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A Look Behind Rising Food Prices: Population Growth; Rising Oil Prices; Weather Events

Rising food prices, crowned by a recent record high spike and chronicled in the graph below, have played a role in triggering the spread of unrest that we’ve witnessed recently from Tunisia to Egypt and beyond. Though most residents of rich countries can absorb higher food costs without much struggle, residents of poor countries, especially those living in major urban areas such as Cairo, cannot. Higher food prices are immediate threats to their health and, in some cases, even their lives, especially those of the very young and the elderly.

Rising food prices
Figure 1. Illustration from the New York Times.

The current spike in food prices, which has now exceeded the price spike in 2008, has been blamed on various factors, including unusual weather events, higher demand, smaller crop yields, and the diversion of food crops to biofuels.

Unusual weather events have certainly played a role.  The devastating heat wave that struck Russia last year damaged the wheat crop enough to cause the Russian government to halt grain exports for the year.  Heavy rains in Australia damaged wheat crops to the point that some were downgraded for use only as animal food.  Historic flooding in Pakistan damaged grain crops there as well.  Right now severe drought is threatening the wheat crop in parts of China.  Whether these extreme weather events and others represent just random bad luck or are harbingers of more numerous such events in the future remains an open question, but considerable evidence falls on the side of more frequent severe weather events for planet Earth.

According to NOAA (National Oceanic and Atmospheric Administration), 2010 tied 2005 for the hottest year on record and 2010 was the wettest year on record.  According to Kevin Trenberth, head of the National Center for Atmospheric Research in Boulder, Colorado (cited in UK Guardian, “How extreme weather could create a global food crisis,” Feb. 4, 2011):

There is a systematic influence on all of these weather events nowadays because there is more water vapor lurking around in the atmosphere than there used to be, say, 30 years ago.  It’s about a 4% extra amount, provides plenty of moisture for these storms, and it’s unfortunate that the public is not associating the fact that this is one manifestation of climate change.  And the prospects are that these kinds of things will only get worse in the future.

Nor is Mr. Trenberth the only one worried about changing weather patterns.  Paul Krugman wrote recently in an Op-Ed article in the New York Times, “Droughts, Floods and Food,” (Feb. 7, 2011):

While several factors have contributed to soaring food prices, what really stands out is the extent to which severe weather events have disrupted agricultural production.  And these severe weather events are exactly the kind of thing we’d expect to see as  rising concentrations of greenhouse gases change our climate—which means that the current food price surge may be just the beginning.

Though I agree with Mr. Krugman that current food prices may continue to increase, I do not believe that rising food prices in the future will be a direct result of climate change, though when a severe weather event affects a crop it will be ever more likely that a spike in food prices will follow.  As I will argue below, I think food prices will be further exacerbated primarily by a combination of continued population growth and rising energy prices, both of which are probably more predictable, at least in the short run, than is extreme weather and its potential effects.  In reality none of these trends are predictable, though population growth, rising oil prices, and more frequent extreme weather events will, if they continue, affect food price trends.  Even this is not certain, of course, because some new miracle food or production technique could appear and diffuse widely in a short period of time.  But that seems unlikely; prudence suggests that we should deal as best we can with the trends that we see in front of us, including climate change.

Smaller crop yields may also have played a role in the current spike in food prices, though grain yields are variable from year to year and are obviously affected by weather patterns around the world.  Again, their role in future food production remains unpredictable.

The diversion of food for fuel is likely to continue.  The most obvious examples are the use of sugar cane in Brazil and corn in the United States for the production of ethanol.  Despite its economic insanity, the use of corn for ethanol production in the United States is likely to expand, especially if generous subsidies remain in place and crude oil prices remain high.

In turn, however, high oil prices, if they continue, will almost certainly help drive up food prices because oil is critical to the production of food crops, both directly and in its affect on fertilizer prices.  The world is now struggling to increase crude oil extraction, even in the face of higher prices.  As the graph below shows, even under the unlikely “Low Price” projection by the Energy Information Administration, crude oil prices are unlikely to drop back to where they were in the 1990s.  If we take the “Reference” case as the most likely scenario, it should be likely that higher crude oil prices will translate into higher food prices down the road, especially if the world’s population continues to grow.

Expected Oil Prices
Figure 2. Illustration of expected oil prices from EIA's International Energy Outlook.

A recent article in The Economist, “Protests and the Pump,” (Feb. 3, 2011) commented:

Irrespective of events in the Middle East, however, the pressure on oil prices is likely to grow.  The market has recovered very strongly from the lows of 2009 thanks to bumper growth in emerging markets and a decent recovery in America….Even if OPEC eventually makes use of its spare capacity the world’s thirst for oil could start to outpace supplies in the next two years.  Then $100 a barrel could look like a bargain.

