This Marketplace report on the OPEC summit highlights what we’ve seen revealed in the Wikileaks memo. Don’t think that just because oil prices dropped for a bit that everything’s better now. These fluctuations will continue and the overall trend will be a continued rise.

By Stephen Beard for Marketplace -  APM

The price of crude jumped by more than $2 a barrel today. A key meeting of the Oil Producers’ Cartel — OPEC — failed to find agreement on an increase in production. The meeting in Vienna was a contentious one — and that’s putting it mildly. Now, just weeks after a consumer pullback that prompted gas prices to drop, there are fears of another sharp rise in the price of oil. Which would not bode well for any kind of global economic recovery.

But there’s an even more fundamental divide in the cartel. Between those countries like Saudi Arabia with big reserves that want a stable price for their oil, and those like Iran, Libya and Venezuela who have little spare capacity. Samuel Ciszuk is an oil analyst with IHS Global Insight.

Samuel Ciszuk: Those who are starting to see the end of their reserves are obviously interested in maximizing the amount of money they will get out of it.

That group of countries today refused to back Saudi Arabia’s call to pump more oil and restrain prices, hence the jump in the price of crude. But the Saudis hinted that they may step up production anyway. Chris Skrebowski of Peak Oil Consulting says this could herald the end of OPEC.

Chris Skrebowski: I think it’s probably a 60 or 70 percent chance that this will fundamentally change the cartel. That in practical terms, it will split.

With Saudi Arabia pumping more oil and with OPEC in disarray, that would seem to be good news for beleaguered oil consumers. But as Professor Kent Moors of Duquesne University told the Marketplace Morning Report, don’t bet on it.

Kent Moors: Well, gas prices probably have gone down as much as they’re going down nationally. We’re not going back anywhere close to $3.30 or thereabouts.

Such is the rapid growth in demand for oil — in China, India and elsewhere — the price seems headed inexorably higher.

Meanwhile, the oil sands in Canada which are touted as an alternate solution further reveal how problematic peak oil is becoming as we get closer to spending a barrel of oil to extract one:

By Scott Tong for Marketplace - APM

This pipeline fight is over the most expensive oil in the world. Oil companies drilling in the Canadian oil sands typically spend $60 or more to produce one barrel of crude. It’s what’s called tough oil — it takes a lot of energy, geology, and fancy acronyms.

Drew Zieglgansberger: Probably the most advanced technology right now is called SAGD, or it stands for Steam-Assisted Gravity Drainage.

Drew Zieglgansberger is vice president at the Canadian oil firm Cenovus. We’re on a bus, touring their operations in middle-of-nowhere, Alberta. He says the world’s easy oil is gone.

Zieglgansberger: The oil now that people are looking for are not the nice light oil sitting in pools that you drill into it and it just flows by itself.

What’s left is in remote places, often way underground. As for the oil sands, they’re not even a liquid.

Zieglgansberger: It’s basically a solid matter. It’s very much like a shoe polish. It’s hard and it’s… if you put it in a cup it would be there forever. If you dump it out, it’d be like dumping some wet sand in your sandbox.

Still, processing the oil sands is worth it, ‘cause American import one hundred barrels of crude, every second. That comes out to 24,000 barrels by the time this story is over. Or one million gallons. The key ingredient to oil sands is heat: you send steam down a well, turn the sand into liquid, and pump it.

Zieglgansberger: This is basically a big, big boiler.

The steam source runs almost 3000 degrees Fahrenheit. Great big fire.

Zieglgansberger: This is where we’re burning natural gas. If you look at a normal barbecue, your barbecue is probably about 30,000 or 40,000 BTU of heat, maybe. This one generator is 250 million. It’s a massive amount of energy.

There’s the rub. In some cases, the energy put in equals what you get out.

Not worth it, says Calgary author Andrew Nikiforuk. His book is called Tar Sands.

Andrew Nikiforuk: The returns are absolutely minimal. It takes one barrel of oil or oil equivalent to get one-and-one-half barrels. Some steam plants are getting even negative returns.

Energy use makes the oil sands process emit 17 percent more greenhouse gases than normal oil — according to a U.S. government study. Critics say that makes for one of the dirtiest crudes in the world, not to mention the chemical wastewater, and clearing of forests for mining.

Canadian activist Danielle Droitsch is with the Pembina Institute.

Danielle Droitsch: It’s similar to Venezuela. It is similar to Nigerian oil. So it’s sort of the worst of the worst.

