Week of June 29

I suppose the biggest news of last week was the announcement on the part of the UK newspaper The Guardian of having obtained a leaked copy of a report by the World Bank on biofuels production. The Bank was said to have suspended publication out of concern about President Bush's reaction to its findings. Bush in the past has made many favorable comments regarding American biofuel production, by which he means corn based ethanol. The finding of the report is that the impact of biofuel production accounts for some 25% to 35% of the current prices in commodity food crops and has dire implications for the poorest inhabitants of our planet. The report cites a number of factors including diversion of food crops themselves to fuel production as well as decisions on the part of agribusinesses to allocate land to fuel crops, thus limiting production of foodstuffs. The report also indicates that speculation on commodity futures plays a significant role in the unprecedented price escalation.

In the past I have been skeptical as to the impact of the biofuels industry on food pricing, if only because large scale cultivation of plants as fuel sources occurs in only a few countries, and, because according to my research, the volumes of biofuels produced are simply not that high. I would concede that an impact on corn prices is occurring in the U.S. and Mexico due to a diversion of much of the crop to ethanol producers, but only in Brazil is similarly large scale production taking place, while simultaneously Brazil is rapidly expanding its total food production by deforesting the Amazon region. That in itself is an extraordinarily dangerous policy apt to accelerate global warming and deplete the amount of oxygen in the atmosphere, but for the time being biofuels production is not causing food price spikes in Brazil.

The Guardian itself did not see fit to publish the purloined report, and though further allusions as to its possible contents are found elsewhere on the Web, I would be engaging in hearsay and speculation to repeat them.

A New Form of Bio-based Synthetic Fuel

SunPine, a Swedish firm, has announced a new process for manufacturing motor fuels out of vegetable oils, animal fats, and "tall oil", which is a byproduct of paper production. The resulting fuel is said to be similar to petroleum diesel rather than to conventional biodiesel. The firm has supplied no specifics regarding the economics of production, but has indicated that it is building a plant with a capacity of 26 million gallons annually, fairly small even by biofuel industry standards, but of commercial scale nonetheless.

Arctic Oil - the Great Northern Herd

During the eighteen seventies when the railroads were busy hiring gunmen to destroy America's enormous herds of bison, the buffalo hunters themselves, for the most part, refused to believe that they would ever deplete the herds, even as they were slaughtering tens of millions of animals per year. By 1875, however, a steep decline was obvious, and three years later herds of even hundreds of animals had almost vanished. Buffalo roamed the vanishing prairie in relatively small assemblages, at most a few dozen animals, and often only a handful.

At that time the hunters began to speak of the Great Northern Herd, a still enormous body consisting of thousands, even hundreds of thousands of the wild cattle, always over the next rise or across the next river, a phantom given substance by rumor, speculation, and the desire to sustain somehow the lucrative trade in hides. It became part of the folklore of the Old West.

Of course no such herd existed, and the last of the buffalo hunters abandoned their bloody trade in the early eighteen eighties.

Anyway, last week a geologist with the U.S. Geological Survey named Donald Gautier claimed that he'd identified the equivalent of the Great Northern Herd in arctic waters, reserves of over 100 billion barrels of crude oils, or a resource equivalent to those in Iran or Iraq, the largest resource holders remaining apart from the Saudis. We heard even more extravagant claims from the outgoing Boris Putin who claimed trillions and announced an expansion of Russian territorial waters.

Certainly, Russian effrontery in laying claims to vast territories on the seafloor beneath the Arctic Ocean suggest that that country's leaders suspect that considerable amounts of oil are to be had, and to be had with increasing ease now that it appears likely that the Arctic will become completely ice free every summer and that the northern polar ice pack may disappear altogether.

Such an eventuality would result in even more rapid global warming, as would the rapid extraction of the oil and its delivery to insatiable global oil markets, and perhaps in just a few more decades Antarctic ice sheet would disappear as well, exposing that whole continent to oil exploration. Few suspect that Antarctica is extraordinarily richly endowed with petroleum, but I've seen estimates exceeding 50 billion barrels, not to mention coal which is abundant in the vicinity of the Southern Pole.

Unfortunately, the exploitation of either resource, which falls within no generally recognized national boundaries, would be certain to raise international tensions to an even higher level at present, and could even precipitate a full scale resource war.

There will be blood. Or at least there might be.