Oil prices in 2011 averaged record highs, despite global economic woes.

Brent crude, the world oil benchmark, averaged $111 per barrel, breaking the previous record of an annual average high of $100 set in 2008. That spike contributed to a huge global recession. West Texas Intermediate (WTI) rose even more, averaging $95/barrel, an increase by 20% over its 2010 average price of $79. WTI traded at a hefty discount to world oil prices throughout the year – as much as $26/ barrel.

Global automotive market intelligence firm Polk forecasts worldwide new vehicle sales in 2012 will rise 6.7% over 2011 volumes  to 77.7 million vehicles. Polk expects China to make the largest contribution to global sales growth for new vehicles, with an anticipated 16% increase over 2011.

Polk expects that U.S. light vehicle sales will increase by 7.3% to 13.7 million vehicles. As this chart by Calculated Risk shows, sales are struggling to return to levels reached almost two decades ago, when the U.S. population was ~50 million less than today.

Polk is optimistically forecasting U.S. auto sales to return to “normal” levels of greater than 16 million vehicles per year by 2015 – and for global auto sales to approach 100 million by 2016.

Where is the gasoline to power all these new cars going to come from? Despite record high global oil prices, global oil production is refusing to budge. Members of the Organization of the Petroleum Exporting Countries (OPEC) – which supply ~42% of global production – produced an average of 30.74 million barrels per day in December 2011.  OPEC production has been fluctuating within a ~5% band, as has global production.

Production of crude plus condensate has been basically flat since 2005, with new sources just barely managing to compensate for a 5% decline per year from existing production. Any increase in total liquids over that time has largely come from increases in NGPLs and other liquids.

Total liquids production worldwide increased 0.5% per year from 2005 to 2010 – but that includes low net energy fuels such as biofuels. However, the global supply of net oil exports available to importers other than China and India (what Jeffrey Brown calls Available Net Exports, or ANE) fell at a rate of 2.8% per year from 2005 to 2010. Brown expects oil available for import by most of the world to fall by 5% – 8% each year for the rest of the decade.

In Saudi Arabia (now the world’s second largest oil producer after Russia), production has been declining.  Only a dozen or so of the 54 oil producing nations in the world are still increasing their oil production.

If global economic growth, feeble though it may be, manages to continue in 2012, we can expect even higher oil prices. Even if people are willing and able to pay higher prices, there are limits to global supplies of oil that can be refined into motor fuels. What good will all these new cars be, if there is not enough fuel to power them?

It’s a good bet that rosy forecasts for U.S. and global auto sales will prove to be powered by nothing more than fantasy.

The World Meteorological Organization recently reported global greenhouse gas emissions rose at a record pace in 2010. Now another new analysis by the Global Carbon Project, an international collaboration of scientists, comes to the same conclusion: emissions rose 5.9 percent in 2010, the largest amount on record. The combustion of coal represented more than half of the growth in emissions.

The brief pause in the growth of emissions during the recession is over, at least for now. Emissions grew at a rate of ~3% yearly during the last decade. The growth rate in the 1990s was ~1% per year.

The analysis showed developing countries, including China and India, have surpassed the wealthy countries in greenhouse emissions. In 2010, developing countries were responsible for 57% of global emissions. But don’t think that rich countries are off the hook. The fast rise in developing countries has been caused to a large extent by the outsourcing of energy-intensive manufacturing industries. The rich countries have exported some of their emissions while continuing to consume the imported goods.

Meanwhile, the climate talks in Durban are going nowhere. The latest “earth-shaking” news is that China may agree to legally binding emissions reductions – but no earlier than 2020, and only if Kyoto is extended, and only if rich nations kick in $100 billion annually to a nonexistent mitigation fund. The U.S. is saying it isn’t interested, preferring “bilateral agreements”.

The clock is ticking. If the rise in greenhouse gas emissions is not reversed quickly and substantially, by 2020 it will be game over for saving Earth’s human-friendly climate.

Global temperatures in 2011 have likely been warmer than any previous strong La Niña year, according to the World Meteorological Organization (WMO).