Droitsch moved to D.C. last year, in her view to keep the oil sands industry honest. She’s fighting the expansion of a pipeline carrying Canadian oil sands crude to the United States. And for now it is stalled. The application’s been at the State Department for 33 months. Opponents like Droitsch think choking off supply will help choke off oil addiction quickly. But the reality of driving suggests, maybe not.

Analyst Jim Burkhard at IHS Cambridge Energy says most of us own our cars for a decade or more. So it’ll take a long time to retire a whole generation of oil guzzlers.

Jim Burkhard: So even if we have stunning success in electric vehicles, it will take decades before we see that reduce overall global oil demand.

Read the rest of the article to find out more about the pipeline.  Peak oil isn’t fake science. It’s real. Oil companies have been talking about it for a decade, but try to play it down. We have some time left, but we’re on the down-hill slope at this point.

Saudi Prince Al-Waleed bin Talal said Sunday that he wants oil prices to drop so that the United States and Europe don’t accelerate efforts to wean themselves off his country’s supply.

In an interview broadcast Sunday on “CNN’s Fareed Zakaria GPS,” the grandson of the founding king of modern Saudi Arabia said the oil price should be somewhere between $70 and $80 a barrel, rather than the current level of over $100 a barrel.

“We don’t want the West to go and find alternatives, because, clearly, the higher the price of oil goes, the more they have incentives to go and find alternatives,” said Talal, who is listed by Forbes as the 26th richest man in the world.   Source

Soaring food and fuel prices are threatening to derail growth in Asian economies, according to a report by the Asian Development Bank (ADB).

The bank has warned that if food and fuel prices continue to surge, economic growth in the region could be reduced by up to 1.5% this year.

According to the bank, domestic food prices have risen at an average of 10% in many Asian economies this year.

Oil prices have also surged because of the crisis in the Middle East.

The bank said that a combination of these two factors has been a major setback for growth in Asian economies.   Source

Excerpts from an op-ed piece in the Washington Times, titled “Rising Oil Prices Threaten Economic Crash” by Robert Zubrin, detail the economic jeopardy we are placed in as fuel prices rise. The author relates that more US drilling and other carbon-based fuels are a possible answer.

In recent days, oil prices have climbed above $100 per barrel. As chaos spreads through the Arab world, we could soon see much worse.

The distress to American workers caused by such events is manifest, but the economic damage goes far beyond the impact on the unemployed. A sustained oil price of $100 per barrel will add $520 billion to the U.S. balance-of-trade deficit. Furthermore, there is a direct and well-established relationship between unemployment rates and the rates of mortgage defaults.

Thus, the $130-per-barrel oil shock of 2008 didn’t just throw 5 million Americans out of work, it made many of them default on their home payments and thus destroyed the value of the mortgage-backed securities held by America’s banks. This, in turn, threatened a general collapse of the financial system, with a bailout bill for $800 billion sent to the taxpayers as a result. But that is not all. The destruction of spending power of the unemployed and the draining of funds from everyone else to meet the direct and indirect costs of high oil prices reduce consumer demand for products of every type, thereby wrecking retail sales and the industries that depend upon them.

Indeed, the world today is already in deep recession. Yet as a result of the systematic constriction of oil production by the Organization of Petroleum Exporting Countries (OPEC), which is limiting its production rate to 1973 levels of 30 million barrels per day, petroleum prices stand at more than four times what they were in 2003. This has imposed a tax increase on our economy of $500 billion per year, equal in economic burden to a 20 percent increase in income taxes, except that instead of the cash going to Uncle Sam, it will go to Uncle Saud and his lesser brethren.

The only way out of this mess is forcefully to expand production of liquid fuels from sources outside OPEC control, particularly our own. That means unleashing our own domestic oil supplies through expanded drilling and also opening our vehicle-fuel market in a serious way to alternative fuels, such as methanol, which can be made cheaply from coal, natural gas or biomass and used in flex-fuel cars.

It may be too late already to stop the crash that will follow the current oil price run-up, but we still have to get started without further delay. Otherwise, while the crash itself will bring down world fuel demand and thus oil prices for a while, they will just rise once more when the economy begins to recover and slam us right back down again. And again. And again.

I hate to be pessimistic, but all that does is buy us some more time, and despite the push to alternative energy, I think we’re fighting a losing battle.  The current energy needs of the US, and the rest of the world, will continue to out-pace the availability of viable fuel sources.  

In spite of the recent push to ethanol, which has contributed to the rising cost of corn and foods made from it, the focus on solar, wind, and nuclear energy, and the various other alternatives, I believe the demand will continue to grow while war, natural disasters, and general political bickering with put the US further in the hole. 

