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Monday, April 28, 2008

The Goracle and grain rationing arrive in Tel Aviv

Tel Aviv University announced on Sunday that former US Vice President Al Gore, who received a Nobel Peace Prize for his work on 'global warming,' arrives in Tel Aviv next month to attend a conference on renewable energy.
Al Gore, Nobel laureate, former vice president of the United States and author of the global warming documentary An Inconvenient Truth, will deliver the opening address at a conference on "Renewable Energy and Beyond," scheduled to be held at Tel Aviv University May 20-21, the university said Sunday.

Gore will be arriving on a special visit to Israel as guest of the Dan David Prize. The 2008 Dan David Prize will be awarded to Gore on May 19 for social commitment to environmental protection and the prevention of a global ecological disaster, a statement from the university read.

Tel Aviv University is organizing the international conference with the intent of addressing all issues - technological, economic, political - pertaining to moving towards using renewable energies as a substitute for oil and coal.

President Shimon Peres, National Infrastructures Minister Binyamin Ben-Eliezer, and Environmental Protection Minister Gideon Ezra will also attend the conference.
Ironically, also on Sunday, Israel's largest supermarket chain announced that it was limiting purchases of rice by consumers who are attempting to stock up in the face of an anticipated 60-70% price rise. The limit was lifted Monday morning as prices rose by 65% (in a country with a single-digit inflation rate since the mid-90's). Many people believe that the two events are connected.
The current rise in food prices is the most serious in the last century and shows no sign of slowing down any time soon, according to agricultural economist Prof. Yakir Plessner of the Hebrew University's Faculty of Agriculture in Rehovot. A colleague, Professor Ayal Kimhi, foresees the crisis causing political shock waves in sensitive areas of the world. These will in turn lead to higher oil prices and further increases in food prices.

"We see the first signs of political instability throughout the world," Kimhi says. "Poor populations are the most vulnerable. We are talking about more than a billion people who live on less than a dollar a day. The political instability can lead to unpredictable results. Nigeria, for example, is an important oil producer sitting on a political powder keg. A blowup there could adversely affect the price of oil and make the food price crisis worse," Kimchi says.

Plessner says food prices will moderate only if "farmers in the United States plant huge areas of land with grain. But that will take a few years. There is no short-term solution." To get farmers to cooperate, Plessner says, the U.S. must stop subsidizing corn grown for the production of fuel ethanol.
Some observers blame a major part of the global food crisis, which has suddenly burst into the fore in the last few months, on the subsidizing of corn grown for fuel ethanol production:

One factor being blamed for the price hikes is the use of government subsidies to promote the use of corn for ethanol production. An estimated 30% of America’s corn crop now goes to fuel, not food.

“I don’t think anybody knows precisely how much ethanol contributes to the run-up in food prices, but the contribution is clearly substantial,” a professor of applied economics and law at the University of Minnesota, C. Ford Runge, said. A study by a Washington think tank, the International Food Policy Research Institute, indicated that between a quarter and a third of the recent hike in commodities prices is attributable to biofuels.

Last year, Mr. Runge and a colleague, Benjamin Senauer, wrote an article in Foreign Affairs, “How Biofuels Could Starve the Poor.”

“We were criticized for being alarmist at the time,” Mr. Runge said. “I think our views, looking back a year, were probably too conservative.”

Ethanol was initially promoted as a vehicle for America to cut back on foreign oil. In recent years, biofuels have also been touted as a way to fight climate change, but the food crisis does not augur well for ethanol’s prospects.

“It takes around 400 pounds of corn to make 25 gallons of ethanol,” Mr. Senauer, also an applied economics professor at Minnesota, said. “It’s not going to be a very good diet but that’s roughly enough to keep an adult person alive for a year.”

Mr. Senauer said climate change advocates, such as Vice President Gore, need to distance themselves from ethanol to avoid tarnishing the effort against global warming. “Crop-based biofuels are not part of the solution. They, in fact, add to the problem. Whether Al Gore has caught up with that, somebody ought to ask him,” the professor said. “There are lots of solutions, real solutions to climate change. We need to get to those.”

Mr. Gore was not available for an interview yesterday on the food crisis, according to his spokeswoman. A spokesman for Mr. Gore’s public campaign to address climate change, the Alliance for Climate Protection, declined to comment for this article.

