Get ready for a rocky year. From now on, rising prices, powerful
storms, severe droughts and floods, and other unexpected events are
likely to play havoc with the fabric of global society, producing chaos
and political unrest. Start with a simple fact: the prices of basic food
staples are already approaching or exceeding their 2008 peaks, that
year when deadly riots erupted in dozens of countries around the world.
It’s not surprising then that food and energy experts are beginning
to warn that 2011 could be the year of living dangerously -- and so
could 2012, 2013, and on into the future.
Add to the soaring cost of
the grains that keep so many impoverished people alive a comparable rise
in oil prices -- again nearing levels not seen since the peak months of
2008 -- and you can already hear the first rumblings about the tenuous
economic recovery being in danger of imminent collapse. Think of those
rising energy prices as adding further fuel to global discontent.
Tomgram: Michael Klare, Resource Revolts
[Note for TomDispatch readers: Last
week, I asked you to consider writing friends, colleagues, relatives --
whomever -- and urge them to go to the "subscribe" window at the upper
right of TD's main screen, put in their email addresses, hit “submit,”
answer the “opt-in” email that instantly arrives in your email box (or,
unfortunately, spam folder), and receive notices whenever a new post
goes up. (Word of mouth is, of course, still the major kind of publicity
this site can afford.) A number of you did so and TD got a nice stream
of new subscribers. Many thanks indeed! If some of you meant to do this
but didn't quite get around to it, now's as perfect a time as any! And
it really does make a difference to us. Tom]
He was a poor 26-year-old trying to eke out a living and help pay for his sisters' schooling. He met the deep corruption of
the Tunisian regime face to face in the most everyday and humiliating
way -- in the form of bribes he couldn’t afford just to keep his little
stand open and the power of a bureaucracy to shut him down on a whim.
In frustration, in protest, he doused himself with paint thinner and burned himself to death (though it took days for that death to come).
His name was Mohammed Bouazizi; he came from the town of Sidi Bouzid,
which you’ve never heard of; and his is a terrible story. Now, he’s
known across the Middle East as the man who started the Tunisian
revolution and will undoubtedly go down in history -- along with Thich Quang Duc, the Buddhist monk who calmly seated himself in a Saigon street in June 1963 and started a political firestorm by immolating himself to protest a repressive American-backed South Vietnamese government; and Jan Palach,
the Czech student who did the same in Prague’s Wenceslas Square in
January 1968 as a response to the Soviet invasion of his country. In
all three cases, others followed their painful example. In all three
cases, sooner or later it ended badly for the powers-that-be.
Across the Middle East today, immolations are on the rise and nervous American-backed autocrats are listening to the rumbling from below, like the Egyptian demonstrators already reportedly chanting, “We are next, we are next, [Tunisian dictator] Ben Ali, tell [Egyptian autocrat Hosni] Mubarak he is next.”
In his act, however happenstantially, Bouazizi combined two crucial
things that ensure the upheavals he began won’t be restricted to
Tunisia. At his little stand, he sold fruit, and to die, he used a
petroleum-based product. Basic foods and fuel are experiencing
startling price rises globally. Behind the Tunisian events, like recent
riots in Algeria, Jordan, and elsewhere, lie the rising cost of things
that people can’t do without. In Algeria, young rioters torching
buildings were also chanting, “Bring us sugar!” As Michael Klare, TomDispatch regular and author most recently of Rising Powers, Shrinking Planet,
points out, we’ve entered the age of resource revolts and there’s no
turning back. (To catch Timothy MacBain's latest TomCast audio
interview in which Klare discusses what rising food prices mean
globally, click here or, to download it to your iPod, here.) Tom
The Year of Living Dangerously: Rising Commodity Prices
and Extreme Weather Events Threaten Global Stability
by
Michael T. Klare
Already, combined with staggering levels of youth unemployment and a
deep mistrust of autocratic, repressive governments, food prices have
sparked riots in Algeria and mass protests in Tunisia that, to the
surprise of the world, ousted long-time dictator President Zine
al-Abidine Ben Ali and his corrupt extended family. And many of the
social stresses evident in those two countries are present across the
Middle East and elsewhere. No one can predict where the next explosion
will occur, but with food prices still climbing and other economic
pressures mounting, more upheavals appear inevitable. These may be the
first resource revolts to catch our attention, but they won’t be the
last.