Despite a relatively cool, La Niña influenced 2011, the 10-year running average for the period 2002-2011 ties 2001-2010 as the warmest 10-year period on record.

Even before the climate talks in Durban began on Monday, participating nations were conceding that the chances of reaching any meaningful agreement were zilch. Expectations are low: the best to be hoped for is an agreement to begin negotiations on a global deal that can be implemented by 2020, along with making “some progress” on establishing “financing mechanisms” to help developing nations deal with the impacts of global warming. With western economies in the process of imploding, any agreement on money transfers – no matter how modest – may now be out of reach.

Two days into the talks, actions by Canada threaten to torpedo what remains of the global climate process. A rumor surfaced that the government of Conservative Prime Minister Stephen Harper plans to formally withdraw from the Kyoto Protocol on curbing climate change before the end of 2011. Canadian Environment Minister Peter Kent, commenting on but refusing to confirm the report, referred to the Kyoto agreement as “in the past” and stated that opting into the treaty was “one of the biggest blunders” made by the previous Liberal government.

The “rumor”—coming so early in the climate negotiations—is likely to render the low-held chances for a treaty breakthrough at the Durban talks even more remote.

Time is fast running out if catastrophic climate change is to be averted. Just recently Fatih Birol, chief economist at the International Energy Agency (IEA) and one of the world’s foremost authorities on climate economics, warned:

If we do not have an international agreement whose effect is put in place by 2017, then the door to holding temperatures below 2 ° C will be closed forever.

The thinking that a 2 ° C rise would be “safe” is optimistic, as no climate model currently incorporates the amplifying feedback from methane released by a defrosting tundra. A new study published in Nature titled Climate change: High risk of permafrost thaw finds the permafrost can be expected to releases up to 380 billion tonnes of CO₂ equivalent by 2100:

Arctic temperatures are rising fast, and permafrost is thawing . . . . Our collective estimate is that carbon will be released more quickly than models suggest, and at levels that are cause for serious concern.

We calculate that permafrost thaw will release the same order of magnitude of carbon as deforestation if current rates of deforestation continue. But because these emissions include significant quantities of methane, the overall effect on climate could be 2.5 times larger.

The new study only looked at the land-based permafrost.  A study published last year warned release of even a fraction of the methane stored offshore in the Eastern Siberian ice shelf could trigger abrupt climate warming.

The new study finds:

Across all the warming scenarios, we project that most of the released carbon will be in the form of CO₂, with only about 2.7% in the form of CH₄. However, because CH₄ has a higher global-warming potential, almost half the effect of future permafrost-zone carbon emissions on climate forcing is likely to be from CH₄. That is roughly consistent with the tens of billions of tonnes of CH₄ thought to have come from oxygen-limited environments in northern ecosystems after the end of the last glacial period.

Edward Schuur, lead author of the study in Nature, pleads that we must address the source of emissions from humans if we are to have any chance of keeping Arctic carbon frozen in permafrost rather than going into the atmosphere.

Given what’s going on in Durban – where the best outcome that can be expected is for the rich nations to agree to throw a hundred billion dollars or so as a sop to the poorer nations, rather than actually doing anything to slash emissions – the chances of that coming to pass are approaching zero.

A recent post noted the U.S. was grouped at the bottom of the OECD countries in terms of social justice. A reader asks, how does the U.S. stand compared to the “1000 lb. gorillas” in terms of population – India and China – and other nations in, for example, South America?

The “social justice” rankings look at a number of different factors, including poverty, education, health services, intergenerational equity, and income inequality. The GINI index is used to measure income inequality. Overall social justice ratings are not available for all nations, but the GINI index is compiled for most of the world’s nations – by the CIA, no less! While the GINI Index may not be a perfect measure of social justice, there’s a pretty good correlation between the two, and it’s the best we’ve got.

The CIA World Factbook explains the GINI Index “measures the degree of inequality in the distribution of family income in a country.” The Big Picture highlights where the U.S. stands:

There we are at #39 (out of 136 – the lower the ranking, the more unequal), right next to Bulgaria and Cameroon. The CIA’s ranking of the 136 countries listed is here.