The summary of a very well written, excerpted chapter from The Post Carbon Reader: Managing the 21st Century’s Sustainability Crises, Richard Heinberg and Daniel Lerch, eds. (Healdsburg, CA: Watershed Media, 2010) as posted by Oilprice.com, backs up my perception that nothing short of a comprehensive approach, founded on decreasing energy consumption in general, will help solve this problem. I recommend reading the whole report for a list of advantages and obstacles faced when considering alternative energy.

How Will Society Evolve in a Post-Carbon World?

Alternative energy forms are crucial for a global transition away from fossil fuels, despite the myriad challenges of their development, scaling, and integration. In face of the peaking of global oil production—to be followed by peaks in natural gas and coal extraction—and of the need to reverse trajectory in carbon emissions, alternative energy sources will need to form the backbone of a future energy system.

That system, however, will not be a facsimile of the system we have today based on continuous uninterrupted supply growing to meet whatever demand is placed on it. As we move away from the energy bounty provided by fossil fuels, we will become increasingly reliant on tapping the current flow of energy from the sun (wind, solar) and on new energy manufacturing processes that will require ever larger consumption of resources (biofuels, other manufactured liquids, batteries). What kind of society we can build on this foundation is unclear, but it will most likely require us to pay more attention to controls on energy demand to accommodate the limitations of our future energy supply. Moreover, the modern focus on centralized production and distribution may be hard to maintain, since local conditions will become increasingly important in determining the feasibility of alternative energy production.

While it is great to hold out hope, how many Americans that you know will part easily with the freedom of movement and luxury of unlimited energy expenditure that we currently enjoy?  Perhaps it will happen. Perhaps we can change, but I wonder if we can do it in time or if it is already too late.  It’s going to take some significant changes in methods and perspective. Personally I think we’ll keep on trying to control oil resources, while trying desperately to play catch-up.

Oh geez, I’m doing it, I sound like the Doomers. :)

Recent Food Crisis News Stories

Rather than reblog every story I come across regarding the growing food crisis, I’ve been trying to compile a list every week or so to make it easier for you to follow the trends and pattern.

Here is the most recent batch of relevant stories. If you buy food and store what you are already eating NOW, if the price increases even 5% you have saved that much money already.

Focus on foods made from grains, meat, coffee, cocoa, and even vegetables.

U.S. too vulnerable to rising oil and food prices

…oil is what we call the “keystone” commodity, meaning higher energy costs translate to higher costs for all other commodities. Unfortunately, demand is strong here as well. According to International Monetary Fund data, in early 2006, global nonfuel commodity prices — such as food and industrial materials — broke free of their post-Cold War trading range, increasing 37% before receding in the Great Recession. Since bottoming out in December 2008, these same essential economic inputs have risen another 78%, for an increase of 149% in the last decade.

Food, in particular, is trading at all-time highs. Corn and soybeans are at near-record prices. Wheat, hit badly last summer by the Russian heat wave, is still trading 30 percent higher, even after fears have eased over a major Chinese drought.

High global food costs, radiating out from drought-stricken Asia, could further destabilize other developing nations, democratic or not, whose populations are upset that their governments are unable to protect them from the disruptive forces of the global marketplace. Here at home, higher basic food and other costs would erode the accounts of middle-class families even more.

Lack of Food could determine Libya’s Future

Food shortages in eastern Libya, the largest rebel-controlled area, have reached dire levels. Fighting has left food stocks depleted and food supply chains in shambles. Around Benghazi, food prices have reportedly risen by 50 to 75 percent. Due to its poor suitability for agriculture, Libya imports the majority of its food, which has become largely impossible since fighting broke out.

Grocery Prices in Canada predicted to rise five to seven percent more by end of 2011

Torontonians will be paying between five and seven per cent more for groceries on average by the end of the year, economists say.

A family that spends about $400 a month on groceries could end up paying up to $340 extra in a year.

Bad crops around the world, oil trading for more than US$100 a barrel and the economic recovery are driving prices higher.

Food companies are raising prices due to the soaring costs of key commodity ingredients like wheat, corn, sugar and vegetable oil, which have gone up as much as 50 to 100 per cent over the last year at a near-record rate.

Crop Prices Feed Inflation of US Food Bills

And it’s not just corn prices that are soaring. Soybeans are moving along with them. Wheat is climbing, too. So is sugar. And coffee. And cocoa. Some experts say they have never seen so many commodity prices so high at once.

