The Bush administration states that corn-based ethanol only accounts for 3 percent of global food price inflation. The USDA's chief economist disagrees -- he says biofuels add up to 10 percent of food price hikes. Other estimates have gone much higher -- but until today, the most How the World Works had seen anyone claim was 40 percent.

But now the U.K.'s the Guardian is reporting that it has laid its hot hands on a confidential World Bank report that makes the astonishing claim that 75 percent of the surge in global food prices can be attributed to biofuels.

The figure emphatically contradicts the U.S. government's claims that plant-derived fuels contribute less than 3 percent to food-price rises. It will add to pressure on governments in Washington and across Europe, which have turned to plant-derived fuels to reduce emissions of greenhouse gases and reduce their dependence on imported oil.

Senior development sources believe the report, completed in April, has not been published to avoid embarrassing President George Bush. "It would put the World Bank in a political hot-spot with the White House," said one yesterday.

If true, biofuel mandates are without a doubt a "crime against humanity." We can only hold our breath and wait for the inevitable leakage of the full report and the ensuing feeding frenzy as the world feasts upon the data. But in the meantime, here's one clue as to how the World Bank came up with such huge numbers.

It argues that production of biofuels has distorted food markets in three main ways. First, it has diverted grain away from food for fuel, with over a third of US corn now used to produce ethanol and about half of vegetable oils in the EU going towards the production of biodiesel. Second, farmers have been encouraged to set land aside for biofuel production. Third, it has sparked financial speculation in grains, driving prices up higher.

I'd be curious to know whether other biofuel/food price number crunchers include "financial speculation" as part of the equation. Speculators, in theory, are pumping money into commodities because they believe prices are going to go up, but not necessarily because of biofuel expansion. The unreleased World Bank report apparently completely dismisses changing diets in China, India and elsewhere as an explanation for rising food prices, but I'd lay odds that for commodity traders, the perception of such a phenomenon is one big reason why they're making their own bets.

So are biofuels responsible for speculation? Or is it a misunderstanding of what is actually going on commodity markets that is encouraging traders to invest in grain futures?

Again, I look forward to reading the paper, and I look forward to reading the ensuing dissection of the paper. Because 75 percent is a big, big number.

Here's a cool map mashup you can play with all Fourth of July weekend long, courtesy of the Center for Neighborhood Technology, via a tip from Eric Hess at Sightline.

Using the Housing & Transportation Affordability Index, you can zoom in on different regions of the U.S. and get an immediate, visceral sense of how much city, suburban, and country dwellers are paying for gas and transportation, both in absolute terms and as a percentage of their total household budgets. Even better, you can compare the figures between 2000, when gas was around $1.81 a gallon, and 2008...

I, of course, went straight to the San Francisco Bay Area, and who would have guessed it? Residents of San Francisco and Berkeley pay a lot less for gas, both absolutely, and as a percentage of their total household budget, than do the suburbs and even further outlying regions. But saying it is one thing -- looking at it is another. Forget all that back-to-the-land utopianism -- the city is where it's at, if you wanna go low-carbon.

But what's really scary is the color-coding changes from 2000 to 2008. In 2000, the urban regions are generally yellow -- indicating expenditures on gasoline between $0 and $1600 per year, and the suburbs are beige -- $1600-$2400. There are only a few scattered orange and red spots -- ranging from $2400 to $3800.

Flash forward to 2008: The entire map is SCREAMING RED, with much smaller patches of orange and minuscule splotches of yellow... in downtown San Francisco and Oakland.

On Wednesday, a World Bank economist warned the nations of Eastern Europe that they would have to welcome more immigrants "to prevent their economies being hobbled by labor shortages caused by rapidly aging populations," reported the Associated Press.

"There's no question that immigration will be needed to fill labor shortages," Pradeep Mitra told reporters. "The trade off is: accept migration in a regulated way or don't be serious about converging with EU 15 living standards."

Mitra was referring to the 15 Western nations who made up the European Union before the entry of 12 other European nations since 2004.

Mitra's uncompromising stance will raise hackles on both the left and the right. Economist Dean Baker, for one, has long maintained that the labor shortages that will purportedly plague the aging, baby-bust societies of Europe can be easily solved by paying higher wages to currently unemployed and underemployed citizens. Meanwhile, cultural conservatives decry the desecration of treasured national identity that will inevitably befall a nation that lets in too many "others."

