Doug Saunders, the “Reckoning” columnist in the Globe and Mail columnist, can usually be counted on for some Saturday-morning insights. It’s his job: “examining developments in the world of intellectual and political ideas, keyed to current news developments.”
Today he quotes a commodities broker to make the link between oil and the price of bread. Hardly an original insight – but the broker goes further:
… in his world, (there are) only four demands: the creation of transportation, the generation of heating and power, the manufacture of materials and the provision of sustenance through food and water.
“Historically, these four demands never used to talk to one another – they were silent,” he said. That is, they lived in different worlds of pricing, depending on the amount of energy they could produce per dollar spent….
“Then, starting in December of 2000, there was a great convergence,” he said. “Natural gas went first – the $2-per-BTU commodity exploded to $3 almost overnight – it hit the supply wall, and collided with oil. By 2004, oil moved its price up to $8 per BTU and linked itself with the metals market. Then finally, in 2006, oil, gas and metals moved higher and linked themselves with the food market.
“After that, we don’t care what commodity you buy. We called it a bushels-to-barrels-to-BTUs convergence. Take corn: It can now create heating and transportation; it’s actually very good for burning to generate electricity. It can create plastic or cardboard, so it’s a source of materials. And finally, you can eat it if you want. It can meet any of these demands. And you can use petroleum to create plastics, or to create fertilizer to grow food – suddenly, we are indifferent to what commodity we are buying to meet our demands.”
So rather than mining, or logging, or digging oil sands, or farming, nowadays we are simply extracting an aggregated uni-commodity from the ground, one that can be deployed for almost any purpose. This means that food is no longer just food: It is speed and heat and enclosure.
It also means that the price of a loaf of bread now depends not just on how many people are hungry, but on how many people want transportation, heat and plastic.
Makse so much sense, and explains why our world has become so much more volatile. A consequence of connections.
