Wednesday, February 02, 2011

Will Ethanol Break the Muslim World After All?

Ethanol has proven to be an inadequate solution to the problem of foreign oil, but it has toppled at least one Arab ruler and may not be done yet. The Soros backed college students and the Islamists have done their part in the protests, but the Tunisian and Egyptian mobs would never have made their showing without a goad. And the goad was high wheat prices. Part of the spike in wheat prices was due to the shift to ethanol production.

Remember when Americans were lining up with cans of gasoline during the OPEC oil boycott? Arab Muslims are now in the same boat, except with bread, rather than oil. Arab countries are frantically buying wheat, especially after the events in Tunisia and Egypt. Regime stability in the Middle East is now tethered to wheat prices. The Arab has prided itself on the power to pressure America using the price of oil, but the United States has now proven that it can do the same thing to the Arab world with the price of wheat. The price of oil may be climbing in America, but in Saudi Arabia the price of wheat is up by more than half.

The Arab-American relationship was built on a power inequity. They had a resource that we needed. But now we have a resource that they need even more badly. While you can do a lot of things with oil, you can't eat it. And while Americans may get angry when oil prices go up, unlike the Arabs, we don't overthrow the government. Of course anyone can grow wheat. China and India are the world leaders in wheat production. Behind them, Russia, America, Australia and Canada. But Russia has just stopped exporting grain. China uses most of its wheat domestically too but is ramping up export production. Wheat however is only one commodity. There are others.

The Arab Muslim world has held American foreign policy hostage using the one commodity they had that we needed. But as a side effect of their own terrorism, we adopted a course that unintentionally spiked up the price of a commodity they needed. They acted as if violence and chaos could only benefit them by driving up the price of oil, but the rising price of wheat is blowback. We of course did not set out to hammer the Muslim world with ethanol subsidies (though a smarter and cannier administration might have done that) and that is the beauty of it. Instead while trying to untangle ourselves from foreign oil because of their behavior, the net effect was to demonstrate their own instability.

It's more than a lesson in the interconnectedness of the world in the age of globalism. It is also a reminder that we may have more power than we realize. We don't need to invade a country and then occupy it for years at the cost of billions of dollars and thousands of lives. As it turns out we can topple regimes even faster with ethanol subsidies. Of course this isn't actually a solution. Wheat prices hit the poorer Arab countries the hardest. That being the countries without the oil. The net beneficiaries of populist protests will be the Islamists. And wheat won't be a permanent lever. China will ramp up its wheat production more aggressively in response to higher prices. We lack the wheat equivalent of OPEC to function as a price setting cartel. And the current conditions which brought together droughts in China, flooding in Australia and ethanol subsidies in America are close to unique. But what they do is show our power.

Ethanol is controversial on the left because it raises food prices and controversial on the right because it is built on subsidies and regulation. As a substitute for oil, it's inadequate, but as an economic weapon it raises certain possibilities. The United States is an economic superpower, but that is a power we rarely leverage. While the Muslim world has conducted a multipronged assault using lawfare, economic warfare and proxy terrorist groups-- we responded with charm offensives and massive armed offensives. But it can't hurt to take a page out of their book. To also use more subtle weapons. Including economic warfare. And as has already been demonstrated, price volatility can have a more explosive impact than a bomb.

The Muslim world has a small upper class, a sliver of a middle class and a huge underclass. While the trappings of the 21st century are there, from cell phones to the internet, there is more than a slight whiff of the feudal about the whole arrangement. Tyranny and brutality won't upset the applecart, but food availability does. (Medieval revolts were often triggered by high food prices.) What a feudal system needs above all else is stability. The illusion of a timeless order. A way of life in which change does not even exist. Instability is like lighting a match in a crowded room filled with fumes. And we have already seen what that match can do.

Arab Muslim rulers have bought peace at home by exporting their surplus populations and their terrorists to America and Europe. They have spun hateful fantasies about America and Israel to direct the anger of their own citizens away from the government. And we have been paying the price for it. Their artificial stability fuels our terrorism and the rape gangs and murders in our cities. The blowback from their terrorism has rebounded against them before. But always in a limited way. And with plenty of warning. This time though there was no warning. Just an economic tidal wave headed their way.

The rise in the price of wheat has hurt Americans. Particularly working families. But it has hurt the Muslim world far more. With the Obama Administration's continued commitment to ethanol subsidies, wheat prices are likely to keep on rising. And even with a Republican congress, that may not change significantly, because subsidies develop an interest based appeal of their own. Iowa is a swing state and ethanol is big business. The ethanol tax credit and tariff went through the Senate in December at 81 to 19 and 277 to 148 in congress. Throw in a cold winter and wheat prices are only going to keep rising.

In 2007-2008, Egypt saw major food riots break out. As did Yemen, Somalia and Bangladesh. The UN and the Davos summit have already issued urgent warnings about political instability due to food prices. The Islamists and Soros' boys have successfully piggybacked on this year's food riots, making it seem as if they had a massive following in the streets and a mandate for change. They succeeded in Tunisia, but Egypt is still up for grabs. But whoever replaces the dictators will not do any better. The Muslim Brotherhood wants to burqa all the women and start a war with Israel. That will certainly make the average Egyptian temporarily forget about the price of bread, but will make matters much worse.