The AP story reminded me to go back and read "No Babies," the epic look at Europe's demographic woes by Russell Shorto in last Sunday's New York Times Magazine. There is much to mull over in Shorto's analysis -- especially his assertion that the countries experiencing the most precipitous birth rate drops are those that have modernized economically but do not provide strong social welfare support systems for working two-parent families. There's also an implicit answer to the Dean Baker thesis: the highest wages in the world won't do much for a society in which everyone is a resident in a nursing homes and in some European countries, the birth rates are dropping so fast that such a future is not unthinkable.

The possibility of expanded immigration as an answer to this dilemma gets short shrift from Shorto, even though it might seem to some the most obvious solution. Europe's demographic woes, when viewed from the perspective of the planet, just don't seem that critical when we're still on track to go from the current total of 6.7 billion to around 9 billion by 2050. Labor shortage? You gotta be kidding me.

But Shorto offers two quick dismissals. The first, he says, is that immigration might not actually fix the problem.

The actual numbers, according to several authorities, are discouraging over the long run. By one analysis of U.N. figures, Britain would need more than 60 million new immigrants by 2050 -- more than doubling the size of the country -- to keep its current ratio of workers to pensioners, and Germany would need a staggering 188 million immigrants in the same time period. One reason for such huge numbers is that while immigration helps fill cities and schools and factories in the short term, the dynamic adjusts over time. Immigrants who come from cultures where large families are standard quickly adapt to the customs of their new homes. And eventually immigrants age, too, so that the benefit that incoming workers give to the pension system today becomes a drag on the system in the future. A European Commission working document published in November 2007 concludes that "truly massive and increasing flows of young migrants would be required" to offset current demographic changes.

But that won't happen, because, well, "few Europeans want that. Immigration already touches all sorts of raw nerves, forcing debates about cultural identity, citizenship tests, national canons, terrorism and tolerance, religious versus secular values."

Undoubtedly so. However, in the long run, something's gotta give. Either you accept that you are going to wither away and die, secure in your cherished cultural identity, but not reproducing enough to survive, or you open up your arms and embrace the stranger, and forge some new, synthetic, syncretic identity that may not be the same as what came before, but is healthy enough to flourish.

Call it a variation of the theory of natural selection, as it applies to nation states. The xenophobes who don't subsidize day care and parental leave die off, while the truly multicultural social-welfare societies thrive.

Out for a bike ride in Northern California, whipping down some rural road where the cows far outnumber the cars and the only energy actively being consumed is generated by the home fries you had for breakfast, it's easy to feel, however fleetingly, that you've escaped from the gas-price peak-oil climate-change rat race. The world simplifies. Head winds and hills are straightforward challenges, easy to parse, in contrast to such mysteries as to how much speculation contributes to the cost of oil, or how to calculate the net energy-efficiency of biofuels.

But then I read, in this morning's edition of the Road Bike Rider newsletter, that WTB, a high-end bike component manufacturer, raised prices on its tires and tubes 20 percent as of Monday. Michelin is following suit, instituting its own 15 percent price hike on Sept. 1.

There is no escape.

A spokesperson for Michelin cited a well-worn litany of problems: "rising raw material, energy and transportation costs." The issue of energy and transportation costs is one with which we're all too familiar. The raw material, in this case, is natural rubber.

The vast majority of the world's production of natural rubber comes from southeast Asia, and its price has been on an inexorable rise for half a decade. Some analysts blame the diversion of former rubber plantations into palm oil production. Others point an accusatory finger at hedge fund commodity speculation. And as with all agricultural commodities, the price of inputs -- fertilizer, etc -- is rising, along with demand. But the big picture brings in, well, everything. A press release from Ohio State University, discussing some plans to develop an alternate source of natural rubber in the U.S., quotes Akron-based Delta Plant Technologies President Bryan Kinnamon offering a nice capsule of complexity.

"The United States depends on 100-percent imported natural rubber, whose price has increased almost seven-fold since 2002, costing the country $3.3 billion a year," Kinnamon pointed out. "Additionally, natural-rubber supplies are becoming increasingly unstable as a result of rapidly expanding growth in China and India, decline in rubber production due to industrialization in Southeast Asia, and increasing utilization of this material by former Soviet Bloc countries. Estimates indicate that demand will exceed supply in 2020 by approximately 15 percent."

So now, I can't inflate my tires without pondering the global economy and the perils of tire price inflation. Bleah.

But not all is lost.

Enter, the "Russian" dandelion.

