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Page added on April 23, 2012
Peak oil spells bad news for farm input costs
PEAK oil may force farmers to change the way they farm and where they export, according to Sydney University Agriculture and Environment senior lecturer Dr Lindsay Campbell.
Mr Campbell believes farmers will face an increase in the price of chemicals, nitrogen, phosphate and freight costs, caused by increasing energy costs stemming from peak oil.
“It will change the way farmers operate,” Dr Campbell said.
As natural gas prices no longer mirror oil prices, they will become harder to predict, and since the price of nitrogen is heavily reliant on natural gas prices, Mr Campbell believes farmers need be be cautious.
“Super phosphate will also rise proportionally to nitrogen because it requires large energy inputs,” he said.
“It will affect the world market.”
Because of this, one of the biggest challenges Mr Campbell believes farmers will face, will be changing their farming systems and turning the clock back to the 1970s.
“It will be necessary to adopt some of the traditional practices such as growing legumes for their ability to fix nitrogen, because it will save money on fertilisers,” he said.
Mr Campbell said farmers have reduced the legume component in farming over the past few years because nitrogen has been cheap, which has led to more farmers growing cereals.
“A change in farming system will occur, as people turn from today’s specialised farming, back into more mixed farming operations,” he said.
The other downside that came with peak oil was an increase in the cost of transportation from the farmgate to market.
Mr Campbell believed transportation costs currently represented around 10 to 12 per cent of the value of a commodity, and said if the oil price goes up it would be substantially higher.
“This will force Australian farmers to look at what sort of competitive advantage they have in markets,” he said.
“The increase in transportation costs may mean that farmers change their export target markets for products.”
Mr Campbell said if the oil price was to rise dramatically it could mean farmers were better off exporting produce to closer markets such as South East Asia instead of the US or Europe.
While some peak oil supporters predict the shift towards growing produce solely for domestic consumption, Mr Campbell disagreed and said domestically the amount consumed was so small it was almost a fringe market.
“To be growing something for consumption in the WA market we probably only need about 5pc of the farms,” he said.
“Australian farms are geared towards an export market and I don’t think that will change.”
8 Comments on "Peak oil spells bad news for farm input costs"
SOS on Mon, 23rd Apr 2012 9:40 pm
This article is really about the self fulfilling prophecy of peak oil and the harm those policies are causing. Peak oil is a creature of politics and is being used in a very sinister and punishing factor to advance political careers.
As in climate change funding is also being used to promote the idea of peak oil. Children around the world are going hungry because of the policies hindering production and use up and down the entire oil/gas supply chain causing artifically high prices.
SOS on Mon, 23rd Apr 2012 9:44 pm
If you want to see energy costs go down support orderly and rapid development of americas resources. Our president is Oils best friend. The policies he represents are causing artifically high prices resulting in huge oil company profits.
The best way to bing down prices and return profits to a normal percentage range would be to promote development, expecially in those areas where known proven reserves exist. We arent doing that now, in fact only 3% of the leasable areas are open to production.
Its also the answer to americas financial problems.
Kenz300 on Tue, 24th Apr 2012 2:50 am
The global economy was built on cheap oil. It may not make sense to ship fruit, vegetables and manufactured products around the world when the cost of shipping increases dramatically. Oil has a monopoly on transportation fuels. Every ship, plane,and most cars and trucks run on oil. Everything you buy needs oil to get it to the store. Everything you buy needs oil to produce it.
BillT on Tue, 24th Apr 2012 5:36 am
SOS….you are either really brainwashed or your paycheck comes from Big Petro. Either way, you are so far off the path of truth that you are lost. There is no way that the Us will ever be independent of energy imports. The idea that it is even possible is something you might dram of on a very good high. Not reality.
Your easy way of life has an expiration date and it is not 30-40 years in the future, it is likely closer to 5-10, if that long. When the first bomb drops on Iran, we may find that it has been shortened considerably.
SOS on Tue, 24th Apr 2012 10:45 am
The solution is always just around the corner, just out of touch. The problem is always the government or something else that i have no control over.
Rick on Tue, 24th Apr 2012 3:15 pm
SOS, is dead wrong.
Though back to farming. Industrial farming is coming to an end. Small local beyond organic farms will be feeding us in the near future. Depending on who’s still around. And many will have to grow their own food too.
SOS on Tue, 24th Apr 2012 10:47 pm
LOL. You are wrong because you watch too much msnbc. LOL see how effective that tactic is biit? Very intellegent insights you have! lol
North Dakota just brought on another 7,500 b/d.
Luddites gather around hear the truth Peak oil is a poltictical phenomena with lots of usefull idiots leading the charge.
Edward on Wed, 25th Apr 2012 2:53 am
SOS: 7.5k barrels a day sure sounds like a lot, but it’s a tiny tiny part of the ~85 million barrels that the world produces and consumes every day.