Monday, January 19, 2015

Uncertain Health in an Insecure World – 19

Oil Price Shocks & Global Health – "Don’t Bring Me Down”

Oil prices are the world’s most volatile and geo-politically manipulated commodity.

In 1979, the overthrow of the Shah of Iran and the ascension of Ayatollah Khomeni quickly doubled global crude oil prices to a peak of US$39.50 per barrel.

Fast forward thirty-six years… On January 16, 2015, the spot market price of West Texas Intermediate (WTI) crude oil closed at a shocking low of US$48.69 per barrel!

A generation of oil exploration, gulf wars, climate change and global health crises later, the price of oil is less than $10 per barrel different… How can that be?

In late November 2014, Saudi Arabia’s oil minister Ali Al-Naimi said what his analysts had been signaling for weeks – high-priced oil production from shale and tar sands needed a market-based trimming. By December 31, 2014 the price of crude oil had cratered by -46%, to US$53.27 per barrel. Other notable Saudi-OPEC instigated oil price shocks followed price peaks in 1986 (falling -41% to US$15.04 per barrel over seven years), and again in 2008 (falling -55% to US$53.48 per barrel in just six months).

Like you, in January I gladly pumped gas into my car for less than US$3.00 per gallon for the first time since 2008, when then WHO Director-General Dr. Margaret Chan said, “We face a fuel crisis, a food crisis, a severe financial crisis, and a climate that has begun to change in ominous ways. All of these crises have global causes and global consequences. All have profound, and profoundly unfair, consequences for health…. The health sector had no say when the policies responsible for these crises were made. But health bears the brunt.”

I then drove 800 miles up the U.S. east coast listening to economic spinmeisters on the radio touting the benefits of falling crude oil prices on consumer prices and manufacturing costs.

What is the Uncertain Health in an Insecure World point, you ask?

The direct and indirect effects of irrational peaks and precipitous shocks in oil prices on global health may be less obvious than 2014’s other sentinel events, but are far more serious than Ebola (despite 8,429 deaths), the flu (and the 23% effective vaccine) and global warming (when the average temperature was +1.24oF higher than the 20-year average).

In rich countries, health care has been characterized as a “luxury good”, more readily purchasable as personal incomes and national standards of living rise. A 2013 study by Massachusetts Institute of Technology and University of Chicago economists analyzed the continual post-WWII rise in national health care spending as a percentage of GDP (tripling in the U.S., and rapidly growing in O.E.C.D. countries) in relationship to household incomes, market prices of oil, and local oil reserves. Their clever analysis of the elasticity of demand for health care purchases showed that rising income was unlikely to be the major driver of rising health care costs as a percentage of GDP.

What, then, is the cause?

Oil price shocks permanently damage personal income, and exert an unhealthy impact on public health spending in both oil-rich countries and oil-less jurisdictions.

As noted in Lancet at the time of the 2008 oil price shock, under-nutrition (mostly in poor countries) results in 35% of global child mortality and 11% of global disease burden. In 2009, the United Nations counted 1.02 billion undernourished people. Oil scarcity impacts food production quantity and pricing – oil is necessary for farm machinery, pesticide production, food transportation, etc. Sustainable agriculture & land ethics guru Fred Kirschenmann predicted that the end of cheap energy would force the redesign of the global food economy.

Massive global public health shocks are inevitable during this bio-fuel vulnerable food economy transition.

Increasingly expensive oil extraction from shale and tar sands – what the Saudis are currently pushing down on – inevitably drives up the cost of industrial food production, negatively impacting food security. Food insecurity has significant public health consequences. In 2010, the World Bank projected that a 35% food price increase would add 80 million undernourished people worldwide. This is well within the range of historical bio-fuel production related oil pricing peaks and shocks.

With the global population projected to exceed 9 billion by 2050, food insecurity will only worsen.
Jeff Lynne follows the 1979 Electric Light Orchestra (ELO) lyric, “Don’t bring me down”, with a strange word “….Brrruce!” Lynne’s original follow-on lyric was actually “….Groos!”, a Bavarian greeting that band members heard while recording their album in Munich. But the universally misheard mondegreen of “….Brrruce!” stuck in the final version of this ELO hit.

So, thirty-six years later, people hear what they want to… in music, and about oil shocks.

But in the Square, we are not so easily fooled by spinmeisters.

We understand that oil price shocks are bad for global health, even if the gas we pump is cheaper.

A wave of the honorable minister's oil wealthy hand bodes ill health.

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