China is #52 at 41.5, India #80 at 36.8. Russia is #51, at 42.2. Fine company the U.S. finds itself in – we’re not close to even rubbing shoulders with the European countries from whom we claim to have inherited the mantle of civilization and global leadership.

It wasn’t so long ago the U.S looked quite a bit better.

A GINI rating of o.39, which the U.S. sported about 30 years ago, would today put us in the same company as Mauritius, Malawi, and Mauritania. Now there’s something to aspire to! With a little more work we might be able to match Moldova, and then maybe even Yemen!

But we’re moving in the other direction. Banana republic, here we come!

Seth Borenstein of the Associated Press reports that greenhouse gases in the atmosphere are increasing faster than the worst case scenario outlined just four years ago in the IPCC’s 4th Assessment Report:

The global output of heat-trapping carbon dioxide jumped by the biggest amount on record, the U.S. Department of Energy calculated, a sign of how feeble the world’s efforts are at slowing man-made global warming.

The new figures for 2010 mean that levels of greenhouse gases are higher than the worst case scenario outlined by climate experts just four years ago.

Humans emitted about 564 million more tons (512 million metric tons) of carbon into the atmosphere in 2010 than it did in 2009 – an increase of 6%. Joseph Romm at Climate Progress posts these graphics.

China, the United States, and India are the world’s top producers of greenhouse gases. While the U.S. dithers and does nothing to stop global warming, the power to do so has slipped out of our hands. Earth’s fate now lies largely in the hands of others.

Emissions in developing countries are rising very rapidly and are projected to continue doing so. For example, between 1990 and 2009, among the top 5 emitting countries, China increased its per capita emissions by over two and a half times and India doubled them.

The demand for coal in India is expected to increase rapidly in the future, dominated mainly by the power sector as India’s government aims to double power generation over the next decade. India is currently the third largest producer of coal in the world; and India’s coal imports, which totaled 55 million tons in 2010, are expected to rise to 186 million tons by 2014 and to soar to ~300 million tons by 2016. China’s coal consumption rose to 2.28 billion metric tons of coal in the first nine months of 2011, up 10.3% from 2010. China is projected to more than double its consumption of coal by 2035.

OPEC forecasts that the use of all fossil fuels will continue to rise – with the burning of coal to more than double by 2035:

Raymond Pierrehumbert at RealClimate sums up all you ever really need to know about CO2 emissions and climate:

• The peak warming is linearly proportional to the cumulative carbon emitted
• It doesn’t matter much how rapidly the carbon is emitted
• The warming you get when you stop emitting carbon is what you are stuck with for the next thousand years
• The climate recovers only slightly over the next ten thousand years
• At the mid-range of IPCC climate sensitivity, a trillion tonnes cumulative carbon gives you about 2C global mean warming above the pre-industrial temperature.

Pierrehumbert notes we have already emitted about half the trillion-ton figure, so our whole future allowance is another 500 gigatonnes – assuming Earth herself doesn’t kick in. Nehring (2009) estimates that known global economically recoverable coal amounts to 846 gigatonnes, based on 2005 prices and technology. That’s ~634 gigatonnes of carbon, which all by itself is more than enough to bring us well past “game-over.” Proved reserves of conventional oil add up to ~139 gigatonnes C, proved natural gas reserves another ~100 gigatonnes C – and these two energy reserves are so valuable and easily accessible that it’s probably inevitable they will get burned. The carbon associated with the Athabasca oil sands deposit adds up to about 230 gigatonnes; estimates of how much of that will ultimately be economically recoverable vary from 10% to 70%.