Did you know that during World War II, "the Soviet Union made tires for its military machine out of rubber extracted from a dandelion that grows in the mountains of Uzbekistan and Kazakhstan?" Or that the U.S. simultaneously instituted a crash course in Russian dandelion experimentation, only to abandon the project after the liberation of southeast Asia from the Japanese, and concurrent advances in synthetic latex production?

So reported Kevin Mayhood in the Columbus Dispatch on Tuesday, describing renewed efforts by Ohio State University scientists to squeeze rubber from the dandelion of the former Soviet Union. 3 million acres of the Russian dandelion, said Kinnamon, could satisfy 30 percent of U.S. demand.

Now you know what I'll be dreaming about, the next hill I climb -- my next bike, rolling up the road on tires made from Russian dandelions.

If anyone still listened to vinyl any more, we'd call this a broken record.

• For the sixth straight month, U.S. payrolls declined. The Labor Department reported that nonfarm employment in June dropped by 62,000. Significant losses in construction (43,000) and manufacturing (33,000) were only partially offset by an 8000 job gain in the mining sector, and a 15,000 job boost in the ever-popular health care sector.

• Crude oil futures set another record, breaking $145 a barrel.

Maybe it's a good thing the New York Stock Exchange is closing three hours early today, as part of an extended July 4th weekend. The less time to mull these figures, the better.

The dismal performance of the Dow Jones Industrial Average in June resurrected a phrase we haven't heard much in the last couple of months: "since the Great Depression." As in, the worst June for stocks since...

July is only two days old, but so far, it's not looking much better. All the major U.S. stock indices took big hits on Wednesday -- the Dow was down 166 points, closing at 11,465, the lowest mark since September 2006. As of Wednesday, the Dow is officially in "bear territory" -- 20 percent down from its October 2007 high.

The reasons for Wall Street's gloom are straightforward. Surprisingly low U.S. oil inventory numbers pushed oil futures up again, a bad jobs report suggested some truly grim jobs figures might be released on Thursday, and General Motors' share price was hammered -- one Merrill Lynch analyst even speculated that the company might be forced into bankruptcy. There are no easy fixes to either the housing or the energy crisis, and there is increasing chatter in financial circles worrying that the credit crunch is heating up again.

Remember back when the housing bust was just gathering momentum? The last refuge of die-hard real estate boosters was to argue that since the general state of the economy was good, the housing market would quickly rebound. Lasting damage would be minimal. But with the benefit of hindsight we now see that the housing bust ended up weakening the broader economy to the point where a well-aimed oil price sucker punch could deliver a knockout blow. In the space of just a few months, we've gone from wondering why higher oil prices weren't exerting a greater drag on the economy to watching a major structural transformation in how Americans live play out as if on fast-forward. Public transit is suddenly crowded, SUVs are an endangered species, the most recently built suburban communities are one step away from ghost towns.

And all this is occurring against the backdrop of a decade in which wages for working- and middle-class Americans stagnated, the state of healthcare coverage declined, the richest got even richer, and the federal government engaged in a combo spending spree/tax cut binge that severely constrains its ability to take any dramatic corrective action.

Bear territory, indeed.

Last August, Barack Obama scored points with India when he declared that the United States must be ready and willing to attack Al Qaida targets in Pakistan. On Monday, he made even more friends in the country when his campaign issued a statement of condolence honoring the passing of India's first Field Marshal, General Sam Hormusji Framji Jamshedji Manekshaw.

How the World Works follows U.S. political developments with pathological obsessiveness, and yet saw not even a whisper of this news in the U.S. blogosphere. But in India, where Manekshaw is revered as the general who defeated Pakistan in the Indo-Pakistani War of 1971, leading to the creation of an independent Bangladesh, people took notice.

The Times of India, for example, observed that neither the McCain campaign nor the White House saw fit to so much as mention Manekshaw's passing. Shame, shame.

Let's outsource the political analysis:

The statement, which comes at a time when the Indian government itself is under attack for its lackadaisical treatment of a national hero, is emblematic of the image the Obama campaign has sought to build for its principal -- that of a thoughtful, accomplished, well-read candidate who is on top of world affairs and day-to-day developments. Evidently crafted by an alert aide, the statement also helps hit the right ethnic buttons in the US...

Obama, his supporters say, is of a different mettle and tempered at a different time. He is the first presidential candidate who is not an Europeanist or Atlanticist. His foreign policy experience is not contaminated by the Cold War. His roots, upbringing, and experience, although mostly American, have shades of Asian and African -- which in part explains his quick response to something as remote, for Americans, as Manekshaw's death. Obama, in fact, has taken active interest in the political developments in his paternal home Kenya, whose Marxist opposition leader Raila Odinga claims to be his cousin.

