Singapore Peak Oil

With the recent flooding situation in Thailand (Link), the price of rice is going to increase. This is only the beginning of a multi-decade long increase in the price of food as climate change, peak oil and a growing population make it increasingly difficult to feed everyone satisfactorily (850 million people are chronically hungry according to FAO). Mr Lee KY thinks that it is no problem because we can pay for it if our economic growth is strong.

Lee Kuan Yew in TODAYONLINE:

Student: In the next 20 to 30 years time, what if global demand for food outstrips supply, then what will be of our food security plan?

Mr Lee: It doesn't matter whether you grow your own food or you buy your food. The question is the price. If there is a food shortage worldwide, the price of food, produce will go up. And the answer for a country like Singapore is to make sure that our incomes rise, our total GDP rises faster than the food prices.

It does not matter whether you grow your own food or you buy your food. The question is the price? Really, Mr. Lee? Let's go back a few years in history and consider the following news headlines from 2008:

Brazil May Curb Rice Exports to Boost Inventory

Vietnam to cut rice exports to curb inflation

Cambodia Halts Rice Exports to Curb Rising Domestic Prices

India introduces rice export ban

And also from 2011

Myanmar Puts Lid on Its Rice Exports

Egypt says rice export ban to Oct 2011

It is often said that money makes the world go round, but when times are desperate and push comes to shove, governments around the world are going to restrict their food exports to protect their domestic supplies and to calm any local food unrest. When that happens, it does not matter how rich you are because no country is going to sell any food to you. Your dollars and cents will just be worthless pieces of paper or electronic entries in a bank's vault or computer database.

It was fortunate that Thailand did not ban any rice exports in 2008:

Thailand will not ban rice exports (2008)

With the recent catastrophic floods in Thailand and Vietnam (AFP Link), there is a huge chance that their governments might just introduce curbs or restrictions on the amount of rice that they export.

Now consider this plausible scenario a few years from now: 1. Extreme weather patterns destroy the production of all the major rice exporting nations; 2. Oil production in the Middle East plummets due to Peak Oil and political unrest. Results? Food prices soar and every major food exporting nation bans food exports completely to protect their domestic markets. What becomes of Singapore's food supply? Are you going to chew your paper Singapore dollars? In light of this, is it not important to grow your own food, Mr Lee?

Also, some intelligent responses from a reader in that TODAYONLINE report:

david

Updated 05:42 PM September 06, 2011

When there is global food shortage, it is no longer a matter of price. We may not be able to get any food, or enough food, at any price.

Even if Singapore owns the farm overseas, the foreign government (where the farm is located) may not allow the farm produce to be exported. Even if the foreign government allows the farm produce to be sold to Singapore, the workers at the farms or trucking firms or dockyards may sieze the produce to feed their own families first. Do you think they care about Singapore's survival or the rule of law?

It may not be sexy or wonderful for our economic numbers to produce our own food, but it is time that Singapore placed more importance to food security.

What was wrong with Lee Kuan Yew's reasoning? His typical, mainstream economic way of counting everything in dollars and cents and his strong belief in the free market system. Some comments that I left on Gerald Giam's blog are worth repeating here:

The way I see it, the main problem is that mainstream economists have a wrong set of units for accounting. They reduce everything to dollars and cents which are nothing more than abstractions divorced from the material world. Oil prices hit a low in 1999 at $17/barrel but the price did not tell us what was left in the ground for us to extract. All it did was to create the temporary illusion that oil was plentiful, and that alternative sources of energy were therefore uneconomic and unnecessary – in dollar terms – according to the self-deluded economists.

Had they learned to calculate the economic inputs/outputs of a nation in terms of energetic units (Watts, BTUs, etc.), biocapacity and ecological footprint, they would have realized that our entire growth-centric-consumerist economic paradigm is one giant energy sink and resource blackhole that is squandering away at unsustainable rates the earth’s natural capital and natural resources that have taken eons to form.

Excerpt from Dirt: The Erosion of Civilizations, pp. 198-200. This book is available for borrowing at the Singapre National Library.

