Mexico Will Follow Egypt Into Collapse
Bill James, Seeking Alpha
Mexico seems likely follow Egypt into collapse within two years based on falling oil revenue and rising food prices:
Mexicans spend about 22% of their disposable income on food. In 2010 corn prices increased 52% and wheat 47%. With the floods in Australia, ethanol in the U.S. and higher fuel prices it seems likely food will consume 50% of disposable income within a year. That is an average. There will be a critical percent of the population where food costs will exceed their disposable income. Hunger will amplify risks.
Mexico’s government gets about 40% of its revenues from oil. As noted in BP data complied at Energy Export Database Mexico’s domestic consumption (black line) will force its oil revenues (green area) to drop to zero within a few years. Egypt’s oil revenues dropped to about zero in 2010.
…Without oil from Mexico, one of the U.S.’s top three suppliers, the economic dislocation in the U.S. will be fundamental; even if oil could be purchased from the Middle East, the number of tankers required for the additional days of transport do not exist and cannot be built in time.
…Investing in this environment is complicated by the wild randomness of potential outcomes. There is no way to gauge how individual companies will manage events. So my wild guesses are based on the fundamental fact that life requires energy. Less affordable energy, less life. More efficient use of energy, more life. Since we all wish to survive, resources will flow towards solutions.
(31 January 2011)
FAO, IMF anticipate more civil unrest and protests because of soaring food prices
Staff, Merco Press
FAO in the coming days is expected to release its monthly Food Prices Index, which measures the changes in price of food staples, like wheat, sugar, dairy products, cooking oil, and meat. December 2010 was the highest index score on record, surpassing June 2008 when riots over high food prices broke out in several countries around the world.
According to FAO sources the January 2011 Index may be very near the December 2010 record peak.
This is not to say this is the only cause of the civil unrest in Egypt, Tunisia, Jordan, Yemen or even as far east as Indonesia, but these questions of political economy really cannot be ignored when trying to understand the protests across the Middle East and North Africa. If this trend in the Food Prices Index continues, it is not unreasonable to expect that civil unrest will spread to several other countries….
…“Oil and food prices have gone up dramatically. In the last two quarters of last year the IMF Food Price Index rose 30%. Grain went up 60% and oil prices have surpassed IMF forecasts of 78 US dollars per barrel”, said the IMF official during a recent conference in Cairo.
(31 January 2011)
Dignity, bread and liberty; the start of peak food revolutions
Mike Small, OpenEconomy
“What has changed the placid Egyptian population into a boiling mass of revolt?” Goes the not-so-subtle sub-text of much corporate media coverage. First the supposed quietism of the Egyptian people is over-stated, there have been other strikes and protests in recent years. As recently as 2008 Egyptians rioted over bread prices. Second they are hardly a boiling mass, in fact the remarkable feature of the events in Tahir Square and across the country was the peacefulness, civic organisation and dignity of hundreds of thousands of people demanding change. But the short answer to the question ‘what made it all kick-off?’ is: bread, not twitter. It’s not an RSS feed they’re after: ‘Dignity Bread & Liberty’ is the slogan.
The western media may be obsessing with social media but believe me this isn’t the thing you are focusing on if you don’t have enough to eat. Egypt, as the world’s largest wheat importer, is reliant on countries like Russia and Pakistan for its food supply. American writer Danny Schechter puts it well: “Yes, the tens of thousands in the streets demanding the ouster of the cruel Mubarek regime are there now pressing for their right to make a political choice, but they are being driven by an economic disaster that has sent unemployment skyrocketing and food prices climbing.”
Prices in Egypt are up 17 percent because of a worldwide surge in commodity prices that has many factors, but speculation on Wall Street and big banks is a key one. The European Commission yesterday published a new version of a report on commodities, which acknowledged a link between speculation and price increases. A previous version of this report argued that there was no evidence of such link, but this clashed with Sarkozy’s agenda for the G20. Hence, Michael Barnier redrafted the report.
Meanwhile, writing in Les Echos, French economist Francois Bourguignon calls into question a number of received wisdoms on commodities prices: volatility is no higher today compared with the 70s or the 80s; the massive entry of index funds on commodities markets has not increased prices ; the volatility of agricultural prices is mostly due to unanticipated variations in market fundamentals, such as climate, costs, and demand.
But whether it’s climate, speculations and spivs (or a lethal combination) the fact is that people are out in the streets not just to assert their demands for a democracy, but by their need to eat.
Nouriel Roubini – who was among the first to predict the financial crisis and was dubbed a Cassandra for his troubles in 2005 – urges us not just to look at the crowds in Cairo, but what is motivating them now, after years of silence and repression? …
…If we take Roubini’s advice and look at underlying motives or para-economics we can see deeper issues. Is it too speculative to see the 25 January revolt as the first food revolution as fuelled by peak oil? Oil prices affect food prices when you have a petro-chemical food economy.
(4 February 2011)