Tuesday, May 27, 2008

And Mexico wins the rationing lottery-

No, this isn't quite rationing- but it's the first move in that direction.

Interesting that it's in the Business section, isn't it?

"The Mexican government is to give its poorest citizens a monthly cash payment of 120 pesos ($11.55; £5.85) to help them cope with rising food prices."

Basically, their decision so far, is to continue paying speculation inflated food prices- spending taxpayer money to prevent a few folks from actual starvation.  (And quite certainly not preventing a few others.)

The gutsy government move would be to A) prohibit food speculation (and hang a few speculators to show you're serious), and B) initiate actual rationing of basics - to ensure that no citizen actually starves - starves - due to financial shenanigans.

Not quite there- but moving in that direction.

Within the financial community, there is growing admission that it's the speculators who are pushing oil prices up.  This is from the Washington Post today: Crude Analysis

Much of the article deals with the question of "how much does it drive the price of oil up when a big player "predicts" much higher prices?"  - which is certainly an interesting question.  But it ends with this casual bomb:

"Roger Diwan, a partner at the consulting firm PFC Energy, adds that people speculating about rising prices don't have to hoard oil in traditional ways. He says the financial players -- such as pension and hedge funds or firms like Goldman -- that are driving the market now don't need to own ships or tanks; they can just bid up prices on the New York Mercantile Exchange, where they can buy on margin. 'The paper market is infinite,' he says, 'and you don't have to pay for storage.' "

Like, duh, everybody knows- it's the "financial players ... that are driving the market."


In case you're worried, it's not really my intention to become a "financial doom" blog here.  What I'm still trying to focus on, and am still furious about, is the world food supply, and prices.  Right this second, the news train is focusing on oil, though, so it may be helpful to point out that the problem is parallel- and works exactly the same way.

Any responsible government needs to ACT.  Right quick.  And the new laws, and new regulations, need to cover food, as well as energy.


Meanwhile; back at the farm.  We're planting garden, and trees, as fast as we can.  Which means we're pooped out a lot.  That's going to be a factor for some time yet.  Today, I get to dig trees to ship to customers.  Used to have a couple employees to share the work...  but, uh... can't afford them any more.  Price of gas, and all that...   gosh, it's all connected, somehow...  (did I say that already?)  :-)


Anonymous said...

Speculation - even the rampant form seen nowadays, especially that - serves an important role in markets. It makes things more expensive than they would otherwise be.

Sure, there's some downside in terms of immediate 'pricing out', but it also serves as an engine to drive the development of alternatives. If there weren't oil speculation, and barrel costs fell back to $100, say, then sure, it would be cheaper to get to work, heat your house, etc. But right now, precisely because it's so expensive, people are driving less, taking public transportation, turning the thermostat down, all the things that they've 'known' for years they should be doing, but weren't.

Wind farms, solar power, nuclear plants, geothermal, hydroelectric - all environmentally friendly alternative energy sources, all of them enjoying a resurgence because of higher oil prices.

Sure, you might say that oil prices would get that high with peaking eventually, but in that scenario you'd have the problem of a push for up-front energy investment in alternatives at the very instant that oil-based energy was the tightest in terms of raw physical availability. By 'pricing ahead' past peak, the oh-so necessary infrastructure improvements that we've talked about for years are being made while the resources needed are still plentiful.

A similar situation exists with agriculture. While acknowledging the global and fungible nature of commerce, the old adage concerning giving fish and fishing remains true. If populations have grown beyond their ability to support themselves, then stopgap measures will only result in bigger problems in the future.

A more concrete example concerning agricultural alternatives from the US, as well - locally grown food is now more cost-effective, and in some places even cheaper compared to 'industrial' food. I believe that New York's Central Kitchen has switched to cheaper locally grown produce for this reason, although I can't find a source at the moment. People are also frequenting farmers' markets more, and planting their own vegetable gardens. All steps that, going by past history, would never have been taken unless food prices had been increased by speculation. Sure, some may be feeling a pinch now, but that's still preferable to keeping the prices low by prohibiting speculation until a true shortage drives them up.

It should be clear that in this case speculation is driving people via market forces to better choices (more local food, conserving energy, alternative power, growing vegetables) far more effectively than any public relations campaign. Especially if you fall on the Doomer side of the peak-oil spectrum, this should be very good news; people are finally changing their lifestyles for the better.

Anonymous said...

to 1st comment - ABSOLUTELY !!!!

- yes lots of people are starving
- yes I am a bit cynical
- but that would happen anyway, only a little later

Suck Ugly Vehicles are NOT selling - huge plus - every one of them "eats" enough to feed 100s of ppl if not thousands.

I've changed my driving mode - gained 10% (30mpg to 33mpg in my Focus) and I was not all that wasteful before.

I bike, my spouse is not so against driving my car instead of a subaru (YAY!!!).

Ships getting sale power will be accelerating huge PLUS.

the list could go on forever.

Yes I agree with greenpa that pushing on icebergs is very important, but lets face it - there is a tiny minority that does it.

and NOTHING short of catastrophic (oil/gas/energy) prices will change the behavior of the "masses".

So I say "YES" to higher oil prices and "NO" to increasing production - those metaphorical icebergs are not melting fast enough while the real ones are almost all gone.