It is now slowly starting to emerge that an Obama presidency will pursue a foreign policy that will be very different in tone and tenor to that of any previous White House occupant -- both by virtue of his own background and the team of aides and advisors he is putting together. Without reading too much into the Manekshaw statement, it appears that South Asia itself will occupy a significant place on his radar, given the number of aides, advisors, and specialists he has from the region.

If the rest of the world could vote in the U.S. presidential election, it seems pretty clear that Obama would win by a landslide (although perhaps not in Pakistan.) But how the candidate's Indian fandom will play out in the battle for swing state voters in the U.S. is less clear. Still, it's nice to know he's paying attention.

Semi-random tidbit. A 1971 profile of Manekshaw written by Fox Butterfield in The New York Times contained the following amusing anecdote:

Unlike most senior officers of his generation he did not attend Sandhurst, the British military academy, but he has long been noted for following British military tradition.

He lives with his wife and two daughters in Army House in New Delhi, rising at 5:30 each morning for a small glass of whisky, the news on the B.B.C. and an hour of puttering in his garden before going to work.

Two years ago, when he was elevated to his present post; a newsman remarked that one of his daughters was named Sherry and her daughter's name was Brandy -- this in a country with a strong prohibitionist tradition. "I hope the Deputy Prime Minister doesn't object," General Manekshaw replied, referring to Morarji Desai, a well-known teetotaler.

Whisky and garden-puttering at dawn! Some people know how to live.

UPDATE: Sepia Mutiny has more.

Two months ago, Starbucks CEO Howard Schultz told Time magazine that "For the first time in our history as a company, we have negative traffic this year vs. last." This week, the other shoe dropped. In what Schultz called "the most angst-ridden decision we have made in my more than 25 years with Starbucks," the company is planning to close 600 stores, resulting in as many as 12,000 layoffs.

As an economic indicator, that's just plain bad news. If Americans are giving up their Starbucks lattes and settling for the dregs from the office coffee machine instead, you know they're truly desperate. An impulse toward penny-pinching can be understood, but not such an abject embrace of the dark side. Coffee's important, people!

Which brings me to an even more disturbing Starbucks subplot. The Wall Street Journal reported on Tuesday that Starbucks' rollout of "a new, milder brew" as its primary drip coffee had "alienated a small yet vocal group of longtime patrons." Sales were up, noted the Journal, but so was consumer discontent.

Dig around on the Net and you can find some hurtful comparisons of the new brew, Pike Place Roast, to such monstrosities as Dunkin' Donuts house coffee. "Bring back the bold" is the new rallying cry.

From the Journal:

But the new strategy, which played down the company's more-established robust roasts, has touched off a debate about what customers think Starbucks should stand for: bold coffee for connoisseurs or a tamer brew for the masses?

To some coffee aficionados, the idea of Starbucks as a watering hole for connoisseurs might seem risible. But those wont to such mockery likely do not remember, or never experienced, what it was like to live in Dunkin' Donuts land in the pre-Starbucks era. Starbucks, for millions of Americans, offered a clear step forward.

And in that respect, despite its mass market drive toward a Starbucks (or two, or three!) on every city block, the coffee company conveyed a message of cheery symbolic potency with every cup of java. The quality of life will improve, Starbucks told us. Coffee will get better.

But now Starbucks has looked at the depressing figures in its account books and decided that to boost sales, it must water down its brew; it must give into lowest common denominator pablum and renege on its liberational promises. As a tactical decision, perhaps the strategy, in combination with the layoffs and store closures, will brighten up Starbucks' bottom line. But as a metaphor, the message is a glum acknowledgment of defeat and surrender.

Like apparently a whole lot of people, I was unaware that Sheldon Adelson, the casino tycoon, is currently the third-richest American, ranking behind only Warren Buffett and Bill Gates. And I wasn't sure that I cared. Bugsy Siegel -- now there was a glamorous Las Vegas gambling magnate. A newbie like Adelson just didn't pique my curiosity. But by the fourth or fifth time I saw Connie Bruck's humongous and fascinating New Yorker profile of the multibillionaire mentioned in the blogosphere, I realized I was going to have to set aside the rest of my afternoon and become more informed.

