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Simmons is fond of quoting oil in price per cup. He uses 15 cents per cup to show how cheap it is compared to anything else of any value. He must not have checked out agricultural commodities. A pound of corn which is more than a cup sells for about six cents locally. How is it that as oil prices rise to $300 that agricultural commodities can remain priced so cheaply? If they do, ethanol/biodiesel production will continue to expand.
Critics of oil sands, ethanol, biodiesel often complain that these are not a cure all as promoted by some advocates. It is not necessary to have a cure all, silver bullet type solution in the early stages of post peak oil where the decline rate is relatively small. Some conservation brought by higher prices (finally) and increased production of tar sands, ethanol and biodiesel will partially mitigate peak oil effects initially. I think that is what is happening now in that gasoline prices are slow to follow crude oil's lead to new highs.
No, practical, corn is not six cents per cup.
There are 128 cups per bushel.
Corn, according to Friday's close, is 3.77$ per bushel.
3.77 divided by 128 equals .029453125. Let's call it 3 cents per cup. I would say that that is substantially less six cents.
If you remember correctly, he said that nothing "worthwhile" is priced less than fifteen cents a cup.
While food seems very "worthwhile" to me, others apparently find that not to be the case.
http://www.populistamerica.com/stop_calling_me_a_doomer
If you ground that corn up and packed it into a cup to remove most of the air volume, does it make a difference?
:-)
--
Jaymax (cornucomer-doomopian)
Since oil and natural gas based fertilizer are among the main inputs into corn, the price of corn is going to go up with the price of crude oil. Since is takes at least 5 barrels of oil and gas to produce ethanol with the energy equivalent of 6 barrels of oil, the cost of ethanol is going to go up a lot, too.
Most fertalizers are made of Natural Gas. If oil rose to $300, but NG stayed at $7 MCF, or even doubled to $14 MCF, food price increases will be much less than you think.
PartyGuy,
Only nitrogen fertilizer is made out of natural gas. Phosphorus is mined from phosphate rock deposits mostly located in Florida in the US and potash is from strip mines in New Mexico in the US. Its hard to call one-third of the fertilizer requirements "most fertilizers are made of natural gas".
Another big source of nitrogen fetilizer is bird guano. Mostly in the US agribusiness manure is a pollutant in water run-off although some is composted and sold in garden supply stores. Its a real wasted asset.
Bob Ebersole
Nitrogen fertilizer is the "dominant" fertilizer of the three nutrient fertilizers you refer to. Approximately 85% of all ammonia used in the US is used for nitrogen fertilizer, a substantial amount as anhydrous ammonia. At more than $500/ton, it has gotten quite expensive.
Phosphorus (as phosphate) and potassium (as potash) while "mined" also require substantial treatment to turn to suitable agricultural products. That means energy.
In addition to the phosphate mined from Florida (the highest point in Florida is actually a gypsum stack from the phosphate rock processing), you also have substantial deposits in eastern NC (Aurora, PCS Phosphate) and eastern ID (Soda Springs). In the case of the Eastern ID deposits, the rock is either hauled by dedicated haul road (the trucks on this road have the right of way when the cross "ordinary" roadways) or pipelined to the phosphate plant. PCS Phosphate in Aurora is the single largest phosphate mine in the US ( if not the world).
All "manures" tend to be high in nitrogen (and phosphorus) but there is a transportation/cost issue with the weights required for commercial agriculture.
I believe he often compares it to the cost of water...
I'm not sure that his argument is that it should cost more than water, which i would disagree with, but that it should be at least at parity with water.
Really? You don't think that crude oil, which takes hundreds of millions of years to form, and fairly rare geological structures to preserve until today, made from millions of years' worth of sunlight, shouldn't cost more than something that falls freely from the sky?
--C