However, the scientist who shared the Nobel Peace Prize with Mr. Gore, Rajendra Pachauri of the United Nations’s Intergovernmental Panel of Climate Change, has warned that climate campaigners are unwise to promote biofuels in a way that risks food supplies. “We should be very, very careful about coming up with biofuel solutions that have major impact on production of food grains and may have an implication for overall food security,” Mr. Pachauri told reporters last month, according to Reuters. “Questions do arise about what is being done in North America, for instance, to convert corn into sugar then into biofuels, into ethanol.”

In an interview last year, Mr. Gore expressed his support for corn-based ethanol, but endorsed moving to what he called a “third generation” of so-called cellulosic ethanol production, which is still in laboratory research. “It doesn’t compete with food crops, so it doesn’t put pressure on food prices,” the former vice president told Popular Mechanics magazine.

Others would assign less blame to the use of corn to produce fuel ethanol but would blame 'environmentalists' generally for the worldwide failure to properly exploit alternative fuel sources for the past thirty years:

Collectively the intermeshed muddle of environmental movements have ensured that the dirtiest source of power (coal) is still the most heavily used for the past thirty years. They’ve done this by opposition to new oil and gas exploration, drilling, and refineries. They’ve done this through tax and regulation of fuel standards. They’ve done it through intense opposition and regulation of new nuclear plants, and NIMBY opposition to large scale wind and solar farms. They’ve opposed hydro-power wherever it’s been attempted. It seems that the only power that’s good or green is that used specifically for their house, and none other.

They’ve opposed all forms of new energy but it isn’t a vast plot - instead it fits with their general blurry vision and strategy. As stated above they just muddle their way towards a low-energy world, often working at cross-purpose without understanding the ultimate evil effect. That vision and strategy is to make energy scare and expensive, in hopes of stopping environmental degradation. Instead they insure not only environmental degradation, but also hunger and poverty in third world nations, and the eventual destruction of wealth in the US.

Is it a mistake that the high-guru of Global Warming comes from a coal mining state where the coal boom is once again on and the attempts to stop it are being fought in the state Legislature? Is it a mistake that a supposedly “environmental” Senator, Ted Kennedy, opposes windmill farms in his neighborhood?

There’s no doubt that mankind contributes some to global warming, you can prove that to yourself on any windless day by driving well outside a metro area, measuring temperature, and then driving back inside and measuring temperature. Typically you will see a 1-4 degree higher temperature inside the “heat bubble” of the metro area. (Note that both readings should be approximately the same elevation or the experiment is pointless, elevations do vary in temperature, and moderate winds will also mask urban heat bubbles.)

The policy question isn’t whether we contribute to global warming, instead it is “do we contribute enough to crush economies with carbon caps, to stifle new energy development through environmental regulation, and starve people through misguided energy policy?” Does being clean warrant people still dying in coal mines or from the pollution burning coal creates — because regardless of what the environmentalists do, the reality is that people still need energy and will get it from one source if blocked from another?

This is one reason why you hear the oxymorons “clean coal” and “carbon sequestration” so much lately. Coal is dirty no matter what you do, and the money spent cleaning it or sequestering carbon would be better spent on nuclear, solar, wind, geothermal, oil, and natural gas.

So how does all this affect Israel? Let's go back to Haaretz for the gruesome details:
The global rice crisis is hitting Israeli consumers in the pocket, with prices rising between 33 percent and 65 percent Sunday in the Super Sol supermarket chain, the largest in the country, in accordance with the price update of local sugar and rice company Sugat.

The second-largest supermarket chain, Blue Square, has not yet updated its prices but is expected to raise them soon.

Sugat said demand for rice increased by hundreds of percent over the weekend, "because everyone heard about the global shortage and the expectation of a price increase and ran to the stores," said Sugat CEO David Franklin. A senior source in the retail field confirmed that rice sales late last week were three times higher than on peak sale days.

However, concern over a rice shortage in Israel has dissipated. Super-Sol has lifted its brief two-package per customer restriction, saying that "in light of the rise in prices in the world and in Israel, the Super-Sol chain wanted to prevent merchants from buying at the chain's stores in order to accumulate stock and make a fortune at the expense of the customer."

"There is no rice shortage in the world, and there is no food shortage," said Gideon Ben Nun, CEO of Shekel-AGIO Risk Management & Financial Decisions. "There is only an atmosphere of panic."

Meanwhile, the prices of products based on wheat and corn, as well as cooking oils, are expected to rise shortly by up to 10 percent, sources in the food industry said.

Price-controlled bread will be more expensive by between 10 percent and 15 percent within three months. In addition, coffee prices are expected to rise by between 5.5 percent and 8.5 percent and candy prices are due for a 5-percent hike, on average.

