Sunday, December 20, 2009

Apocalypse Now delayed...

From time to time I check at The Oil Drum to see what thoughtful, but definitely pessimistic minds have to say about changes in our energy supplies and consumption patterns might mean in the future.  TOD has, of course, been as caught off-guard by the decline in oil use/price - ostensibly due to the recession - as oil producers.  And they are seriously starting to wonder when the demand will pick up.
The Organization of the Petroleum Exporting Countries meeting in Angola on Tuesday was expected to keep supply steady because of concern any cut could push prices higher and threaten global economic recovery. But high inventories could force OPEC's hand early next year, before the second quarter when seasonal demand is typically at its lowest, PFC said. "OPEC could face the prospects of needing to undertake Herculean efforts to tighten up fundamentals in early 2010," PFC Energy said in the report.

"Most likely the organization would need to agree to substantial cuts -- of 1 million bpd or more from actual production -- in early 2010 in order to bring total inventories down to manageable levels." The oil price is close to the $75 per barrel top exporter Saudi Arabia and others have said is fair to both consumers and producers. Saudi Oil Minister Ali al-Naimi described the price as "perfect" earlier this month and has said there was no need for the group to change supply levels. [More]

The current oil supply situation is a vexation for Peak-Oilers who are scrambling to revise doomsday scenarios. Plus it is also changing the economic urgency of alternative agrarian ag systems, which fell into step with Peak-Oil predictions.  That body of growers may be larger than I imagine, and if the Census of Ag is of any relevance, may account for the growth in small farms.

At any rate, it is informative to consider how they are betting their operations on a fuel-deprived future.  Contrary to my admittedly vague pregnostications, these producers think the changeover to scarce resources will be swift.  I think it will trgger adjustments to make it a much slower phenomenon, as guys like me adapt to price signals on inputs.

Oddly the decline in petroleum production could mean tougher times for the ethanol business model, as the choice between food and fuel is reviewed in a much harsher light. Regardless, this comment is typical of the discourse among these growers.
I have no doubt that as energy supplies become very restricted that agriculture will be at the top of the rationing list. Especially Big AG as they will have to produce the vast volumes of grain that will be required to prevent mass famine. It will get harder and harder for them to succeed. Riding this wave just behind them will be people like me. Small farms, using little to no synthetic fertilizers or chemicals (those will be restricted to use by the Big Ag farms growing the bulk food). As agriculture evolves back to a more traditional structure the small farms will once again become diversified operations where they produce meats and grains as well as veggies and value added products. Over time the growing of veggies will slow and the growing of beans, grains and other staples will rise on the small operations. This will be as the energy costs rise. When energy costs rise the point will eventually be reached where the CAFO operations will no longer be financially viable. They only exist because we have access to very cheap energy and because the Govt subsidizes corn/soybean production. Much of your grocery store processed food also depends on this situation. In the future all of this will be washed away by rising energy costs and shortages. Thus the diversified small farms close to the population centers will dominate once again.
As energy supplies continue to shrink (long after you and I are gone) there will come a time that operations scaled like mine may pass too. Unless, we have manage to maintain some semblance of 'civilization' via these methods so that we can find clever ways to utilize alternative energies, maybe invent a few more efficient technologies, learn to live on less, etc we will not make it into the future. [More]

These guys are not radical wackos, as industrial producers often categorize them.  In fact, they have on the whole thought more profoundly about what they are doing than most of us in the other sector. Unfortunately, that does not necessarily guaranteee their ability to forecast the future of agriculture, and the last two years have upset most of their stronger apocalyptic announcements.

The could be right in the long run, but it will be a far longer run than most of us thinkAnd the brains involved in ag will not be idle in the meantime.

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