Monday, April 14, 2008

What is to be done?

"This brings me to the final thing that could stop runaway biofuel growth: public policy. So far, there has been a fairly broad coalition in favor of increasing ethanol production. This encompasses agricultural interests, environmentalists hoping to reduce carbon emissions and rely on a renewable fuel, and many citizens concerned about reliance on Middle Eastern oil supplies. The Renewable Fuels Association reported recently that 3/4 of Americans believe we should increase our reliance on ethanol. This kind of thinking has led to subsidies and mandates for biofuel production in the US, in Europe, and even in a number of developing countries.

My conclusion in this analysis is that this broad agreement is in fact mistaken. It is based on a failure to appreciate the speed with which high oil prices and profitable biofuel operations can fuel a very rapid growth of the industry up to the point that it consumes a sizeable fraction of global food production. This will have only modest benefits for global fuel supply, but will cause massive abrupt global hardship in poor countries. Many unforseeable consequences may follow from that."


D. sent me this this morning. I replied:

The issue of biofuels has been totally debunked. Even the WB and the IMF and the UN are now opposed, but they voice it mildly in order to avoid the wrath of the US. Yet the US continues unabated. Blame it on my conspirational mind, but I cant help thinking that this reeks of black mail: if the world wants food, then oil prices will have to remain low. Otherwise, biofuels will replace food crops and countries that produce oil but not food (the ME), will have to spend the oil
dividends on food or beg. It is also handy for political control through food aid: look at the begging by the WFP for money to by food for relief. I'm trying in my head to crystallize the situation but I find it remains nebulous. My big question to myself is: what do we want? A global food production world based on trade in which food is a commons and gets redistributed? Local food production to cater for own needs? The way it was until recently: demand driven unregulated global food market. But with the decline in food availability, it is increasingly becoming supply-controlled. To put it simply: the increase in food prices is due to a generalized food inflation: there is money, but the food supply is limiting so food prices go up. But as money is not evenly distributed, there will be lots of people who wont be able to afford food from the market. So the Saudis will be able to buy food, but not the Yemenis. What are they to do?

I need to think this through better, but I have to correct midterms.

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