Monday, February 21, 2011

Political Forecasting is Failure Prone

Political Forecasting is failure prone.... particularly in despotic regions like the Middle East and North Africa. Most of us following and commenting on this had visions of Yemen first, then maybe Algeria or Iran... Libya was not at the top of the list.

Oh, well.

That's the problem with forecasting... the future doesn't always cooperate.

6 or 7 years ago, upon becoming "peak oil aware", I really thought the argument about declining petroleum  production's effects on food supply in the short term had merit... then after research (and some experience running a small farm) I came to the conclusion that weather  would be the bigger issue (at least in the short term)... but in watching the MENA smolder and flame I am not so sure that fossil water isn't bigger than "Peak Oil" for much of the world, certainly MENA and China. I was well aware of the issues facing the U.S. and the Ogallala Aquifer, but did not make the leap that other fossil water sources are similarly impacted.

In my experience events never unfold as predicted.  Yet unfold they do. Oil for front month delivery is up $5 and December is up nearly $3.50. Several posts ago I mused that the jerks getting over on the rest of us via the "Homeland Security" budget were trying to scare the sh#! out of the electorate... and that they needed somebody, somewhere to blow something up... and that Al Quada is getting swept aside by a tidal wave in the MENA... I didn't think these regimes would last a couple of years, and certainly not the decade... well, at the pace this is coming I'd say that 50/50 its all over by Christmas.... and even if it is, the Homeland Security folks will find a new "enemy" we need to spend $800 Billion a year worrying about.

If you read the first link listed above you will see that somebody is "expecting" the Middle East to experience a doubling of the population in 30 years... WTF is that somebody smoking?  Where is the water and food going to come from? China? They have no water. The U.S.? We will be a wheat importer in a decade or so... (I should point out that I do not believe that "climate" is the threat. There is a BIG difference between climate and weather.  Yet in all of the doomer posts I read these folks simply can't let the climate change shot pass by... read this excellent post by Stu Staniford on why the climate change pitch is a non-starter... I agree with Stuart... food prices are high, grain inventories are low, and we can hypothesize all we want... but nothing in the data supports the "climate change" story as the culprit. On the other hand, the graph at the beginning of the article, while showing clearly the fallacy of the climate argument would argue that a very unfortunate weather year would have a huge impact, given that inventories are so very low... and given that inventories of both corn and wheat, and now soybeans (and I must say that I do not follow that crop and inventory like I do corn and wheat for reasons I am not sure of), are low would suggest that its not acreage (deciding which crop to plant) issue but something else... exactly what I have no idea. Being a blogger, I am always happy to provide a hypothesis, but would prefer to wait for more data (as in next year's crop and weather!)).

How the price of food and oil are balanced is the $64,000 question, and they could easily be balanced as to be very satisfactory to their respective producers, but for those that see cheap food as a right somewhat like cheap oil that outcome is going to be somewhat less than satisfying. Farmers are going to be the next group the Left hates.... cause they are going to make an awful lot of money with corn and wheat at $25 to $50 per bushel.  I can just see it now...

Egypt was small potatoes next to Libya, and Libya is medium potatoes compared to Algeria and Iran, who are in turn altogether about the potato that the Kingdom of Saudi Arabia is....

Anybody that thinks KSA doesn't convulse badly just ain't paying attention.

An Oil shock could come at any time.

8 comments:

Anonymous said...

Don’t feel like the lone ranger. I figured that the ME would explode in sectarian violence, thus far that doesn’t even seem to be on anyone’s mind.
On the fossil water; have you seen where India is rediscovering their ancient aquifer recharge system? Unfortunately I can’t find anything about it online but, when they first started worrying about it, a decade or so ago, someone noticed that they had all these ancient earthworks, now runes, that served as small impoundments over fractured rock and other places where water can seep into the aquifer at an accelerated rate. If they rebuild the system, then most rainwater will be diverted in to small ponds above fractured rock, think of it as a gravel sieve. In other instances it would be diverted into a string of small ponds above a long fissure in the rock. The implications of the discovery are profound and way, way out in tinfoil hat land. After all no one needs to recharge an aquifer unless they can deplete an aquifer and how on earth did they manage that at some point before the Raj?