The expected price hikes come on top of an average rise of about 13 percent in hundreds of products over the past year.

Restaurants say they will have to raise their prices by about 10 percent in order to compensate for the increased cost of ingredients.
What to do about the problem? The government minister in charge of the issue, Yitzhak Herzog, proposes to adjust (for inflation) the minimum income guarantee allowances (havtachat hachnasa) received by low income Israelis more often than the current once per year.
Pnina Ben-Ami, senior adviser to Welfare and Social Services Minister Isaac Herzog, told The Jerusalem Post that with the price of rice and other staple foods soaring this week, compounding recent hikes in electricity and gasoline, the minister is to lead an initiative to raise National Insurance Institute allowances for the poor more often - twice rather than the current once-a-year update - to stop them from eroding.

"The erosion of allowances makes it very hard for needy people to cope in their day-to-day lives," Ben-Ami said.
The problems with this solution are that to date inflation has been generally lower than the increase in food prices, and that someone has to pay for the cost of the more frequent adjustments if they happen. Arguably, Israelis are already the most highly taxed people in the world. Can we really afford to raise our taxes further? Raising taxes further is likely to mean more working poor, more people leaving the country so that they can keep more of what they earn and will - in the long run - stifle economic growth.
"There are crazy rises all over the world, and nothing we can do will stop it," Tzvia Dori, who is in charge of internal trade and price supervision in the Industry, Trade, and Labor Ministry told the Post. "Only direct assistance to the poor people in Israel can help," she said, rejecting the idea that other commodities in addition to bread be put under governmental supervision.
That may well be true. But does that assistance have to come from the government?

There are other things that can be done. First, while there are many charities in Israel, getting Section 47 approval (the equivalent of 501(c)(3) status in the US that makes donations deductible) is almost impossible here without having a direct connection to someone on the Knesset Finance Committee. And once a charity gets approval, the tax deductions are meaningless for most Israelis because they cannot be used unless you file a tax return and most Israelis aren't required to and don't file tax returns.

Instead of concentrating on 'narrowing gaps' between high and low earners (something that caused Bank of Israel Chairman Stanley Fischer to quip "If we want to get rid of poverty in this country we should close the hi-tech sector." Why? Because poverty in Israel is a measure of inequality; it's people who are below half the median income. You can reduce the top incomes by getting rid of the parts that are prospering, and quite likely you'll reduce the relative poverty rate)," we need to concentrate on giving economic incentives (read: tax deductions) to the wealthy in return for helping out the poor.
Eran Weintraub, director of Latet, the largest charitable foundation in Israel supplying food to the poor, warned of crippling consequences for his organization and those who need its help. "Latet will have to stop buying and distributing rice very soon [because of the rising cost], and will in general buy smaller amounts of food," he told the Post. "The poor will get less from us, and will be forced to buy less in the stores, so they are being hit from all directions. People who, until now, barely kept their heads above water will now also become truly poor."
I'm sure that if you donate money to Latet, you can get a tax deduction. But only if you file a tax return. Most people in this country do not file tax returns unless they are self-employed. Would a universal filing requirement accompanied by deductibility for charitable donations encourage people to voluntarily transfer some of their wealth directly to the poor without the government acting as a go-between? After seeing how miserably socialism has failed around the world, I think it's worth a try. I wonder if Mr. Gore would agree.

The food situation also has security implications for Israel. One of the things that has driven up food prices is increased energy costs. In other words, the collapse of the dollar (something that can really only be appreciated outside the US - most of my earnings are in dollars and I am getting creamed right now financially as a result) and the accompanying price rise in oil which is purchased on dollar terms is resulting in lining the pockets of our enemies such as Iran and Saudi Arabia.

That raises another way the government could help all Israelis: cut gas taxes. As of last night, a liter of 95-octane unleaded gas (petrol for you Brits) costs NIS 6.41 ($1.86). That means a gallon of gas here costs $7.04 (and you thought you were paying a lot)! And it will likely go up at midnight Wednesday night (as it does almost every month). A big chunk of that is taxes; the standard estimate here is that at least 50% of the costs of running a car consists of taxes. The government could cut the gas tax and stave off inflation (people drive anyway) that would necessitate increasing subsidies to the poor and would make more of us into working poor.

Those are some of my ideas this morning. In the meantime, Mrs. Carl bought about fifteen kilos of rice on Sunday (obviously not from Super-Sol), so we are set for a few weeks.


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