And Earth herself is starting to kick in. Drying of northern wetlands has led to much more severe peatland wildfires and nine times as much carbon released into the atmosphere, according to new research led by University of Guelph professor Merritt Turetsky:

Russia, Indonesia and Canada all have abundant peatlands, but they also have been hotspots for intense peat fires in the past decade. Our study shows that when disturbance lowers the water table, that resistance [to fire[ disappears and peat becomes very flammable and vulnerable to deep burning. * * * Currently, peatlands are considered important global stores for carbon. But we’ve shown that human disturbance or climate-induced drying can switch peatlands from sinks to potentially huge sources of carbon, with losses associated with severe burning far outweighing long-term rates of sequestration.

And then there's the shocking conclusion from the study “Amount and timing of permafrost carbon release in response to climate warming” in Tellus by NOAA and the National Snow and Ice Data Center (NSIDC):

The thaw and release of carbon currently frozen in permafrost will increase atmospheric CO2 concentrations and amplify surface warming to initiate a positive permafrost carbon feedback (PCF) on climate. . . [Our] estimate may be low because it does not account for amplified surface warming due to the PCF itself. . . We predict that the PCF will change the arctic from a carbon sink to a source after the mid-2020s and is strong enough to cancel 42-88% of the total global land sink. The thaw and decay of permafrost carbon is irreversible and accounting for the PCF will require larger reductions in fossil fuel emissions to reach a target atmospheric CO2 concentration.

There are ~1,672 billion tonnes of carbon equivalent trapped in the form of methane in the Arctic permafrost, about twice as much carbon as currently contained in the atmosphere. Methane is 25 times as potent a heat-trapping gas as CO2 over a 100 year time horizon – but 72 times as potent over 20 years.

Even the International Energy Agency is warning time is running out to avert catastrophic climate change. Fatih Birol, the agency’s chief economist, says he’s not optimistic that anything will be done.

While humans continue to fiddle and burn, Earth’s carbon cycle is slipping beyond human ability to control.

Last November the German Bundeswehr published an extraordinary study of the implications of peak oil. An English version of that study – titled Peak Oil: security policy implications of scarce resources – has now been made available, and is posted at Energy Bulletin. The peak oil study is Sub-study I of a two-part study entitled “Armed Forces, Capabilities and Technologies in the 21st Century – Environmental Dimensions of Security”, undertaken by the Bundeswehr Future Analysis Branch addressing the subject of finite resources and their potential security policy implications. The second part of the study will deal with climate change and demography.

The Study begins by accepting the reality that peak oil is upon us . . .

The term “peak oil” stands for the maximum rate of oil production and refers to the point in time at which the rate of a single oil field, of an oil-producing region, or globally reaches its absolute peak. * * * From peak oil, however, this level will irreversibly decline in the long term. Generally speaking, oil will therefore continue to be available and recoverable beyond the 30-year timeframe chosen in this study, albeit in quantities that are possibly too small to fully satisfy global demands and at considerably higher prices.

. . . without quibbling about the exact point in time at which the peak occurs:

The precise global peak oil date is controversial and can only be determined with certainty in retrospect.

The study states the reality that every nation in the world has a vital interest in securing energy supplies. While the world’s leaders may not be talking about peak oil to their publics, that doesn’t mean ruling elites are not fretting and plotting behind the scenes.

It can therefore be stated that against the backdrop of the ever-decreasing availability of fossil fuels, the challenge of ensuring long-term energy supply is reflected in national strategies worldwide, leaving no doubt as to the vital importance attached to this issue. In this context, the fact that energy supply aspects occupy an increasingly important place in the national security strategy documents of various countries is an indication of the increasing securitisation of this area * * * is likely to have consequences on the nature of future energy relations.

It’s impossibly to foresee what the impacts of declining oil supplies will have on our lives. What’s certain is that oil-importing countries will, with increasing desperation, be scrambling to secure their share of ever-diminishing supplies:

Ultimately, it is hardly possible to calculate from today’s perspective how suppliers and consumers will respond to global peak oil. Against this backdrop, the continuous assessment of diversification opportunities seems equally necessary and difficult, particularly with regard to the ousting or competition effects with other oil-importing countries that such efforts would bring about in the face of declining production rates.