350 ppm CO2 - no way we get there without a global economic meltdown, and what better way to kill the economy than to make oil hugely expensive.

Yes... it annoys me too that the oil companies get filthy rich, but between "happy motoring" and obscene oil profits - I would rather "they" have the profits.

Sorry for such a long-winded agreement ;)


Greenpa said...

Anon #1 and TJ - I agree with a great deal of what you say- but- :-) Two things, mainly -

I'm not arguing here for shutting down futures markets; they CAN serve a purpose. But literally hundreds of billons of dollars have been dumped into oil and food futures in the last two years- that had never been in those markets before. It's out of control- ask Warren Buffet.

And, yes- teach them to fish. But - I deny that it's necessary to watch them starve, and die- in order to achieve the sustainable equilibrium.

Those in dire straits are their because of uncontrolled greed. We need to control the greed; relieve the dire circumstances- and go from there.

Anonymous said...

But the whole point is that those hundreds of billions of dollars are the only thing causing this positive change, small though it may be. To do anything on a meaningfully large scale, or on a long enough term, you have to be able to look well into the future - thus the speculation. Futures markets do have their roles, but because they are still tied so closely to the 'real' economy that they're limited in how far ahead they can forecast. It's not so much an issue of strict control as it is, "Is this a force for positive change?" And yes, it looks to be.

The problem with your second point seems to be that people, time and time again, as a whole, simply *don't* change *unless* they are in dire circumstances. Global warming and peak oil have been around for decades, but people kept on driving more, buying more, and wasting more. It's only now, that you have stories on CNN about people choosing to bike in order to have money for food, that these trends are reversing.

The countries hardest hit by the hunger crisis - in central Africa, especially - are also the countries with the highest rates of population growth. If their agricultural output can increase a commensurate 2% annually (greater than that, really, to account for catch-up) and the food aid is only a temporary measure, then fine. But if they can't feed themselves now and aren't on a path to do so in the future, then for every million hungry people receiving food aid, there will be two million in a matter of decades.

And that's assuming that you can get those sorts of annual gains in agriculture over decades. Doubtful. If anything, there should be a 'help those after they start helping themselves' approach, but all of the coverage I've seen suggests that the focus is on one-time shipments of the finished foodstuffs, rather than the infrastructure necessary for self-sufficiency.

The bottom line is that recent history and current population demographics suggest that it's not just a case of "give a hungry man a fish, and he'll eat for a day", it's an instance of "give a hungry man a fish, and the next day face two hungry men."

So give food aid by all means, but only do it as a sideline to developing the local agriculture. Otherwise, when the confluence of natural resource limitations and population growth occurs, you'll be facing a(n at least partially) self-supporting population, rather than a starving population that's twice as large, or more.

jewishfarmer said...

The problem is that this reasoning is based on the same assumptions that got us into this mess. This is the reverse of the "rising tide lifts all boats" nonsense we've been hearing for years. In that case, it is necessary to massively enrich the rich so that (maybe, usually not) a tiny amount of wealth can trickle down to the poor. In this model, it is necessary to starve the poor, so that the middle class can finally begin conserving. Can none of us really imagine a more rational way to do this.

At this point, demand destruction among the middle class is very small - and the poor were already the smallest users - they ate less meat, they consumed less energy. This is the least efficient way possible to do this. It would be perfectly feasible to directly target the big consumers - the wealthy and middle class. One option would be tradable rationing - effectively a direct reallocation of wealth from the poor who already use less to the rich who can afford to buy more. There are other options. I don't buy this "this rather dim way we're getting at it is the only possible option" argument.


Greenpa said...

Sharon- exactly. We CAN do this better. What an embarrassment to our species that we're handling it so poorly. Another reason why the alien intelligences refuse to visit and talk with us. :-)

Anonymous said...

Here in rural BC the high price of gas makes it easier to find god employees who don't want to commute. If the economy slows down rural, local jobs should be at premium. Hopefully you can raise your price to compensate for gas price increase and keep good people as employees.

Anonymous said...

Giving food aid to the poor is fine. But even better is to couple food aid with family planning. If the poor cannot feed their children why should they continue to have more? Especially if they already have 2/3 kids?

The problem is not speculation, the problem is market distortion which mainly came from misguided government policies. Ethanol policy was a big mistake. So is agriculture subsidy to big farmers.

Anonymous said...

Sharon - ". Can none of us really imagine a more rational way to do this." - of course we can !!!

All of "us" and most of "them" - any intelligent person can imagine better ways of solving climate and energy. But to expect sufficient number of ppl to do anything about it is not realistic. I do believe in humanity - in a sense that there are a lot of kind well meaning ppl and even some willing to sacrifice... But you detect the sarcasm, I am sure.
It seems to me that in the (rather ugly) reality of today - the global markets, consumption patterns etc. - the only way to move toward the re-localization and sustainability is to have impossible energy prices.
I agree with you about the "trickle down" BS - complete BS. But the oil price factor is not so much of a trickle down thing. And no I don't expect oil companies windfall to translate into windfarms. I do think that mega profits for big oil is a reward for screwing the planet (who did kill the electric car ?)... but if this is the only way to get changes to happen....
I would much rather see double the price of gas from taxes that would be spend on wind/solar/better farming/etc. - but realistically that will never happen.