Global riot epidemic due to demise of cheap fossil fuels

If anyone had hoped that the Arab Spring and Occupy protests a few years back were one-off episodes that would soon give way to more stability, they have another thing coming. The hope was that ongoing economic recovery would return to pre-crash levels of growth, alleviating the grievances fueling the fires of civil unrest, stoked by years of recession.

Protester in Ukraine

But this hasn't happened. And it won't.

Instead the post-2008 crash era, including 2013 and early 2014, has seen a persistence and proliferation of civil unrest on a scale that has never been seen before in human history. This month alone has seen riots kick-off in Venezuela, Bosnia,Ukraine, Iceland, and Thailand.

This is not a coincidence. The riots are of course rooted in common, regressive economic forces playing out across every continent of the planet - but those forces themselves are symptomatic of a deeper, protracted process of global system failure as we transition from the old industrial era of dirty fossil fuels, towards something else.

Even before the Arab Spring erupted in Tunisia in December 2010, analysts at the New England Complex Systems Institute warned of the danger of civil unrest due to escalating food prices. If the Food & Agricultural Organisation (FAO) food price index rises above 210, they warned, it could trigger riots across large areas of the world.

Hunger games

The pattern is clear. Food price spikes in 2008 coincided with the eruption of social unrest in Tunisia, Egypt, Yemen, Somalia, Cameroon, Mozambique, Sudan, Haiti, and India, among others.

In 2011, the price spikes preceded social unrest across the Middle East and North Africa - Egypt, Syria, Iraq, Oman, Saudi Arabia, Bahrain, Libya, Uganda, Mauritania, Algeria, and so on.

Last year saw food prices reach their third highest year on record, corresponding to the latest outbreaks of street violence and protests in Argentina, Brazil, Bangladesh, China, Kyrgyzstan, Turkey and elsewhere.

Since about a decade ago, the FAO food price index has more than doubled from 91.1 in 2000 to an average of 209.8 in 2013. As Prof Yaneer Bar-Yam, founding president of the Complex Systems Institute, told Vice magazine last week:

"Our analysis says that 210 on the FAO index is the boiling point and we have been hovering there for the past 18 months... In some of the cases the link is more explicit, in others, given that we are at the boiling point, anything will trigger unrest."

But Bar-Yam's analysis of the causes of the global food crisis don't go deep enough - he focuses on the impact of farmland being used for biofuels, and excessive financial speculation on food commodities. But these factors barely scratch the surface.

It's a gas

The recent cases illustrate not just an explicit link between civil unrest and an increasingly volatile global food system, but also the root of this problem in the increasing unsustainability of our chronic civilisational addiction to fossil fuels.

In Ukraine, previous food price shocks have impacted negatively on the country's grain exports, contributing to intensifying urban poverty in particular. Accelerating levels of domestic inflation are underestimated in official statistics - Ukrainians spend on average as much as 75% on household bills, and more than half their incomes on necessities such as food and non-alcoholic drinks, and as75% on household bills. Similarly, for most of last year, Venezuela suffered from ongoing food shortages driven by policy mismanagement along with 17 year record-high inflation due mostly to rising food prices.

While dependence on increasingly expensive food imports plays a role here, at the heart of both countries is a deepening energy crisis. Ukraine is a net energy importer, having peaked in oil and gas production way back in 1976. Despite excitement about domestic shale potential, Ukraine's oil production has declined by over 60% over the last twenty years driven by both geological challenges and dearth of investment.

Currently, about 80% of Ukraine's oil, and 80% of its gas, is imported from Russia. But over half of Ukraine's energy consumption is sustained by gas. Russian natural gas prices have nearly quadrupled since 2004. The rocketing energy prices underpin the inflation that is driving excruciating poverty rates for average Ukranians, exacerbating social, ethnic, political and class divisions.

The Ukrainian government's recent decision to dramatically slash Russian gas imports will likely worsen this as alternative cheaper energy sources are in short supply. Hopes that domestic energy sources might save the day are slim - apart from the fact that shale cannot solve the prospect of expensive liquid fuels, nuclear will not help either. A leaked European Bank for Reconstruction and Development (EBRD) report reveals that proposals to loan 300 million Euros to renovate Ukraine's ageing infrastructure of 15 state-owned nuclear reactors will gradually double already debilitating electricity prices by 2020.

"Socialism" or Soc-oil-ism?