“Everything’s high,” Agney says, in a booming twang. “Watch the grocery store.”

Indeed, analysts and recently released government estimates predict food prices will rise this year, thanks to a tangle of factors, from rising grain prices to monetary policy to oil costs. Prices for U.S. consumers could surpass the spikes of 2008, while the United Nations said Thursday that its global food prices index has reached an all-time high. Food prices, many believe, ignited the pro-democracy unrest rippling through the Middle East and Africa.

Rising food prices could spark riots in the UK, senior economist warns

Karen Ward cautioned that the UK was not immune to the kind of “food riots” seen in other countries around the world.

“Even in the developed world I think we have very, very low wage growth, so people aren’t getting more in their pay packet to compensate them for food and energy, and I think we could see social unrest certainly in parts of the developed world and the UK as well,” she told Sky News.

She went on to highlight the link between high food prices and the escalating cost of crude oil.

The comments came as the United Nations warned the cost of food is now at the highest level for 21 years and set to rise further.

Food costs have gone up for eight months in a row, with the UK’s National Farmers Union forecasting the trend will continue for the rest of 2011.

Lebanon Stockpiles Wheat

Lebanon last month issued its first wheat tender in a year, buying 15,000 metric tons of wheat from the U.S. and 7,500 tons from Ukraine, Zaineddin said in a telephone interview today. Last year, Lebanon imported about 400,000 tons of wheat, he said. Governments bought more grain to curb domestic prices and quell rioting that toppled leaders in Tunisia and Egypt.

“The government plans to issue more wheat tenders this year after the recent rise in wheat prices,” Zaineddin said. “This is meant to provide the local market with subsidized flour and bread.” Lebanon has wheat reserves to meet demand for about five months, he said.

Economists urge Obama not to “Overreact” to Rising Food Costs

Rising food prices have been linked to the unrest that has swept through the Middle East and North Africa in recent weeks. In most of the uprisings, calls for greater personal and political freedoms have been accompanied by complaints about unaffordable staple food prices.

Asked by FOX News how they would advise the Obama administration to contend with the spikes – which have as much to do with natural disasters and weather shocks as with human factors – both Hassan Zaman, lead economist at the World Bank’s Poverty Reduction and Equity Group, and Manuel Hernandez, a postdoctoral fellow at the International Food Policy Research Institute (IFPRI), said they would caution the president not to manipulate food markets with trade policy.

Duke University Expert warns Food Prices may lead to further unrest worldwide

Bellemare’s research focuses on development economics and food policy. He says the cost of food is likely partly responsible for the uprisings in the Middle East and North Africa and that the unrest will affect food prices worldwide, including the U.S.

Quote:
“Food prices have not been this high since the Food and Agriculture Organization (FAO) of the United Nations began publishing its food price index in 1990. In light of the political unrest experienced throughout the world during the summer 2008 spike in food prices, there is good reason to believe that rising food prices may have played an important role in causing the political unrest in Tunisia and in Egypt. Some say that rising fuel prices will cause further increases in food prices in the U.S. and abroad, and further political unrest throughout the world. Climate change, which has an impact on food prices, is also likely to complicate matters.”

Food prices in Britain are rising at three times the rate of the world’s seven biggest economies.

Figures from the OECD put UK food inflation at 6.3 per cent, well ahead of the average of 2.1 per cent for the G7 group of nations.

The cost of putting meals on the table is also rising much faster than most of Europe.

Rising food costs could force U.S. eatery overhaul

Record-high food prices could be the tipping point this year for U.S. restaurants already struggling with high debt loads and tight-fisted consumers.

The economic downturn and drop in consumer spending has sent a handful of restaurant chains — such as Uno Chicago Grill pizza, Fuddruckers and Charlie Brown’s Steakhouse — into bankruptcy court during the past year. And 2011 is not likely to be much better, experts say.

“There are many companies that can absorb an increase in food costs,” said Steven Simms, a senior managing director at FTI Consulting who has worked on restaurant restructurings. “For companies that are teetering on the edge though, it’s just one more pressure point that they are going to experience as it relates to profitability and their ability to service debt.”

Japan watching rise in food and oil prices

On March 9 and 10, U.N. organizations and Asian developing economies will have an emergency meeting in Bangkok to discuss how to deal with rising food prices. The Asian Development Bank fears that continued political turmoil in North Africa and the Middle East and rises in the prices of raw materials and foods could intensify inflationary pressure and push down the economic growth of the Asia-Pacific region.

