Brief book review: Merchant of Grain

About a year ago I bought Merchants of Grain and never got around to reading it - in fact, I lost track and had to order another copy when I decided to read it over Thanksgiving. Here's my brief take on its pros and cons:

Pros

• In many ways this is analogous to The Prize, Daniel Yergin's outstanding history of oil, thoroughly tracing modern grain trading from its inception in the early 19th century to the present day.


• Depth of research - the amount of information crammed into the 360 pages is truly impressive, most of it quite relevant and interesting, and his journalistic nose clearly enabled him to get to the bottom of some very complex stories and illuminate the characters involved and the very human dynamics of their interaction.

Cons

• Morgan is not a deep subject matter expert like Yergin, and it shows in his analysis. He does a fine job explaining the technical aspects of growing and trading staple crops, but in many instances his subjective assessment of situations seems off to me.


• He also writes with a vaguely accusatory tone that I find irritating and not constructive - e.g. when complaining that the global grain traders have more market information than the U.S. government, or that the global grain trade lacks transnational regulation. What do you propose instead - a benevolent supernational trade regulator?


• Writing is not great - the narrative is jumbled, and the prose itself is sometimes unnecessarily wordy or awkward.


• Out of date - it was first published in 1979, and has barely been updated since (the re-publishers have a trite note on the back that "little has changed' since the initial publication, but developments over the past 3 decades surely merit a similar treatment).

Overall, recommended as a history of the grain trade, but only because it appears to be the best available - I wouldn't give it top marks in the absolute sense.

The Oil Drum series on Canadian oil sands

The Oil Drum has now posted the second part of its series on the Canadian oil sands (parts one, two). In my view it's overly dismissive of some of the environmental charges against oil sands, but is nevertheless highly informative and useful for anyone interested.

One chart I liked (I had been searching for a good version) was this from CERA on well-to-wheel emissions for different types of crude. Oil sands come out not much dirtier than other oil sources.

CERA is chaired by Daniel Yergin (of The Prize and of recent Peak Oil notoriety) and is a highly knowledgeable, well-respected, and middle-of-the-road energy firm, so I trust their numbers on this to be pretty robust.

The latest Peak Oil spat

A reader has asked for me to weigh in on the recent Peak Oil spat; in truth I was meaning to do so, but the commentary has piled up and I felt increasingly intimidated by the task of commenting on it. But here's an attempt at a quick synopsis:

To warm up, on Monday, Daniel Yergin (author of The Prize, the best book about oil I've ever read) wrote a piece in FP saying basically that Peak Oil fears are overblown because the combined response of technology and demand will adjust the world to declining conventional supply.

Then, main provocateur Michael Lynch published an NYT op ed calling Peak Oil "a waste of energy" and making the aggressive claim that oil is destined for $30/bbl in the long term.

The response was quick and furious; not one but two point-by-point rebuttals from The Oil Drum, as well as one by Morgan Downey (the author of the best book about oil I haven't finished reading yet, Oil 101 - I got diverted but it has received great reviews from very credible sources). And from the complete other end of the spectrum, Climate Progress took Lynch to task, going so far as to offer a bet:

Here’s my bet to Lynch. Let’s take the average price of oil from 2010 to 2015. For every $1 a barrel it is below $40, I’ll pay you $200, if you pay me a mere $100 for every $1 a barrel it is above $40.

That should be a no-brainer since I am giving him 2-to-1 and spotting him $10 a barrel off of what he says the right price is.

As I've mentioned before, I fall somewhere in the middle - I think $30/bbl is implausible, but the combination of 1), massive unconventional reserves (oil sands in Canada and Venezuela, deepwater in Brazil and who knows where else) that can be produced at a cost around $50-100/bbl, and 2), the power of high prices to destroy demand and incentivize development of alternative energy sources makes it unlikely that prices will settle much higher than $100/bbl in the next decade. Now, there may be volatility and prices spikes driven by supply shocks - we may have one coming, in fact, as the current recession has slammed exploration capex - but these will only last as long as it takes to deploy additional capital like it was deployed in 2007/2008.

(There is the chance that major geopolitical chaos could result in sustained higher prices, but that isn't the mechanism Peak Oilers are betting on.)

Peak Oil is many things - a mathematical tautology, an effective gimmick:

But regardless of the holes in Hubbert’s theory, peak oil, the gimmick, still serves to remind us that some day the oil will be gone, out of our reach, or most likely of all, extraordinarily expensive. Peak oil, as a way of understanding the real costs–political, economic, environmental–embedded in oil production regardless of the day’s market price per barrel, needs to live on.

... but I do not see it as a rigorous analytical argument that justifies energy alarmism in the short term.