If peak oil unfolds in a “moderate” form, global business could proceed more or less as usual, only with producer countries gaining power and influence at the expense of importer countries. There would simply be a re-balancing of the global balance of power. But there’s a darker possibility, where the world devolves into political and economic chaos:

[A]peak oil scenario in which a so-called “tipping point” is exceeded where linear developments become chaotic and finally result in a worst-case scenario in terms of security policy. For example, if the global economy shrinks for an indeterminate period of time, a chain reaction that might destabilise the global economic system is imaginable. Depending on point in time and the level of dependence of the affected society, such a peak-oil-induced, economic tipping point might have such severe systemic implications that only a few general statements as to economic, political, and social developments beyond the tipping point can be made. This will clearly change the analytical framework for all other security policy conclusions. Because of the widely unexplored “tipping point” phenomenon, it is impossible to conduct a comprehensive analysis of possible effects of such a trigger element. Rather, this study is designed to raise awareness of a possible nonlinear economic development due to peak oil and of the related risk of a severe system crisis.

Over time, obtaining oil will become more of a political rather than an economic endeavor, as governments seek to gain or retain control over a scarce and diminishing resource.

The study warns that in the short term, the global economy would respond proportionally to the decline in oil supply. The consequences laid out in the study read like today’s headlines. Increasing oil prices would reduce consumption and economic output, leading to recessions. The increase in transportation costs would cause the prices of all traded goods to rise, lowering trade volumes. For the unfortunate, this means losing income; for the even less fortunate, starvation. National budgets would be under extreme pressure, as revenues plummet as a result of recession and taxes are slashed in an attempt to restart the growth machine.

The study then gets downright apocalyptic: in the medium term, the global economic system and all market-oriented economies would collapse.

What does all of this mean for Germany and German foreign policy? After the global conflagration that was World War II, the rest of the world should be very interested in German thinking.

The study urges Germany to accelerate the transition to unspecified “renewable energies and raw materials” – without inquiry into whether such energies or raw materials actually exist or could serve to supplant oil and the other building blocks of industrial civilization. In the interim, Germany should continue to rely on its traditional energy mainstays: Britain,  Norway – and, above all, Russia:

[T]he relationship with Russia is above all essential for Germany’s oil and gas supply alignment. Furthermore, it must be determined to what extent energy partnerships can be established and supply relationships can be developed and consolidated with countries of the Caspian region, the Middle East and Northern Africa.

Germany should seek to diversify its sources of energy, with particular attention to the “strategic ellipse” which contains the bulk of the globe’s remaining energy resources.

The map – which shows up early in the study, as shown by its label “Figure 1″ – ominously recalls the theaters of the Second World War, where German strategy was to seize control of the oil fields of the Caucasus and the Middle East. Germans are still sensitive to their peculiar moral dilemma:

In light of global peak oil and efforts to establish strong, reliable relationships with oil-producing countries, value-based concepts of foreign, security and development policy may increasingly become subject to pressure to conform to more pragmatic rival models, like those already pursued by China and India.

A security policy more strongly focused on (economic) self-interest would be subject to special restrictions in Germany and, as evidenced by the discussions surrounding Bundeswehr operations abroad and Horst Köhler’s resignation as Germany’s Federal President, to extensive debate in politics and society. Especially in the Middle East and North Africa, Germany struggles to define its interests, which involve an element of power politics that has strong negative connotations in Germany and is irreconcilable with recent German history. Particularly in these regions, which are most important for future global energy security, Germany is thus mindful to emphasis ethical values as an important motivation.

As push comes to shove, it is realistic to expect that Germany will not reassert its national interest, even if that might be within a greater European context? And the struggle between ethical values and self-interest is not uniquely German. As peak oil begins to bite hard, that same struggle will be played out everywhere, in every nation, even within nations, around the globe.

The United Nations Food and Agriculture Organization reports the Food Price Index rose for the eighth consecutive month in February, to a new record high.

The FAO Food Price Index is a measure of the monthly change in international prices of a basket of food commodities. It consists of the average of five commodity group price indices (cereals, dairy, oils/fats, meat, and sugar), weighted with the average export shares of each of the groups for 2002-2004.

