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Business & Technology
Dec 12 2012 7:32AM
 
Resource crisis looms
SHRINKING STOCKS: British think tank Chatham House says political and social tensions, accompanied by price volatility and environmental degradation, could increase as global demand for scarce food resources, among other resources, grows. Picture: Gallo Images
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Jim Jones

The spectre of resource insecurity has come back with a vengeance. Competition for resources ranging from food through to water and minerals to fuel is intensifying, while resource nationalism – countries wanting to keep their resources at home – is growing rapidly.

The two trends are incompatible, an incompatibility that threatens to give rise to greater price volatility, faster environmental degradation, supply disruptions and rising tensions over access to resources.

All this, at any rate, is the near-apocalyptic view of a study by Chatham House, the respected and non partisan UK think tank. We have a world of intensified resource stress, the study says, partly driven by a decade of tight commodity markets coinciding with rapidly growing demand from emerging markets.

Forty years ago the Club of Rome published Limits to Growth, its own Malthusian view of a future of depleted resources. That scenario hasn’t transpired yet – more resources have been found, technological advances have changed demand patterns and more and more minerals and fuels have been found in increasingly-remote areas. But the precept is again starting to take hold.

Let’s take food as an example. According to Chatham House, the world is only two bad harvests away from another global crisis as demand is boosted by the growing wealth of emerging economies’ peoples. Projections can often prove wrong, but Chatham House reckons food prices will continue to rise with global demand as much as doubling by 2050. Meanwhile, global demand for cereals is rising at an average 1.3% annual clip while average yields are rising by only 0.9%. Malthus redux.

And then there’s all the rest.

Figures speak for themselves. The volume of internationally traded resources – oil, coal, iron and steel, oil seeds and cereals – have grown by half over the past decade. And while that demand growth has largely been led by China, there are other developing countries likely to become significant resource consumers over the next 10 years. Chatham House points to Iran, Vietnam, Turkey and Thailand.

Then there are the producers. Of 19 resources (timber, crops, fish, meat, metals, fossil fuels and fertilisers), the three largest individual producers of each account for 56% of global production. The concentration is even greater among producers of lower-volume resources such as palm oil and speciality metals.

Certainly, other producers are emerging as resource-hungry nations look at all available sources of supply and invest in them. But those fast-expanding resources sectors are creating flash points for political and social tensions. And for all the hype about the “new scramble for Africa”, Chatham House points out that the continent (and that includes South Africa) does not figure in the lists of major resource producers. Many African agricultural or resource-seeking investments remain speculative or have yet to commence production.

As Chatham House sees it, resource politics are set to dominate the global agenda – not environmental preservation or sound economics. The world is on a mad chase to consume. Politics have, of course, always played their part as governments act to preserve access to domestic resources for their own economies.

That stretches from confiscations of foreign-owned assets through windfall profits taxes to partial or outright restrictions on exports – all of which are regularly cloaked in populist justifications.

It might be scare mongering to imply that current resource-driven territorial disputes are akin to Nazi Germany’s 1941 invasion of Russia or Japan’s parallel rampage through south-east Asia. But tensions are arising as some countries seek to extend sovereignty over waters beyond their coasts, particularly those with oil potential. For examples we might only look at the manner in which an increasingly militarily-assertive China is arrogating vast parts of the South China Seas to itself or at Argentina’s renewed claims to South Atlantic waters around Britain’s Falkland Islands (Islas Malvinas).

Whether there’s any peaceful or diplomatic escape from this entire resources imbroglio is another matter. Chatham House proposes a club of 30 nations to include those in the OECD, fast-growing economic powers and major producers of critical commodities, a club that would be an informal forum for resolving problems of resource availability.

The think tank calls for rule-based resource governance, greater emphasis on renewable energies, enforceable cross-border water sharing agreements, mechanisms to limit vulnerabilities to short-term commodity price shocks and the elimination of environmentally-perverse subsidies.

Whether these proposals might transform into real and acceptable initiatives is another matter. The Club of Rome’s forecasts were overtaken and remain deferred – perhaps these from Chatham House will too.

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