Archive for March 3rd, 2008

The "Holy Crap" Files

Sharon March 3rd, 2008

I’m going to guess that most people missed what I think might be the most shocking news of the week. No, it wasn’t Chavez massing on the Columbian Border, Obama overtaking Clinton in Texas polls or the EU Energy Commissioner announcing oil could hit $200 Barrel

No, the big news got almost no attention, but it should have.  It was the revelation that Saudi Arabia has decided to stop growing wheat, and rely entirely on imports because they don’t have enough water to grow their own food.  The Financial Times reports,

The decision would represent a significant shift in policy for the Saudi administration, which launched an agricultural development programme in the 1970s, including the establishment of irrigation networks, to become self-sufficient for some food supplies.

From producing about 3,000 tons of wheat in 1970, Saudi Arabia became a net exporter and by 1991 production had reached 3.8m tons, according to government -figures.

However, water resource issues have previously led to reduced production of wheat and other grains. Demand for water is increasing rapidly in Saudi Arabia as the population has swelled from 7m in 1974 to about 24m, and the economy expanded during the oil boom, with the government seeking to boost industry.

The country has no permanent rivers or lakes and very little rainfall, and the government has relied on dams to trap seasonal floods, tens of thousands of deep wells and 27 desalination plants.

“Water will always be a critical issue in the kingdom, a country that relies on desalinated water for drinking and other uses will always be under pressure,” said Said Alshaikh, chief economist at National Commercial Bank.

“It is so expensive to produce water in Saudi Arabia.”

 It is almost impossible to overestimate how significant this is.  Think about it – the House of Saud and its government have an enormous investment in keeping their society stable – it is the key to the power of any ruling body, and particularly important in Saudi Arabia, where there is a great deal of such instability.  Food riots are the last thing Saudi Arabia can afford. 

 Now let us assume that this policy shift is being made in full awareness of the present biofuels boom, rise in staple food prices and the associated instability.  We’re already seeing food riots in some places, and these seem bound to continue.  Absolute shortages are being discussed and Saudi policy makers are clearly aware of climate change and its potential impact on their region.  Meanwhile many nations, including Russia, are raising tariffs and exporting less grain because of fear for their own people’s supply, further stressing availability. 

There are only two possible explanations for this.  The first is that Saudi Arabia’s absolute water shortages are so extreme that they simply cannot afford to use water for agriculture.  If this is the case, then it does not bode well for the the Saudi people, or for the long term stability of the government or the region.  The fact that the government is willing to risk food shortages in the longer term to protect its limited water supplies now suggests a real and deep and urgent crisis that will likely become more acute if climate change accelerates, as it seems bound to.

The other possibility is that Saudi Arabia is confident of its long term ability to outbid just about anyone for grain production, and is confident that supplies will continue to outstrip demand in the future.  This seems just barely possible to me – that the Saudis recognize that their resources will become so valuable that they can outbid car owners, and even nations trying to keep food reserves.  But since Saudi Arabia will become an enormous consumer of imported wheat, and already relies heavily on food imports, this strikes me as the less likely scenario.  Few nations are willing to give up minimal sovreignty and become dependent – as the article notes, this reverses a long term commitment to independence.  

I doubt that major Saudi leaders are unaware of the projected growth in food needs worldwide – they know they will be competing with an expanding population and an expanding demand for meat and biofuels.  Their oil reserves will likely make them rich for some time to come as oil prices remain high and rise, but the House of Saud has never shown any great desire to redistribute its wealth to the general populace, which it would effectively have to do to import and subsidize wheat and other foodstuffs for a population that is growing nothing.

 No, the far more likely explanation is that the water crisis in Saudi Arabia is so severe that they cannot feed themselves and provide for the water needs of their population.  And if things are already that acute, how long until the next choice has to be made, and the next and the next?  How long before the populace of Saudi Arabia begins to express its discontentment?

In a time of rapidly rising food prices, where projected growth in agricultural prices is almost infinite, and as the planet reaches a crisis point in feeding itself, the decision of a nation to simply give up growing staple foods is a signficant and drastic choice that is most likely motivated by teetering on the edge of a real disaster.

And it is a disaster that we should be paying attention to for a number of reasons.  The first, and simplest is that it mirrors hard choices that will have to be made elsewhere.  As the planet gets hotter and dryer, more and more places will have to make these choices.  As aquifers are depleted, more and more countries will depend on one another to meet their food shortfalls – and more and more hunger will result.

 But also, virtually all scenarios that postulate a reasonably ordinary decline in oil supplies postulate them in a world where global exports operate as they do now, and oil is sold on the market place.  But if Saudia Arabia is experiencing extreme enough concerns about water to stop agriculture, this shows an underlying fissure in the stability of that country.  We depend on Saudi goodwill – or rather, the goodwill of the House of Saud – for a large portion of our present and postulated future oil supply.  But the Saudi people do not love us, and it is not impossible to imagine that our supplies might not decline evenly, but precipitiously in the event that the Saudi government was unable to hold power. 

Edited to Add: A little while after I posted this essay, a piece by Yair Wallach appeared on The Oil Drum that provides more detail on the way food price rises will play out in the Middle East.  It does not mention SA’s decision not to grow wheat, but provides more evidence of the ways food and water may destabilize Mid-East politics.   

Sharon