From 1970 to 1990, the total number of hungry people fell by 16 percent, a decrease typically credited to the green revolution. However, the largest drop occurred in communist China, beyond the reach of the green revolution. The number of hungry Chinese fell by more than 50 percent, from more than 400 million to under 200 million. Excluding China, the number of hungry people increased by more than 10 percent. The effectiveness of the land redistribution of the Chinese Revolution at reducing hunger shows the importance of economic and cultural factors in fighting hunger. However we view Malthusian ideas, population growth remains critical – outside of China, increased population more than compensated for the tremendous growth in agricultural production during the green revolution.

Another key reason why the green revolution did not end world hunger is that increased crop yields depended on intensive fertilizer applications that the poorest farmers could not afford. Higher yields can be more profitable to farmers who can afford the new methods, but only if crop prices cover increased costs for fertilizers, pesticides, and machinery. In third world countries the price of outlays for fertilizers and pesticides increased faster than green revolution crop yields. If the poor can’t afford to buy food, increased harvests won’t feed them.

More ominously, the green revolution’s new seeds increased third-world dependence on fertilizers and petroleum. In India, agricultural output per ton of fertilizer fell by two-thirds while fertilizer use increased sixfold. In West Java a two-thirds jump in outlays for fertilizer and pesticides swallowed up profits from the resulting one-quarter increase in crop yields in the 1980s. Across Asia fertilizer use grew three to forty times faster than rice yields. Since the 1980s falling Asian crop yields are thought to reflect soil degradation from increasingly intensive irrigation and fertilizer use.

Without cheap fertilizers – and the cheap oil used to make them – this productivity cannot be sustained. As oil prices continue climbing this century, this cycle may stall with disastrous consequences. We burned more than a trillion barrels of oil over the past two decades. That’s eighty million barrels a day – enough to stack to the moon and back two thousand times. Making oil requires a specific series of geologic accidents over inconceivable amounts of time…It takes millions of years to produce a barrel of oil; we use millions of barrels a day. There is no question that we will run out of oil – the only question is when.

Estimates for when petroleum production will peak range from before 2020 to about 2040. Since such estimates do not include political or environmental constraints, some experts believe that the peak in world oil production is already at hand… At present, agriculture consumes 30 percent of our oil use. As supplies dwindle, oil and natural gas will become too valuable to use for fertilizer production. Petroleum-based industrial agriculture will end sometime later this century.

Our neighbour is planning to increase their food production. What is Singapore doing besides diversifying our food imports? I know that Singapore land is limited, but relying almost 100% on food imports is not a good long term solution to possible supply disruptions caused by peak oil, wars, or climate change. Nations are already hoarding food supplies to feed their own populations by curbing exports. What can we do to increase local food production? Here is a possible solution: Vertical Farming.

http://www.todayonline.com/articles/248664.asp

KUALA LUMPUR — The Malaysian government is planning strategies to boost food production in the hopes of reducing the country's reliance on food imports and controlling inflation, an official said yesterday.

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A Cabinet panel led by Prime Minister Abdullah Ahmad Badawi has been set up to tackle rising consumer prices, said Second Finance Minister Nor Mohamed Yakcop. The authorities believe it is crucial for Malaysia to be more self-sufficient in its food output.

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"This is because we know that in the long run, inflation related to food products will remain for some time," Mr Nor Mohamed was quoted as saying by national news agency Bernama.

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Malaysia's inflation rate accelerated to 2.7 per cent in February compared to 2.3 per cent in January — partly because of rising food prices.

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The minister did not say what food products would be targeted. But officials have said in recent weeks that they are worried about rice in the wake of a global surge in the commodity's prices.

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The government gives financial aid to rice farmers, who produce about 70 per cent of the country's rice needs. Malaysia imports the rest from its neighbours such as Thailand, Vietnam and Cambodia.

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The agriculture ministry has said it needs RM6 billion ($2.57 billion) to cultivate new rice fields and improve infrastructure to boost rice production. — AP