Put simply, global consumption patterns are now beginning to
challenge the planet’s natural resource limits. Populations are still
on the rise, and from Brazil to India, Turkey to China, new powers are
rising as well. With them goes an urge for a more American-style life.
Not surprisingly, the demand for basic commodities is significantly on
the rise, even as supplies in many instances are shrinking. At the same
time, climate change, itself a product of unbridled energy use, is
adding to the pressure on supplies, and speculators are betting on a
situation trending progressively worse. Add these together and the road
ahead appears increasingly rocky.
Breadbaskets without Bread
Let’s begin with food, the most important and volatile of these
commodities. Food prices declined in October 2008 after the onset of
the global financial crisis, but that seems to have been an anomaly.
The December 2010 index of global food prices
compiled by the U.N.’s Food and Agricultural Organization (FAO) hit a
record 215, one point higher than in the spring of 2008. (In that
index, based on a “bundle” of food staples, a baseline of 100 represents
average prices in 2002-2004.) In fact, some food products, including
sugar, cooking oils, and fats, are now trading substantially above their
2008 levels; others, including dairy products, grains, and meat, are
inching perilously close to record levels.
As 2011 begins, food experts fear that, within months, prices for key
staples will climb above the 2008 threshold and stay there, causing
extreme hardship for poor people around the world. “We are at a very
high level,” said
a worried Abdolreza Abbassian, an economist at the FAO. “These levels
in the previous episode led to problems and riots across the world.”
Of
particular concern to Abbassian and his colleagues is the rising cost
of corn, rice, and wheat, the staple crops of billions in many of the
poorest countries. According to the FAO, by the end of 2010
international corn and wheat prices were already approaching their 2008
peak levels (about $260 and $340 per metric ton, respectively).
Analysts attribute
the rise in grain prices to growing demand in both developed and
developing nations, along with a number of cataclysmic weather-related
events and speculation by investors. An extreme drought
and fierce fires last summer destroyed a large percentage of the wheat
crop in Russia and Ukraine, while heavy flooding in India and the inundation of 20% of Pakistan
damaged significant parts of the grain output of those countries. At
the same time, unusually hot and dry weather suppressed production in a
number of other key farming areas.
What makes the picture look so worrisome today are indications
that the severity and frequency of extreme weather events appear to be
on the rise. In the past few weeks alone, several such events point the
way to serious supply problems ahead. Most significant has been the unprecedented rainfall and flooding in Australia that put an area more than twice the size of California
largely underwater, significantly disrupting wheat cultivation there.
Australia is one of the world’s leading wheat producers. Unusually dry
conditions in the American Midwest and Argentina
have also hinted at future problems in grain and corn output. It’s
still too early to predict the size of this year’s grain and corn
harvests, but many analysts are warning of a shortfall in supplies, along with sky-high prices.
Mainstream analysts and government officials are loathe to attribute
this traffic jam of extreme weather events to global warming. Huge
variations in rainfall can be normal, especially in places like
Australia that are susceptible to El Niño/La Niña ocean-temperature
oscillations, and politicians are fearful of assuming responsibility for
a problem as massive as climate change. But climate change theory has
long suggested that the warming trend -- 2010 tied 2005 for the warmest year on record and nine of the 10 warmest years have come in the last decade
-- will be accompanied by an increase in the frequency and severity of
storms. It’s hard to escape the conclusion that recent events,
including those Australian floods, are tied to rising global
temperatures.
