Comment 22201

By Undustrial (registered) - website | Posted April 29, 2008 at 21:05:35

This is only the beginning.

The kind of chaos which is now appearing in food markets worldwide is a perfect example of where this is headed. Fertilizer is made from oil. Who knew? I certainly found out from dire predictions made by the peak oil crowd. It's also where I first heard biofuels critiqued as a net drain on food and energy resources.

Lots of random commodities have major petrochemical inputs. Fertilizer, asphalt, plastics, medicines...what will be hit next? What about industries? Tourism? Manufacturing? And it isn't just oil-rich products which will go up in price...anything which competes with one will also likely spike, as have prices of coal, natural gas and uranium in the last year. When the two combine, as they did with food (both driving up the cost through last year's 80% increase in fertilizer's costs, plus additional demand from biofuels), prices will simply explode.

With families paying more for gas, more for food, more for heating and electricity, how long before consumer spending starts to drop as a result? And how long after that, will masses of layoffs (first in the high-wage first-world, then in newly promising economies in the third) take that momentum to all new economic lows, as is happening right now in the auto sector?

The price of oil has gone up to six times what it was a decade ago. Six months ago, the same figure was four. Since December, oil prices have been gaining roughly a dollar a week. Sure, strikes in Scotland and rebel bombings in Nigeria come and go, and as tensions ease in those areas, we may see today's price come down somewhat (or explode fiercely if something happens in Iran, Saudi Arabia or Venezueala), but the overall picture remains the same, more people using more and more of less oil. Unless that changes, we're fucked.

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