About 60 percent of world oil deposits are in the Gulf coastal areas of the Middle East. For the time being there will be sufficient crude oil and oil products reserves. But if antigovernment protests intensify in oil-producing countries, speculative funds may move to push up crude oil prices.

In the past month, crude oil prices rose some 17 percent. The current level is nearly three times the level of mid-February 2009, five months after the Lehman Brothers financial collapse. Electricity and city gas bills in Japan will rise this month.

Food prices have been also on the rise due to an increase in demand in emerging economies, bad harvests caused by climate changes and inflow of speculative money into markets. The food price index of the U.N. Food and Agriculture Organization hit 236 in February, with 2002 to 2004 serving as the base years — a record high since statistics were first taken in 1990.

South Korea’s Food Prices Grow Fastest Among OECD Nations

SEOUL, March 9 (Bernama) — South Korea’s food prices grew at the fastest pace in January among the member countries of the Organization for Economic Cooperation and Development (OECD), Yonhap news agency said citing a report revealed Wednesday.

According to the report offered by the OECD, South Korea’s food prices jumped 11.6 percent in January from a year earlier, the steepest hike among the 34 member nations of the Paris-based organisation.

Climate Change contributes to rising food prices, political turmoil, and rising fuel prices

Weather extremes are bound to effect crop yields in unpredictable ways.

To this point the food angle on the Mideast protests has been the stuff of newspaper sidebars. But perhaps rising food prices should be understood as the cause, not consequence, of rising oil prices – in which case, the weather story deserves deeper curiosity and more attention than it has been getting.  Bad harvests around the world last year drove nominal wheat prices in Chicago up 74 percent, corn 87 percent. Food prices in the Middle East were already nearing records as the first crowds gathered in Tunis. They have climbed sharply since – 2.2 percent on the UN index in February alone.

Now the crisis in Libya has sent oil prices rising above $100 a barrel, guaranteeing that world food prices will rise still more. World Bank president Robert Zoellick said last month, “The price hike is already pushing millions of people into poverty and putting stress on the most vulnerable, who spend more than half of their income on food.”   Another bad harvest – a drought in China, for example – would affect hundreds of millions more.

‘Oil, food prices to eat up two-thirds of $110-bln payroll tax cut’

At a time when households heaved a sigh of relief due to the government’s payroll tax cut decision, the commodity boom is threatening to strike down the gains.

“We estimate that at least two-thirds of the $110bn payroll tax cut will eventually be absorbed by higher prices,” Paul Dales, senior U.S. economist at Capital Economics, said in a note. The higher prices have played some role in the 0.1 percent month-on-month fall in real consumption in January, Dales noted.

Kenyan rainfall predicted to be low - food and energy prices expected to rise

Household budgets could tighten further in the coming months following forecasts of depressed and poorly distributed rainfall that could dent food and energy production.

The Kenya Meteorological Department (KMD) on Tuesday said this year’s long rain season that runs between March and May is expected to be below normal, aggravating the misery in arid and semi-arid areas whose economic activities have already been stymied by inadequate short rains.

“Rainfall distribution within the 2011 long rains season is expected to be generally poor over most part of the country with long dry spells likely to occur,” Joseph Mukabana, director of KMD said.

The effects of depressed rains over the first quarter are already taking a toll on the economy where inflation rose for the fourth straight month in February, to 6.54 per cent year-on-year from 5.42 per cent in January, mainly due to a rise in the cost of food and transport.

Sri Lankan government warns of rising food prices due to natural disasters

Mar 08, Colombo: The Sri Lankan government says that prices of food items are bound to see a sharp increase due to natural disasters experienced around the world.

Food Prices SOAR in Argentina, Bolivia, and Venezuela

CARACAS, March 8 (BERNAMA-NNN-MERCOPRESSS) — Venezuela, Bolivia and Argentina are three Latin American countries where food prices have climbed the most during the twelve months last year.

Official regional statistics data shows that in the twelve months to Jan this year, food prices in Venezuela soared 37.2% (above the country’s inflation of 28%); Bolivia follows with 14% (8.4% inflation) and Argentina 13.1% and 10.6%.

Annual food inflation was almost double the retail price index in Costa Rica, 8.6% and 4.8%; Chile, 5.5% and 2.7% and El Salvador, 6.7% and 2.3%.

However it must be pointed out that in some countries the tendency is for an overall rise in all prices, such is the case of Venezuela and Bolivia, while others have suffered the hike in food prices which then pushed up the average inflation.

In Jan this year, some Latin American countries have managed to contain the increase in food prices such is the case of Chile, Honduras and Nicaragua.