Best,
Dan

Anonymous said...

Oops, I need to pay more attention to paragraphs, apologies.

Best,
Dan

Dextred1 said...

Few thoughts,

Food inflation is a direct result of money printing by the FED. Commodities are priced in dollars so this is just an obvious reaction to inflation. This does not mitigate the fact of reaching a tipping point or peak in almost all commodities, I can’t think of one that is not up huge. This tends to portend an end to the deflation stage. Oil is set to explode!

Saudi Arabia is literally surrounded by countries (Yemen, Bahrain, Jordan, Egypt, our experiment in democracy Iraq and Syria) in complete anarchy and if you are reading the tealeaf’s it is obvious that they are the next one to go ka-boom. Oil is already up 5 dollars as you pointed out jeffers. The fact is we don’t get much oil from Mideast, but Europe does. With the debt crisis there, an oil price increase could blow up the bond/equities markets in Spain, Italy, Portugal, Italy, and Ireland and might finally end the dead dog that is Britain.

To be honest guys this is the type of situation that turns into a world war. Hungry, poor, deprived, inflation ravaged and repressed people can make tremendously bad decisions, but that is the simple explanations for all human war.

The problem I see with all of these nations is just like most conglomerations involved in revolutions, one ideology or group steps to the front when the previous dictators/puppets/etc are thrown out. Do we really think that Muslim nations with hard line Muslim groups like Hezbollah, Muslim brotherhood; Egyptian Islamic Jihad, Hamas, Etc are not going to ride the population bulge of a bunch of stupid kids? Hahahaha. They are using these young puppets to bring a unified Islamic state. Can’t wait till they start throwing bombs at Israel, then I might start getting real negative :)

Greg T. Jeffers said...

Dex:

I reject the Fed/food argument as I have posted before... but we shall see.

Dr. Michel said...

Peak Water.
http://www.pacinst.org/press_center/press_releases/peak_water_pnas.pdf

PioneerPreppy said...

There is more to the MENA revolutions/protests than meets our Western Eyes. This is not simply chain jumping movements sparking the next, nor is it food and/or water price based.

I fear we are seeing the first initial moves to a new "AbaSeluMid" Empire forming and it is being facilitated by the Imams and Clerics.

They see the great satan and the rest of the West is declining. The neighborhood cop no longer has the stomach to bash heads. The energy reserves are draining. Western Christianity is declining. Now is their time once again.

My guess is we will just start to see what is really up by Christmas. Maybe.

Greg T. Jeffers said...

PP:

On this I will take the other side of that trade.

Anonymous said...

I'm inclined to agree with Dex, in that the money printing is goosing developing economies big time. People are better fed. They are eating more meat, and also more in general. Food started to rise dramatically just before the economic collapse. Just like oil, we were given a short break in food too. I don't think there is a great mystery here.

The middle east is not sharing in this because the oil money was never used for economic development. The money that did make it out to the people was more in the form of subsidies. Now that oil exports are declining, there is nothing to fall back on, and poverty is increasing. It isn't going to get any better.

I'm inclined to believe that these revolutions are based in economic decline that will not be mitigated by changes in government. This is the beginning of decades of social upheaval and famine that will rock an area of the world that can no longer buy food for a population too large for the land to support. Note that Egypt recently became an oil importer. Food subsidies were reduced. Politics may be the excuse, but food is the reason.

No government may be stable in these conditions. I'm sure that desire for freedom and representative government is a strong component of the revolutions, but these despots have been in power for decades. Why now? If the new governments have no power to resolve the underlying economic issues, they don't stand a chance. And they don't.

Regards,

Coal Guy