In the course of her reporting Bruck provides a crash course in current Jewish politics -- Adelson is as right-wing on Israel as you can get, and is also attempting to be a major player in the Republican Party in the U.S. But what struck me most was the account of how Adelson made the jump from just a really rich guy to one of the super-rich. By getting a gaming license in Macao just before the Chinese government liberalized travel restrictions from the mainland to the former Portuguese territory and longtime gambling enclave, Adelson was effectively granted the right to mint money.

In May, 2004, the first gamblers entered the Sands Macao. Its construction costs were two hundred and sixty-five million dollars, and Adelson made back his initial investment in a year. In December, 2004, Adelson took Las Vegas Sands public (according to Forbes, he owns sixty-nine per cent of the stock) and became a multibillionaire, overnight. The following year, Macao drew 10.5 million mainland Chinese visitors, a hundred and forty-seven per cent more than three years earlier -- reflecting an easing of travel restrictions and an increase in the number of newly wealthy Chinese. By the end of 2006, Macao had become the top gambling center in the world, with gaming revenues exceeding $6.9 billion, a quarter of a billion dollars more than those on the Las Vegas Strip. In 2007, revenues climbed to $10.3 billion. That year, Adelson opened the $2.4-billion Venetian Macao -- with canals and stripe-shirted gondoliers, as well as an extensive shopping mall and a five-hundred-and-forty-six-thousand-square-foot casino, which is the largest in the world. Since the Sands Macao opened, his personal wealth has multiplied more than fourteen times, and, according to the Times, in the two years after his company went public he earned roughly a million dollars an hour.

So here's how the world works, today. Americans spend their cash at Wal-Mart buying goods made in China. The Chinese take that cash and gamble it away in Macao. And then Sheldon Adelson spends it trying to defeat Barack Obama in the U.S. and get Ehud Olmert ousted as prime minister of Israel.

In May, India's Genetic Engineering Approval Committee (GEAC) approved a request by the Maharashtra Hybrid Seed Co. (Mahyco) to begin "experimental seed production" of genetically modified Bt eggplant. (Thanks to GMO Pundit for the link.)

After China, India is the world's largest producer of eggplant, or brinjal, as it is known on the subcontinent. Primarily cultivated by small farmers, it is plagued by a devastating pest, the fruit and shoot borer. But Bt brinjal incorporates a variation of the cry1Ac gene, which works as potent built-in pesticide against the borer.

At the same meeting at which GEAC approved the production of Bt brinjal seeds, the committee heard testimony from Dr. P.M. Bhargava, who ran through a checklist of reasons why recklessly expanding the number and type of genetically modified crops planted in India might be imprudent. The committee dismissed his concerns, and we could have a nice long argument over whether it was wise to do so. Personally, How the World Works agrees with Dr. Bhargava on at least one issue -- there are fundamentally disturbing issues relating to clear conflicts of interest when governments depend on data provided by a private company for safety assurances and risk assessments.

But never mind that. A survey of Indian farmers published in the Journal of Risk Research in 2005 elicited some illuminating opinions on health risks and other issues associated with genetically modified eggplant. For these farmers, the primary, overriding issue is economic. They are already going broke applying conventional pesticides to which the fruit and shoot borer has developed resistance. If they can save money and boost yields by adopting GM eggplant, they will do so.

A comment from a farmer in Ahmednagar:

"Presently, I am cultivating five acres of eggplant and spending 50,000 to 60,000 rupees on pesticides for these five acres and getting three to four lakhs' income from this acreage. If I grow Bt eggplant and get two to three lakhs' income from just two to three acres, I will enjoy greater benefits. Bt eggplant will also reduce pesticide costs from 50,000 rupees to 10,000 to 12,000…With Bt eggplant, I can reduce my eggplant acreage from five to one-and-a-half acres and devote the remaining land to planting other crops."

These farmers aren't just blindly accepting biotech propaganda (Mahyco is a partner with Monsanto in introducing GM technology into India.) They are quite mindful of what other farmers have witnessed with respect to Bt cotton, a topic explored in some depth last year in How the World Works in "Ganesh and Brahma Bow to a New God" and "The Napster Pirates of Transgenic Biotech." At the grass roots level, Indian cotton farmers have legally and illegally planted Bt cotton varieties because they have seen with their own eyes how yields rise and pesticide costs go down in the short term.

A comment from a farmer in Aurangabad:

"I have seen the results of Bt cotton and the reduction in pesticide application in a neighboring farm. If the same technology is transferred from Bt cotton to Bt eggplant, and if the damage inflicted by the fruit and shoot borer can be reduced by at least 50 percent without the use of pesticides, I can save money and profit from the use of Bt eggplant."