Similarly, George Friedman, in The Next Decade:  Where We’ve Been…and Where We’re Going, wrote:

Certainly oil production has moved to less and less hospitable areas, such as the deep waters offshore and shale, which require relatively expensive technology.  That tells us that even if oil extraction has not reached its peak, all other things being equal, oil prices will continue to rise…the increased energy consumption that we will see over the next decade cannot be fueled by oil, or at least not entirely.

Of the four contributors to higher food prices listed above, the most predictable one may be higher demand for food, which is driven both by rising affluence, which allows people to add more animal protein to their diets, and rising numbers of people.  So long as the world economy continues to grow, we are likely to see dietary shifts in many emerging economies, including those of China and India, which together are home to more than 2.5 billion people.  As more animal protein enters their diets, more food crops will be diverted from direct consumption to animal feed, in turn putting further upward pressure on food production and prices. That is why China has become such a large importer of soy beans.

As for population growth, it may be the most predictable of all trends affecting the demand for food, at least in the short run, and also the easiest trend to understand and alter. The graph of food prices above suggests that an upward trend in food prices began around 2000, reached a peak in 2008, then rose to its current peak in late 2010/early 2011. To put this growth in food prices in demographic perspective, the world’s population has grown by more than 800 million since 2000 and continues to grow by more than 80 million annually.

Like world income, world population growth is unevenly distributed. There is enough food to feed our current 6.9 billion people, but many don’t have enough money to buy food at world prices nor land on which to raise their own food. The urban poor will be worst off if food prices remain high, or go even higher, mainly because they must spend a much larger percentage of their incomes just to eat. Our world is currently split in numerous ways, one of which is the following: rich countries are growing little, if at all, demographically, whereas poor countries continue to grow at moderate to high rates.

Figure 3 below shows that virtually all population growth now and into the next few decades will occur in the poor countries; rich country populations will grow slowly in some places and not at all in others. In a few places, Japan, for example, populations will actually decline. Japan’s population is projected to decline from 127 million in 2010 to 95 million in 2050; Germany’s population is projected to decline from 82 million in 2010 to 72 million in 2050. Though demographic shrinkage has its own problems, it may decrease pressure on food prices and prices on other commodities as well when it occurs in rich, high-consumption nations.

Population Graph
Figure 3. Graph from Population Reference Bureau, showing UN projections of population growth.

Recent demographic studies have focused more on population decline in the rich countries than on population growth in the poor ones, and the nature of that focus has been almost exclusively on economics, primarily on future prospects for economic growth. Few if any have written about the potential positive consequences of population decline in rich countries, a topic that I plan to pursue soon.

In the meantime I would argue that for decades we have avoided the consequences of population growth by emphasizing the need for greater food production and ways to meet the rising demand for food. Though this makes intuitive sense, it has put us on a food/population treadmill from which we’re afraid to exit for fear of falling. When times have been good we’ve managed to avoid serious threats of widespread hunger in poor countries by expanding world grain production, by having reserves to help us through bad times, and by continuing to tell people in the poor countries that better times are ahead if only they become more like us, i.e. more democratic and more dedicated to free markets. High food prices threaten our balance on the treadmill, however, because they ration food for the neediest among us.

Economists shrug off such dilemmas by assuring us that high food prices will bring forth greater harvests in the future, hence increasing food supplies and decreasing prices. Their preference is to remain on the treadmill and hope it remains profitable. They may be right; then again they may be wrong. It is getting more difficult to continue expanding food supplies as constraints on production, including higher energy and fertilizer costs, lead ever closer to diminishing returns. Whatever economists might say, we cannot squeeze blood from turnips.

Most ecologists and many geographers argue that there are already too many people on Earth and that it is the steady growth in human numbers that threatens to bring our food/population treadmill experience to a bad ending. Without reducing human numbers there are other alternatives that might take some pressure off food prices. For example, people could choose to eat less, but evidence suggests that we’re moving in the opposite direction and that overweight and obesity are becoming problems not just in America but elsewhere as well. People could also choose to eat less meat, but right now that trend also is moving in the other direction.

It would be more efficient–and a far wiser investment–to help people in poor countries achieve their desired family sizes. This is not a coercive proposal but a humane one, a proposal to slow or stop future population growth voluntarily before it is curtailed by the reappearance of those four famous horsemen. Surveys repeatedly show that women in poor countries desire fewer children than they have. Improving the lives of women, including better education for them, coupled with supportive family planning programs and at least minimal social security programs, would be moves in the right direction.