The index was up 2.2% from January and is the highest (in both real and nominal terms) since January 1990, the inception date of the index.

Rising food prices are resulting from increasing population, changing diets, and diverting land from food production to biofuel production – not to mention rising cost of energy inputs due to peak oil, and extreme weather brought on by global warming. The political instability we are beginning to see may prove just the beginning.

In January, sales at gas stations accounted for 10.34% of all retail sales, according to the Commerce Department. That’s the highest level since October 2008.

In July 2008 – just before the big crash – gasoline prices exceeded $4.15 a gallon and gas station sales accounted for 12.47% of retail sales. When gasoline prices last rose to $3.25 a gallon, in March 2008, gas station sales accounted for 11.55% of all retail sales – significantly more than now.

Fuel prices aren’t all that’s been soaring – food prices have, too. The United Nations Food and Agriculture Organization reports global food prices reached an all-time high in January 2011.

Last year, unusual and extreme weather – too hot or cold, or too dry or wet, due in part to global warming-induced climate change – affected major food producers and exporters around the world, from Russia and Ukraine to Canada and the U.S., Germany, Australia, Pakistan, Argentina and the countries of Southeast Asia.

Food riots have started again. Political unrest, stoked by rising food prices, is sweeping the Middle East and North Africa, threatening the stability of the world’s oil supplies. Egypt, Tunisia, Yemen, Libya and Bahrain have seen political uprisings. There have been demonstrations in Algeria, Jordan, Iraq, Morocco, and now Oman. Were instability to spread to Saudi Arabia, the world would tremble indeed.

The world’s food supply is highly dependent on oil.  In a back-of-the-envelope calculation, Paul Chefurka estimates the operation of the world’s food supply consumes about 23% of the world’s oil.

Oil shortages mean food shortages. Food shortages lead to political upheaval, disrupting oil production. Meanwhile in the U.S., we’re burning over one-third of our corn crop – one-sixth of the world’s supply of corn – to run our cars.  This chart is via Early Warning.

Running our cars and trucks is once again on the verge of becoming so expensive that the cost will blow up the economy.

And oh yes, in the U.S. the disparity of wealth between the rich and the rest has never been greater.

Leading indicators of revolt in the Middle East and North Africa include corruption, unemployment, and the percentage of household income spent on food.

Rising inequality in the U.S. is one measure of corruption. As the hijacking of the bailout by the banksters conclusively evidences, democracy in the U.S.  – with a big assist from the Supreme Court in Bush v. Gore and Citizens United – is nothing more than a sideshow and the U.S. is now demonstrably an oligarchy.

Unemployment? While the “official” rate is stated to have fallen to 9.0% – but that number would be over 11% were it not for millions of people allegedly dropping out of the labor force over the last year. And the more revealing U-6 rate is running at 16.1%.

And food costs? Over the 12 months, the food index has risen 1.8% with the “food at home” index up 2.1%; both 12-month changes are the highest since 2009. More tellingly, there has been a dramatic increase in hunger in the United States in the last three years and a record 14+% of the population is on food stamps. Maybe the rich can still buy food, but it’s getting harder and harder for everybody else as their incomes are dropping even as food prices rise.

If food prices are not yet making Americans scream, Americans are much more sensitive to rising prices at the pump – God help anyone who would interfere with our love affair with our cars. The energy index has increased 7.3% over the last 12 months, with the gasoline index up 13.4%. Crude oil prices have been fluctuating around levels last seen just before the 2008 spike to $147/barrel. One additional geopolitical spark could set off an explosion, the likes of which we’ve never before seen.

How long before growing inequality in the U.S. results in riots and unrest?  Is what we’re seeing in Wisconsin a mere harbinger of more serious struggles to come?

Our politics – whether local, national, or international – is laughably incapable of confronting reality. Here in Oregon, even a “progressive” governor has abandoned his environmental roots and embraced “economic development,” a policy direction reiterated by his newly-appointed natural resources adviser saying the focus will be “on jobs, not mainstream environmental issues.”

