybean oil and many other types of vegetable oils are the latest, most striking example of a developing global problem: costly food.

And much of this problem can be directly linked to the insatiable thirst for alternative fuel as biofuel production cuts into food production including crops which provide us with cooking oils.
A startling change is unfolding in the world’s food markets. Soaring fuel prices have altered the equation for growing food and transporting it across the globe. Huge demand for biofuels has created tension between using land to produce fuel and using it for food.

A growing middle class in the developing world is demanding more protein, from pork and hamburgers to chicken and ice cream. And all this is happening even as global climate change may be starting to make it harder to grow food in some of the places best equipped to do so, like Australia.

In the last few years, world demand for crops and meat has been rising sharply. It remains an open question how and when the supply will catch up. For the foreseeable future, that probably means higher prices at the grocery store and fatter paychecks for farmers of major crops like corn, wheat and soybeans.

And you know those inevitable idiotic injuries that occur on Friday after Thanksgiving as shoppers fight their way into Wal-Marts and Targets? That may become more common.
No category of food prices has risen as quickly this winter as so-called edible oils — with sometimes tragic results. When a Carrefour store in Chongqing, China, announced a limited-time cooking oil promotion in November, a stampede of would-be buyers left 3 people dead and 31 injured.

Perhaps we should have given more thought to our fuel needs sooner than we have. Biofuels sound like a grand idea to wean us away from oil imports, but apparently many didn't consider the trade-offs.
Biofuels accounted for almost half the increase in worldwide demand for vegetable oils last year, and represented 7 percent of total consumption of the oils, according to Oil World, a forecasting service in Hamburg, Germany.

The growth of biodiesel, which can be mixed with regular diesel, has been controversial, not only because it competes with food uses of oil but also because of environmental concerns. European conservation groups have been warning that tropical forests are being leveled to make way for oil palm plantations, destroying habitat for orangutans and Sumatran rhinoceroses while also releasing greenhouse gases.

And don't think for a second this situation is or will be limited to third-world nations. Christina dropped this link from the Dallas Morning News in one of my comment threads this morning.
The sharp rise in food prices seen in 2007 is expected to be followed by another higher-than-normal jump next year, the USDA said Monday. And 2008's punch will be to the bread basket.

Items made with wheat (breads and crackers) and soybean oil (cooking oil and fried foods) are expected to rise so much next year that they'll boost the cost of cooking at home by up to 4.5 percent – half a percentage point more than predicted just a month ago.


Meanwhile, the Energy Information Administration forecasts a 17.7 percent jump in crude oil prices next year, with a corresponding 10.7 percent boost in the price of a gallon of regular gasoline.

So just driving to the grocery store will cost more.

It is becoming quite obvious this decade is going out with a bang.

Crossposted at Big Brass Blog

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