We promise much to residents of poor countries but deliver little. Unless you truly believe that life in the shanty towns of the poor world is better than it is, it makes sense to help people achieve smaller families. That in turn would allow poor countries to invest more money in education, public health programs, economic improvements, and other things to improve the lives of those who now must cope from day to day with unimaginable squalor and hardship. According to the United Nations Fund for Population Activities (“Ensuring that Every Pregnancy is Wanted,” 2010):

At least 200 million women want to use safe and effective family planning methods, but are unable to do so because they lack access to information and services or the support of their husbands and communities. And more than 50 million of the 190 million women who become pregnant each year have abortions. Many of these are clandestine and performed under unsafe conditions.

So long as we emphasize increasing food production as the only answer, and ignore population growth, we will remain on the food/population treadmill, walking a tenuous course that will most likely end up as bad news. If we truly seek to help people in poor countries create better lives for themselves, then we need to do all we can to help them achieve the smaller families that most of them would like to have. To ignore the issue of large families and high fertility is to condemn more generations to life in crowded shanty towns, lives that will struggle to eke out an existence that the poorest people in rich countries would find unacceptable and unendurable.

Martin Hutchinson, one of the few financial writers who understands something about population issues, wrote recently, in a piece called “The Blight of Population Growth,” (Feb. 7, 2011):

Both the rioters in Cairo’s Tahrir Square and the Western commentators on those riots have missed a vitally important component of Egypt’s miseries: its excessive and rapidly rising population. With such population growth even the wisest Egyptian ruler, the great Ptah-hotep, could not have achieved a rapid rise in the living standards of Egypt’s people. We should not mock; if this problem is not attacked seriously and rapidly on a global scale, the world of the 22nd Century may bear all too great a resemblance to today’s downtown Cairo.

To put his comment in the perspective of our analogy of the food/population treadmill, at some point increasing food production will fail to keep pace with global population growth. At that point we may have crashed and burned.

By. Dr Gary Peters

This is a guest post by Dr. Gary Peters. He is a retired geography professor and author of Population Geography.

Article Courtesy of Gail Tverberg at ourfiniteworld.com

Gail Tverberg is a writer and speaker about energy issues. She is especially known for her work with financial issues associated with peak oil. Prior to getting involved with energy issues, Ms. Tverberg worked as an actuarial consultant. This work involved performing insurance-related analyses and forecasts. Her personal blog is ourfiniteworld.com. She is also an editor of The Oil Drum.

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  • Anonymous on February 27 2011 said:
    There are a few issues which were not described within the article and have a more significant overall impact on food availability and pricing. But, like most issues these all work in a negative synergism and they are: 1) primary reserve land loss to urbanization, 2) farming less desirable crop land which produces less and uses more critical and valuable inputs such as fertilizer to do so, and 3) competition for resources such as fertilizer as this industry is maxing out its capabilities in potassium and phosphorus (based on recent articles) which are key and critical elements in all crop production. These factors which are causal and interactive mingled together with population increase, fuel/energy cost, and weather will provide the platform for an event of food shortage, globally, that has never been seen in our world.
  • peter hagenrud on April 05 2012 said:
    I agree, resources goes down and population goes strongly up, 1 billion every 13 year. Doing some math over areas and people and here`s the results. With a worldpopulation of 7 billion and total of 149 miljon square kilometers of landmass every human have around the world 21290 sq meters each. Since only 54% of the landmass is accepebel for us to live on becaurse of permafrost areas deserts high mountinareas antartica and so on.Our species could only live on 11496 sq meters as we have to share togheter with mostly other land living animal speices and fauna and that is not sustainable. When it comes to water the guardian had an article about aviable surface water. They measured it to about 200000 sq kilometers, that makes with 7 billion people an amount of 28500 cubic meters to each human. Madness indeed specially knowing that pollution of water is common in a great part of the world especially in countries like china and india. World groundwater levels is decreasing to deeper levels and will not likely to be replaced in the same rate as it is pumped up fore industrial or farming needs. When it comes to farmland according to FAO (food and agriculture organisation) 2010 statistical yearbook arable and permanent farmland toghether an area of 15,26 million sq kilometers.If we ading cityareas and very high populated areas according to columbia university study (Columbia university The GRUMP project )it covered about 3% or 4,5 million sq kilometers. This is 19,26 million sq kilometers just fore feeding and housing our selfes. That area is covering the whole south american continent plus four areas of my homeland sweden (450000 sq km) Cinceraly yours peter hagenrud

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