Lives, both of humans and political entities, are now at stake. But we’re still thinking within the old paradigm of “growth.” How long can it be before we at last drop the pretense, and acknowledge, and openly and honestly deal with the new paradigm reality has dealt us?

Are we seeing the beginnings of another global food crisis?  Consider:

• The United Nations says that the global price of food hit another new all-time high in the month of January and is projecting that the global price of food will increase by another 30 percent by the end of 2011.
• The price of wheat has roughly doubled since the middle of 2010. Unprecedented flooding in Australia has devastated the winter wheat crop. A severe and long-lasting drought in China is projected to have a huge impact on wheat production. Russia, one of the world’s largest wheat producers, is still reeling from the effects of last summer’s record high temperatures and is actually importing wheat this winter to sustain its cattle herds. Some of the worst flooding ever seen in Brazil has caused huge losses for agriculture in northeastern Brazil while at the same time drought and scorching temperatures are withering wheat, corn, and soybean crops in Argentina.
• The U.S. Department of Agriculture projects U.S. corn reserves will drop to a 15 year low by the end of 2011. The price of corn has already doubled in the past six months. Chinese imports of corn is now expected be about 9 times larger than originally projected for 2011.

One phenomenon underlies these disparate events: the extreme weather that is a predicted consequence of global warming. We are suffering the consequences of global warming right now, as manifested in rising food prices, food shortages, and political unrest.

While food prices are soaring around the globe, political unrest is rising as well. Here’s a catalog of recent events (hat tip to Jeff Rubin):

• Demonstrators force Mubarak out in Egypt. Egypt is the world’s largest importer. Egyptian food imports have been paid for by oil exports – but Egypt’s oil exports have been plunging since 1996. What’s hard to understand is why Egyptian dictator Hosni Mubarak would not want to take his purloined billions and flee while he can.
• Political unrest in Tunisia over high food prices in Tunisia recently sent strongman Zine El Abidine Ben Ali packing.
• Riots in Morocco, Algeria and Pakistan are related to the very sharp rise in food and commodity prices.
• Food riots in Algeria prompted three-term president Abdelaziz Bouteflika to lift a 19-year stage of emergency and to quickly place an order for a record 800,000 tonnes of wheat.
• Saudi Arabia, taking preemptive action, recently announced plans to double its wheat inventories.
• Bangladesh and Indonesia placed record rice orders; the former doubling its order, while Jakarta quadrupled its rice purchases.
• In Bolivia, President Evo Morales has been rattled by protests after trying to lift subsidies on gasoline, flour and sugar in December. He subsequently abandoned the effort — but did remove price controls on sugar, causing prices to double.

China may soon be putting additional pressure on global food supplies and prices. The severe drought in the north could result in China, normally self–sufficient in wheat, to become a significant importer this year, an eventuality that would push grain prices a lot higher.

Bill James at Seeking Alpha predicts that Mexico will follow Egypt into collapse within two years, due to the same interplay between rising food prices and falling oil exports:

• 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.

James illustrates his argument with two charts.

Without the ability to feed its people or fund its security forces, how can Mexico remain a viable government?

The question begs to be answered more broadly: without the ability to feed their people or fund their security forces, how can many of the struggling nations of the world retain viable governments? Rising food prices will make this question more and more salient.

The U.K. Guardian reports Wikileaks has released several real stunners, revealing Saudi Arabia privately admits that it cannot ever reach the purported 12.5 mbd capacity it has claimed.

The U.S. diplomatic cables published by the Guardian reveal Saudi officials concede global oil production will soon peak, possible as early as 2012. The cables relate that Saudi Arabia is not only struggling to maintain production, but that increasing domestic demand is leaving less oil available for export.

The Oil Drum observes that real world data supports what is secretly being said and has posted this chart from Energy Exports Databrowser showing not only that production has been dropping but that net exports are dropping even faster as internal consumption rises.

The situation in the Middle East overall isn’t much better: while production may or may not have peaked, exports are down significantly from the 1970s because of rising consumption.