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ECONOMICS -
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Crisis Overload: Peak Oil, Peak Grain and Peak Water

Posted in the database on Friday, August 04th, 2006 @ 14:20:31 MST (2996 views)
by Mathew Maavak    Counterbias.com  

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A deadly combination of heat and drought is slowly wreaking a trail of devastation across much of the globe, and the full extend of this scourge will only be felt as winter nears.

The current phenomenon took meteorologists by surprise as it was unusually global in its reach. Like Murphy's Law, everything that could go wrong did.

Nourishment for winter burnt up under an unusually fiery weather, along a food chain that progressed from withered wheat crops to cattle that were hastily sold off for lack of grazing grounds.

Crops that survived wilted under the sun, yielding produce of lowered quality and quantity; leading ultimately to higher prices. Alarmingly, these were scorched in the surplus granaries of the United States, Europe and Australia.

In the United States, the first half of 2006 was the warmest since 1895, when weather data was first compiled, and the pollinating and tasseling times have since been set back by triple digit Fahrenheits.

The full heat though will be felt in winter. The US Department of Agriculture, the International Grains Council and a motley array of other agro organizations are downsizing the total grain forecast for this year and nobody knows how bad it will get.

In Ukraine alone, the harvest forecast has been cut down to five million tons from the 21 million registered last year. In Poland and Hungary, some crops are expected to be 40% below normal yields, while milk production dropped by 20 percent in Italy.

Lester Brown, President of the Earth Policy Institute, predicts that 20 million tons of global harvest may have winnowed up as summer chaff.

In June, he warned that the global cupboard - or "reserve" - of grains were at its lowest levels since the early 70s. According to this calculation, there's enough basic grain to keep people alive for 57 days, if a combination of disasters strike.

And there is no better place for that to begin than in the Middle East.

In 1973, abysmally low inventories of wheat and an Arab-Israeli war sparked off an oil embargo, runaway global inflation, and upheavals that have scarred societies till today.

The price of wheat shot up six times. According to Brown, if that were to happen today, wheat could fetch $21 a bushel, about six times the current price.

Food prices are likely to rise worldwide, and for a third of the world's population - which subsists on less than $2 a day - a subtle hike in the price of staples would hasten the process of slow starvation.

Not so in the European Union, which, has some 13 million tonnes of "intervention" grain stocks. Just how this works under the current trade regime is left to the imagination. With the recent WTO talks stonewalled over US farm subsidies, think of a trade regime that can technically deprive natives - whether American or Korean - from getting the first dibs of their own food sources.

Limited stocks lead to higher prices which can be afforded by the limited rich, who are usually the fittest in any food fight.

The futures markets for grain are already registering record highs alongside crude oil. One could be forgiven for being ignorant of the Minneapolis Grain Exchange or the broader London futures market till this point.

Some of these futures are being bet on the ethanol fuel industry. According to Christopher Brodie, a partner at UK-based commodities hedge fund Krom River, this tussle over grain adds a Hobson's choice to the Peak Oil dilemma.

"Once the ethanol plants open, we will link the price of petrol to the price of bread, because the price of wheat will be settled by who pays more, the oil industry or the food industry."

Like Murphy's Law, bad news only gets worse. The only sunshine spot here was the brief picking season which blossomed in Europe due to the warmer weather. Fruits and vegetables matured faster than expected, with supermarkets registering fantastic sales.

Fruits, however, cannot be stored for bread in winter, and man cannot live on canned strawberries and pickled cabbages alone for Christmas. The best Santa can do is to bring a truce to the Holy Land, the ancient epicenter of any recorded global crises.

The ongoing war in Lebanon is taking our eyes from a possibly epic humanitarian disaster, the same way the heatwave of 2003 killed 52,000 Europeans in one of the deadliest climate-related disasters in Western history. Close to 15,000 Frenchmen were parched to death when the media focused on the humanitarian crisis du jour in Iraq.

The death toll during the first few months of Operation Iraqi Freedom didn't come close to the summer time victims of Jacques Chirac's eloquence.

When people are being French-fried or freedom-fried - on either end - it is great to divert their attention to an external cause. Wars can be sparked off by any cockamamie reason; profit, wealth and still waters await for those who prevail.

Statesmen ranging from Kofi Annan to Mikhail Gorbachev have repeatedly warned off future wars waged over the most basic of natural resources - water.

China and India - two of the most populous nations - have long-running issues with the Brahmaputra River while Turkey and Syria nearly went to war over a Euphrates dam. The fertile Nile in Egypt may be parched black by a clogged Blue Nile source in Ethiopia, or a diverted White Nile font in Uganda and Sudan.

The giant Iguazu falls on the Brazil-Argentina border has now flowed to a trickle, enough to strain ties between the two South American giants.

Back in the Middle East, Israel may permanently cross the Hasbani and Litani rivers it has long coveted in Lebanon; a dormant casus belli that is rarely mentioned in the media.

Imagine a world when peak oil meets peak grain and peak water at a confluence called peak mayhem?

And we have not even skimmed the surface of troubled waters ahead, spawned by the troubles we caused before.

When the heatwave struck Germany, officials in its eastern zone fretted over World War II-era munitions which may surface on dried-up riverbeds.

Those time bombs never cease to tick.

_________________________

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