PANEL: Global Commodity Crunch: Food, Water, Oil, Energy, Trade?
Master of Ceremonies:
John Authers, Investment Editor, Financial Times
Panelists:
Badr Jafar, Executive Director, Crescent Petroleum Group
Josh Margolis, Co-Chief Executive Director, CantorCO2e
Henk-Jan Brinkman, Senior Adviser for Economic Policy, World Food Programme
Zachary Karabell, President, River Twice Research
Panel summary by Mary Kate Nevin, World Policy Journal
After Financial Times journalist John Authers introduced the panel, Badr Jafar examined the issue of oil shortages from an industry perspective, explaining that the “roller coaster” of oil prices in 2008 was precipitated both by oil speculation and the depletion of reserves. As demand for oil steadily increases in China and elsewhere in Asia, the threat of a serious shortage continues to loom portentously. Going forward, investments to increase capacity must come from public-private partnerships, too little of which currently exist, he says. “The next 10 years is going to be crucial in seeing whether we move more towards partnership or more towards conflict.” 
He then addressed carbon emissions, presenting several practical ways to move toward their reduction. The most important thing the world can do is rid itself of its dependence on coal; “by displacing coal with natural gas worldwide,” he said, “we can reduce carbon emissions by over 70 percent.” He also called attention to rainforest degradation, imploring us to appreciate rainforests’ natural carbon capture and storage capabilities and to take action to protect them. Josh Margolis of CantorCO2e, a business focused on environmental rights, also emphasized the urgency of cutting carbon emissions. The United States emits dozens more tons of carbon per person than places like India and China, but that these developing economies strive to someday consume like Americans “keeps [him] up at night.” But he was optimistic about the global potential to address the issue, citing America’s pending cap-and-trade bill that seeks to cut emissions by 8 billion to 1 billion tons by 2050. “We should never waste an opportunity presented by an acute crisis,” he said, and the opportunity is there “if we accept that we really have to solve the problem.”
Zachary Karabell agreed with Jafar that the acceleration of Chinese economic activity is really at the heart of last year’s oil price shocks. Demand emerged far more quickly than models could predict, he said, and the industry couldn’t handle it. This pattern will be “the new normal” for the immediate future for as long as this fundamental disconnect between supply and demand persists. Plus the volatility of oil prices makes it difficult to invest in capacity expansion. Extraction in Brazil’s newly discovered pre-salt reserves, for example, will be ludicrously expensive and can really only be justified when oil prices are high. Environmental regulations also pose impediments to production, making supply even more inelastic.
Henk-Jan Brinkman addressed another commodity in crisis — food. The food crisis, he said, constitutes “a perfect storm” because of its close correlations to so many other development factors, and it “has been neglected for far too long.” On one hand, when food prices go up, which they will do whenever the other commodity markets go up, households switch to cheaper, less healthy food. Families lose out on important nutrients and can suffer serious health consequences. Climate change is another contributing factor; weather-related disasters that can interrupt food production have been steadily increasing, depressing agricultural yields. On a positive note, thought, advances in technology and biotechnology allow for significant improvement in crop yields, and scientists are working to create seeds that are more resistant to water fluctuations — ones that produce “more crop per drop,” as he put it. Finding a solution to the food crisis is achievable, he declared; we just “need to get the right policy frameworks and the right incentives.”