In Venezuela, the story is familiar. Previously, the Oil and Gas Journal reported the country's oil reserves were 99.4 billion barrels. As of 2011, this was revised upwards to a mammoth 211 billion barrels of proven oil reserves, and more recently by the US Geological Survey to a whopping 513 billion barrels. The massive boost came from the discovery of reserves of extra heavy oil in the Orinoco belt.

The huge associated costs of production and refining this heavy oil compared to cheaper conventional oil, however, mean the new finds have contributed little to Venezuela's escalating energy and economic challenges. Venezuela's oil production peaked around 1999, and has declined by a quarter since then. Its gas production peaked around 2001, and has declined by about a third.

Simultaneously, as domestic oil consumption has steadily increased - in fact almost doubling since 1990 - this has eaten further into declining production, resulting in net oil exports plummeting by nearly half since 1996. As oil represents 95% of export earnings and about half of budget revenues, this decline has massively reduced the scope to sustain government social programmes, including critical subsidies.

Looming pandemic?

These local conditions are being exacerbated by global structural realities. Record high global food prices impinge on these local conditions and push them over the edge. But the food price hikes, in turn, are symptomatic of a range of overlapping problems. Global agriculture's excessive dependence on fossil fuel inputs means food prices are invariably linked to oil price spikes. Naturally, biofuels and food commodity speculation pushes prices up even further - elite financiers alone benefit from this while working people from middle to lower classes bear the brunt.

Of course, the elephant in the room is climate change. According to Japanese media, a leaked draft of the UN Intergovernmental Panel on Climate Change's (IPCC) second major report warned that while demand for food will rise by 14%, global crop production will drop by 2% per decade due to current levels of global warming, and wreak $1.45 trillion of economic damage by the end of the century. The scenario is based on a projected rise of 2.5 degrees Celsius. More

 

Posted with Blogsy

Rising energy prices will challenge western way of life – MoD report

A little-known Ministry of Defence (MoD) report published earlier this year warns that converging global trends will dramatically affect UK economic prosperity through to 2040.

The report says that depletion of cheap conventional "easy oil", along with shortages of food and water due to climate change and population growth, will sustain rocketing energy prices. Long-term price spikes are likely to lead to a long recession in Western economies, fuelling internal unrest and the rise of nationalist movements.

The report departs significantly from the conservative and relatively optimistic scenarios officially adopted by the British government, as exemplified in the coalition's new Energy Security Strategy published in November last year by the Department of Energy and Climate Change (Decc).

Peak "easy oil"

The report predicts that "the imminent passing of the point of peak 'easy oil' will mean that hydrocarbon-based energy prices will rise significantly out to 2040." Other factors affecting energy prices include "increasing demand for fossil fuels" due to South Asia's "industrial rise" and greater "volatility in supply" in the Middle East.

Contradicting the British government's official position on peak oil - which accepts the International Energy Agency's (IEA) latest estimate that oil prices will reach "$125/barrel in real terms (over $215/barrel in nominal terms)" - the MoD report projects an exponential escalation in prices, such that "the increasing price of oil... is likely to reach $500 a barrel by 2040" - almost double conventional projections.

This price rise will, however, "drive the development of alternative fuel sources" including tar sands, shale gas, coal, nuclear and renewables.

Rising demand for "resources and energy" from China and India will spur a "'scramble' for commodities and resources" as less developed countries' "resource requirements may go unfulfilled." There will also be a greater chance of clashes over access to "Middle East resources", the South China Sea and the Indian Ocean.

Climate crisis

Climates change will significantly compound these challenges, including a wide range of impacts such as "rising sea levels... increased incidents of seasonal floods, heat-waves, storms, and unpredictable farm yields."

If sea levels rise quicker than anticipated, "millions of people across South Asia (principally in Sri Lanka, Bangladesh and the Maldives) will be displaced, with no opportunity to return to their homes."

Irregularities in the pattern of monsoon rains are likely to undermine South Asia's "agricultural and domestic water needs", while higher temperatures will "increase the range of vector-borne diseases such as malaria", such that it becomes "prevalent all-year-round."

Water stress

Water may become a "destabilising factor", with water stress and scarcity affecting some "2.5 billion people", and acting as a limiter to economic growth in some South Asian economies, including China by 2030.

Water will be a "defence and security issue" through to 2040, and increasing water demand is also likely to "heighten tensions over shared resources such as the Brahma-Putra Himalayan region and the River Indus", between China, India, Pakistan and Bangladesh.

Food shortages

The sustainability of food production in such conditions "will also be a key issue for the region, with much of the population dependent on rice crops as a staple." The report warns that a "rapid loss of some arable land is likely to promote local, then national migration", which may contribute to unrest.