Pushing women out of the workplace is economically feasible in Saudi Arabia, wallowing in its own oil. It's feasible in generally rural Afghanistan or Gaza which lives off foreign aid anyway. But it doesn't even fly in Iran and would mean economic disaster for Egypt. Cutting ties with America and beginning an expensive war with Israel wouldn't reduce the population much, but would cost a whole lot, and unlike 1967 and 1973, the Russians won't be footing the bill. And what would the price of bread look like then?

The Islamists have two weapons on their side. Oil and the birth rate. But the former can't be eaten and the latter must eat.


mindRider said...

Like usual most of the world's problems stem from the excessive birthrate and the inability of the system to cope with the needs of those added individuals. Instead of recognizing this and curbing the growth with decent family planning (not the chinese way) the illiterate masses listen to their religious leaders that forbid such curbing and the governments in those countries for political reasons do not provide free anti conception means to the aim either so the overpopulation problems keep on popping up and causing turmoil.

jpeditor said...

The hell with ethanol, America should be DRILLING FOR OIL EVERYWHERE and we wouldn't need to starve them with "market" increases in wheat, we simply wouldn't be BUYING AS MUCH OF THEIR OIL.

Charles said...

I wonder if the person who wrote this is living in a time bubble or out of touch totally. Without oil, industry and military halts. Without wheat there are alternatives/.

Here in Europe, there is panic over food shortages, yet the only concern seems to be the Arab states. The Arabs are used to living without wheat.

DP111 said...

There is an assumption that our long-range policies are designed to bring about democracies in the Islamic world. Our politicians may say so, just to bring along the Western populace, who are deeply against any interventions in Third world countries. There is though no reason to assume such. Our policies have always been to weaken our historic enemies,and sometimes even friends (Britain’s policies in Europe for the last 500 years), by de-stabilising them in whatever form. Its the Great Game all over again.

Mubarak in this view, has to go, not because we want to bring the light of democracy to Egypt- but to de-stabilise the entire ME. The occupation of Iraq after Gulf War II, can also be seen in this light. In Iraq we used the excuse of WMD, and when that got shop worn ,we made democracy, with amazingly, sharia, as the stated goal, to invade it, thus setting the Islamic world in ferment.

The net result of Iraq, and now Egypt, will be to dramatically alter the balance of power between the Sunni and Shia worlds. This is already evident. The other result is to is to weaken the Arab world as a whole, reducing even Saudi Arabia, which is now isolated, to become a client state. This will be a novel situation for the Saudis, who till now, have relished in using the power of oil against the West.

In Afghanistan, we used that small and powerless country, to de-stabilise Pakistan. We then support India as a balance against China. Its the balance of power game.

DP111 said...

Its a given, even in the Israeli media, that the fall of Mubarak and its replacement by the MB, will be bad for Israel.

I will now take a different view. So far the US and the EU, has pressured Israel to give in to virtually all Arab demands. The reason stated, or unstated, is that if the ME process does not move forward, it will lead to the fall of "moderate" Arab regimes of the sort of Mubarak. The result is that Israel keeps losing any sympathy for its cause, both within and without Israel. The eventual destination of this road leads to the piece by "peace" destruction of Israel- as it is no longer a viable geographic and strategic nation. Essentially it forces Israel to commit suicide.

The fall of Mubarak, like so many unintended consequences, may actually liberate Israel from its so called supporters. Even In Israel, the "Peace Now" fanatics will be silenced, or lose credibility. Its evident that even Left wing media in Israel are concerned about the fall of Mubarak. We see thus, that real danger concentrates the mind to the essentials.

Coming to the thread topic. The rise in the price of grain will not affect the Saudis onw whoit. However, the loss of a Iraq as a bulwark against shia Iran, has dramatically altered the balance of power between Shia and Sunni. Loss of Egypt to the MB, will concentrate the minds of the Saudis wonderfully. The enablers and financiers of Jihad worldwide, and the main actors in 9/11, will now feel the aftereffects of 9/11. It was not possible to invade the Saudi Arabia after 9/11, as they were the keepers of Mecca and Medina. But in much better way they are now feeling the heat.

Anonymous said...

Canada has all the oil you need, America. It's ethical oil from our Alberta oilsands.

Daniel Greenfield @ the Sultan Knish blog said...

I don't know if that's so, given the willingness of the media and the left to redefine even the worst Islamists as moderates, witness the coverup for the Muslim Brotherhood right now

Paul said...

Interesting observations.

One can go a few steps passed the end product of wheat and start looking at land use itself. The Middle East has very little land available for food production. Mostly it is desert. We still have a lot of land in the industrialized world that exists for food production, but industrialization is what has made it possible and this means oil. Since agriculture is basically a mineral extraction, depleted land has to be supported and revitalized by fertilizer, which also means oil. There is also pesticides, which also mean oil. And also distribution which means oil for plastic packaging and moving crop yields.

But pathological population growth rates are what confound the powers represented by either geolographical advantage. Land use in the US is increasingly bound up in real estate development and so our food productivity is limited by population growth.

In the end, both the power of oil and the power of available land for food production run out and all the power in the world will have no place to go for something to eat. Those closest to the food supply are the last to be vulnerable, but time is running out there too.

Readwriteblue said...

I can remember in the 70's hearing about not calling them OPEC and instead calling them the Organization of Food Using Countries. The battle cry back then was, "One bushel of Wheat for One barrel of Oil." The more things change the more things stay the same. OFUC is here again.

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