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Jeff Rubin's Smaller World
A blog about how weaning our economy off oil means some fundamental changes in the way we live, and other things...

Wednesday, December 30, 2009 6:09 AM

How much longer will our Chinese food be delivered?

Jeff Rubin

If you think you’re eating local now, you haven’t tasted anything yet.

Food and energy are intertwined at many levels, not the least of which starts right at the production stage. Behind the green facade of the farm gate lies one of the most energy-intensive industries in the world. From fertilizer to farm machinery, most modern agriculture is really about making hydrocarbons edible.

No matter what the crop, the most important input is always energy — and it’s getting to be more so every day. Driven by ever greater fertilizer use and farm mechanization, energy represents half the cost of growing wheat (up from 30 per cent only a decade ago), and over 40 per cent of the cost of growing corn or sorghum.

That should tell you right away that a world of rising energy costs translates directly into a world of rising food costs.

And that’ll be even truer in the future. Arable land has not increased in over a decade and virtually every model of global warming predicts that it will in fact decrease.

And while Monsanto and other friendly producers of genetically modified seed claim that their laboratories keep crop yields rising, the real reason is energy. Those green fields in Iowa run on about five and half gallons of oil per acre.

But that’s just the cost of growing food. Even if we only ate what was grown in our own backyards, our food supply still has a troubling dependence on fossil fuels. What happens when we eat food imported from all around the world?

As more of our food is sourced from abroad, the average distance from farm gate to dinner table has now risen to over fifteen hundred miles. That’s a bad energy deal in its own right: for every calorie of energy delivered by imported food, you burn, on average, three more calories getting it to your dinner table.

But at triple-digit oil prices, bunker fuel costs will price many of those long-distance food imports right out of your shopping cart.

Look at Chinese food, for example. Last year, America imported $6-billion worth of food from China—a six-fold increase since 2000. Everything from bok choy to frozen chicken wings is sourced from cheap Chinese farm labor half a world away. But it’s bunker fuel that not only moves those chicken wings across the Pacific but keeps them refrigerated as well.

In a world of cheap oil, your taste buds can easily go global. But with the planet already on the cusp of triple-digit oil prices, your menu will have to change.

Start getting used to local produce, because there’ll be a whole lot less Chinese food delivered in the smaller world of the future.

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Jeff Rubin

After nearly 20 years as the chief economist of CIBC World Markets, Jeff Rubin left the bank earlier this year to seek a larger audience for the story he wanted to tell.


His predictions of steadily rising oil prices over the last decade, including $100 (U.S.) per barrel oil by 2007, had flown in the face of conventional economic wisdom. As he said, soaring oil prices demonstrated that the traditional laws of supply and demand were no longer working for one of the global economy's most basic and essential commodities.


The consequences would be severe. He argued that it wasn't sub-prime mortgages, but record oil prices that drove the world economy into its deepest post-war recession. And unless the economy starts to wean itself off an ever depleting supply of affordable oil, he believes there will be other recessions to follow as economic recoveries quickly push oil prices right back into triple digit range. But weaning our economy off oil means some fundamental changes in the way we live.


That's not the kind of message chief economists' at investment banks are supposed to deliver so he resigned from CIBC World Markets to write about it in his new book Why Your World Is About To Get A Whole Lot Smaller. See his website at jeffrubinssmallerworld.com.

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Light Sweet Crude Oil  (CL-FT)
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