The Energy Crisis Returns
Soaring food prices are being driven as well by speculative investments
and the rising price of oil. Partly in response to the diminishing
value of the dollar, some investors are sinking their money into food
futures (along with gold and silver) as a speculative hedge. At the
same time, the price of oil is edging toward the $100 mark,
making it increasingly profitable for farmers to switch from growing
corn for human consumption to growing it for the manufacture of ethanol,
which in turn reduces the amount of farm acreage devoted to staples.
Oil would have to fall below $50 per barrel to make the cultivation of
corn as a food product competitive with ethanol production -- and that’s
not likely to happen. So even if more corn is produced this year, less
will be available for food purposes and the price of what remains is
bound to rise.
The precipitous rise in oil prices has startled the experts. Not so
long ago, the U.S. Department of Energy (DoE) was projecting a price
range of $70-$80 per barrel in 2011, but as the year began oil was
already trading above $90 a barrel and some analysts predict that it will reach $100 before the year is out. A few are even talking about the $150 barrel and gas prices at the pump of $4 or more. If prices climb above $100, global consumer spending could take another nosedive.
“Oil prices are entering a dangerous zone for the global economy,” says
Fatih Birol, the chief economist for the International Energy Agency
(IEA). “The oil import bills are becoming a threat to the economic
recovery.”
As with food, the rising cost of oil is a product of growing demand,
insufficient supplies, and speculative investments. According to the most recent projections
from the IEA, daily global oil consumption in 2011 will average 87.4
million barrels, an increase of about two million barrels from the first
quarter of 2010. Much of the extra demand is coming from China, where a
newly-minted middle class is buying automobiles
at a record clip, as well as from the United States, where previously
cautious consumers are slowly returning to pre-2008 driving habits.
At a time when the oil industry is experiencing declining rates of
output at many existing oil fields and finding it ever more difficult to
add production, even two million extra barrels per day can be a
daunting challenge (and greater demand is expected in the coming
years). In the United States, for example, much hope was placed in oil
exploration in the deep waters of the Gulf of Mexico and offshore
Alaska, but in the wake of the BP disaster, this seems like a forlorn
prospect. Production in Mexico and the North Sea, two bright spots of
recent years, is facing a sharp decline, while other key producers, including those in the Middle East, are struggling to maintain current output levels at existing fields.
Many energy analysts believe that the world is at (or will soon reach) peak oil
-- the moment when global petroleum output achieves a maximum
sustainable daily rate and begins a long-term, irreversible decline.
Others contend that higher levels of output are still possible.
Whatever the truth of the matter, at this moment the oil industry is
finding it increasingly difficult, and ever more costly, to boost output
above current levels. This, combined with insatiable demand, is
driving prices skyward.
Under these circumstances, speculators are again being drawn into the
oil market as a rare sure bet. Such speculators helped push oil prices
to a record $147 per barrel back in 2008, but fled the market when
prices crashed as the American economy headed to a meltdown. Now,
they’re coming back. “Hedge funds and private investors are buying up
financial instruments tied to the price of crude, and thereby helping
push up oil prices,” the Wall Street Journal reported in late December.
Most analysts are expecting a price surge this spring or summer when
American motorists hit the road. “We will have a spring rally that will
take us to between $3.10 and $3.50 a gallon for gasoline at service
stations in the United States,” predicted Tom Kloza, chief oil analyst at the Oil Price Information Service.
The rising price of gas will, in turn, hurt consumers just as they
show signs of opening their wallets again. No less worrisome,
oil-importing countries like the United States, Japan, and many in
Europe will face soaring bills for fuel imports, further enfeebling
economies already suffering from profound weakness.
According to some calculations, oil prices added another $72 billion
to America’s mammoth balance-of-payments deficit last year. Europe had
to cough up an additional $70 billion for imported oil and Japan $27
billion. “It is a very telling story,” says
the IEA’s Fatih Birol of recent oil-price data. “2010 rang the first
alarm bells and 2011 price levels could bring us to the same financial
crisis times that we saw in 2008.”