As agriculture is the single largest contributor to GDP and employment in the region, the report observes that the decline in agricultural output driven by higher temperatures, erratic weather, lower yields, soil erosion and increased pests and weeds, will primarily affect nearly all those who are "close to, or below, the poverty line."

Demographic time bomb?

Although China and India will incorporate "some measures of sustainable development", those measures will be limited by the fact that "economic growth will remain the imperative throughout the period."

Despite their confidence in being able to meet these emerging climate and energy challenges, the sheer scale of the latter - "especially with regard to food and water availability and the sensitivity of the monsoon cycle, may challenge such confidence."

Under present trends, South Asia will contain "nearly 40% of the world's population" within the next 30 years. China and India will therefore face "increasing demands" from their "burgeoning populations" requiring "strong levels of sustained economic growth over the period to maintain internal stability."

Inadequate "social and educational policies" and persistent "inequality and corruption" could turn this demographic dividend into "a 'demographic time bomb.'"

In fact, the report predicts that due to "rising inequality", ethnic tensions, strict controls on freedom of speech, and increased access to global communications, "China is likely to experience increased incidents internal of unrest."

End of growth due to resource price spikes?

But the West faces other parallel challenges:

"The growth of South Asian economies will impact on most western nations, where the way of life for the majority of the populaces may be challenged by rising energy and resource prices, coupled with a relative decline in the value of their national economies...

The economic and industrial rise of China and India will increase the cost and reduce the availability of UK energy supplies. As a resource-importing nation, and with relatively modest fossil fuel reserves, the UK will be affected by increased resource and commodity costs. The UK will increasingly need to compete with China and India in order to secure enduring access to energy."

Consequently, the report argues that the "western 'way of life'" - associated with "a wide variety of consumer choice and relatively cheap energy" - will be "increasingly challenged as lifestyles follow GDP levels and 'normalise' across the globe."

Within the US and UK, the bulk of the populations will be affected by:

"... rising energy and resource prices, and the declining availability of finance to sustain discretionary spending. In such a context, this could lead to periods of sustained recession in the West, causing increasingly protectionist policies to be adopted."

"Internal unrest"

This could occur even as growth continues in South Asia, with global GDP per capita overall levelling off to "equilibrate", culminating in "the stalling and subsequent decline of many western economies." This will result in:

"long periods of recession and rising disaffection within the UK population... This could subsequently lead to increased incidents of internal unrest, a rise of nationalistic groups and a demand for protectionist economic and defence policies."

Corporate stakeholders

This could occur even as growth continues in South Asia, with global GDP per capita overall levelling off to "equilibrate", culminating in "the stalling and subsequent decline of many western economies." This will result in:

"long periods of recession and rising disaffection within the UK population... This could subsequently lead to increased incidents of internal unrest, a rise of nationalistic groups and a demand for protectionist economic and defence policies."

The report, titled Regional Survey: South Asia out to 2040, was published by the MoD's Development, Concepts and Doctrine Centre (DCDC) as part of its Strategic Trends Programme in January. The DCDC is an MoD think tank within the Defence Academy site at Shrivenham.

The report utilised the input of a range of government agencies and departments, including the MoD's Strategy Unit, the Defence Science and Technology Laboratory, the Cabinet Office, and the Foreign Office - as well as two private institutions, Standard Chartered Bank and Now & Next. Decc is notably missing from the list of contributors.

Standard Chartered has a chequered history replete with scandals and "ethical lapses". Two years ago, an Ecologist investigation alleged that a coal power plant project in India financed by Standard Chartered among others, had "displaced poor communities and will lead to the destruction of forests."

The project was slated to receive carbon credits under the UN's controversial Clean Development Mechanism. Standard Chartered is now heavily invested in South Asia.

Now and Next is the website of a future trend analysis publication, What's Next, which includes among its clients General Electric, KPMG, McDonalds, and Shell.

Privatisation of power

Although the document sets out reasons to believe the UK is well-positioned to "adapt" to these converging trends, and perhaps even benefit from them, the overall vision heralds the recognition that of a rapidly shifting global landscape.

The report concedes that the "'relative' decline of the West is likely to lead to a new power framework where alliances are constantly reassessed and negotiated." This will also see "the declining influence of existing international institutions such as NATO and the UN Security Council."

In this context, the report predicts an accelerating coalescence between nation states and global capital, noting that:

"The line between government, and private industry protection of intellectual property of key technologies for security and wealth creation, may become increasingly blurred... [as] blueprints, patents and formulas will be increasingly seen as the foundations of wealth generation." More

MOD Report