Tunisia, Egypt…? Who’s Next and Who Takes Over? Food & Oil Pressures – by Richard Komorowski – February 19, 2011 – Cornwall Ontario

Cornwall ON – Although Canadians are not yet following the Tunisian and Egyptian lead in bringing down the Harper or McGuinty governments, they would be wise to follow events in the Near East closely, for they will surely have an unpleasant impact here.

In the late 1970s, popular uprisings led to the downfall of the Shah of Iran, who was replaced by the Ayatollah Khomeini. As they say, the rest is history. Recently, Tunisians revolted successfully against their government, with the Egyptians following in short order. Was the reason for these political changes purely a wish for democracy and freedom, or was it something far more fundamental? What has changed recently that could catalyze such incredible changes?

According to the United Nations Food and Agriculture Organisation, average global food prices are set to overtake the peak they reached in 2008, when the oil price crisis precipitated the current depression. The following graph, from the FAO website, clearly illustrates this trend:

So far, these prices haven’t caused too much impact in the western world, mostly because westerners tend to have relatively high disposable incomes, and a relatively low portion of their household budgets goes towards food.

On the other hand, much of the population along the southern coast of the Mediterranean subsist on about $2.00/day. (In Egypt, the number is estimated at 40%). If food prices here rose a few percentage points, people would be seriously inconvenienced, and might have to cut back on other areas of spending, such as going to the cinema or Tim Hortons, but no one is likely to starve. However, when faced with a similar rise in food prices when most of one’s income goes to buy food anyway – there is nowhere to cut back. There are only two options – to steal one’s food, or to go downtown and protest.

The Tunisian and Egyptian governments toppled fairly easily and peacefully, with relatively little violence or bloodshed. The Algerian government is feeling the pressure, and has promised some reforms. Among other things, they have pledged to stockpile (i.e. hoard) 800,000 tonnes of wheat. Not to be left out, most of the other countries in the region are trying to do the same – even supposedly stable Saudi Arabia.

Other governments in the region are now under pressure from their citizens to resign. Yemen and Jordan are two. More significant is Libya, a significant oil producer and member of OPEC. The recent violence and fatalities in Bahrain, right in the Persian Gulf, should really have the West worried.

Another important question is who will replace these fallen (or falling) governments. If we get genuinely democratic governments, we might not have too much to worry about, because democracies tend to cooperate with other democracies, rather than wage war against them. However, should one hold one’s breath, expecting that all will turn out well for the people involved? Or will the religious fundamentalists take over, as they are trying to do in other Islamic countries?

The biggest question of all is what will happen in Saudi Arabia. So far, all is reported quiet on the Saudi front, but for how long? In our favour is the fact that Saudis enjoy a relatively high standard of living, and the Saudi Royal Family has no wish to change the status quo. The danger, however, is that Saudi Arabia is the centre of the Islamic religion, as Palestine and Rome are the centres of Christianity, and that the fundamentalists will specifically target this country.

If there is a revolution in Saudi Arabia, and Islamic fundamentalism starts to call the shots, it is probable that oil from the Gulf region will stop, at least in the short term. The impact on the rest of the world (not just the West, but also China, India and Japan) will be devastating as the price of both wheat and oil soar.

Remember, too, that wheat is a commodity in relatively short supply. Much of last year’s harvest in Russia was lost due to drought, Saskatchewan had serious problems with flooding, and this year, China’s winter wheat crop will likely be hit by drought. Don’t forget, also, that a good portion of Australia’s arable land is under water at this time. With all these problems, plus the rising price of fertiliser and the diversion of agricultural land from producing food to producing ethanol, and hoarding by Arab governments, this situation will become far worse.

The US, at least, has its “strategic oil reserve,” and is still a significant oil producer in its own right. Most of Canada’s oil, however, comes from the Tar Sands, and a diminishing number of conventional wells in Alberta. Most of this oil is exported south, to be refined and consumed in the US. Eastern Canada, however, depends on imported oil.

Do the federal or provincial governments have any contingency plans? It is physically impossible to bring Western Canadian oil here without it travelling through a US pipeline, as we have no oil pipeline north of Lake Superior.