The most disturbing, and yet at the same time enlightening comment of all comes from another Ahmednagar farmer, who notes an unfortunate result of the current practice of intense pesticide application.

"We have to spray pesticides on eggplants every two to three days. Because of this practice, we do not eat the eggplants that we grow. We know that there is a lot of pesticide residue on the eggplants because we are spraying every two to three days! So, we are not eating that stuff. The eggplant is totally made of those chemicals. But we put them directly in the market and sell them anyway. If Bt eggplant is invented, we will be able to eat the eggplants we grow because there will be less chemical residue on the vegetable. I think Bt eggplant is necessary because when we spray every two to three days, what happens is that new diseases are occurring in the human body. People are buying vegetables from the market and eating them. But they do not know what the farmer is spraying on his vegetables."

I have no idea how representative that last farmer's attitudes are of Indian eggplant farmers in general. But the basic calculus seems pretty clear. If Indian farmers can simultaneously cut their costs by cutting their pesticide expenses and boost yields by fending off the fruit and shoot borer, they will pay a premium price for genetically modified eggplant seeds. In a world where all kinds of agricultural inputs are drastically rising in price, that same calculus will likely play out elsewhere, with other farmers and other crops.

I will be honest -- I did not expect to be captivated by Doug Fine's ode to sustainable, local living, "Farewell, My Subaru." As the producer of more than my fair of share of overly earnest blog posts worrying about global warming and resource constraints and all that other stuff deranged Wall Street Journal columnists like to call "mass neurosis," I was less than enthralled by the prospect of immersing myself in a book-length dose of post-hippie back-to-the-land rhapsodizing. (Call me hypocritical, but my life drowns in such contradictions.)

Then, in an idle moment, I started leafing through Fine's tales of solar power and nanny goat misadventures. And 24 hours later, I was done, with a smile on my face.

The joy of "Farewell, My Subaru" is that a chuckle or a wry grin is waiting on every page, if not each paragraph. It's the kind of humor that builds gradually, that sneaks up on you with such stealth that you hardly even realize what a good time you're having until it's all over. By the end of "Farewell, My Subaru" you can think of nothing that would seem like more fun than hanging out at Fine's ranch, vainly striving to keep his goats from eating the rose bushes. Think James Herriot's "All Creatures Great and Small" -- updated as appropriate for the iPod generation.

Here, for example, is Fine noting the lifestyle changes that arrive after he trades in his Subaru for a diesel-powered Ford F-250 pickup truck. (He has to switch to diesel to live his dream of a veggie-fueled, zero-carbon transportation lifestyle.)

But I surprised myself by immediately taking to the Monster Truck I had purchased, the way a recruit handed a bazooka might become entranced by blowing up entire houses during target practice...

On my test drive I noticed tiny Hummers and Suburbans bowing deferentially out of my lane, their drivers smiling submissively and waving me on. I started reading clearance signs because of close calls at my initial overpasses, and when I pulled over I figured out quickly that whatever else it meant to be a full-size truck owner, I was now a parking lot refugee. I've since had scientist friends do the calculations, and it is physically impossible, in the Earth's atmosphere, to steer a 2001 Ford F-250 into a standard parking space on the first try. I suddenly felt deep empathy with every excluded minority. Before the morning was out, I discovered that all of us Monster Truck drivers congregate grumpily on the outskirts of supermarket and hardware store parking lots, taking up one and a third spots and suiting up for the long trek inside. Usually we leave our engines running, since starting a diesel V-8 engine (on any fuel) is such an event that three or more simultaneous starts can affect oil prices worldwide...

Fine makes his low-carbon Odyssey sound like fun, albeit involving a ton of hard manual labor and the occasional coyote- or hawk-inflicted tragedy. Best of all, the tales of the Funky Butte Ranch do not end with the volume. The story continues at his Web site. For a representative sampling, I recommend Fine's account of the trauma inflicted by the temporary arrival of Walt, the Scimitar-Wielding Stud Billy Goat.

The slow food movement -- eat locally, not globally -- has a new acolyte: Wal-Mart.

Reuters' Nicole Maestri reports today that high transportation costs are encouraging Wal-Mart to increase the percentage of fruits and vegetables it buys from local farmers.

"When we're buying local, there are less trucks on the road, less miles that that produce is traveling and therefore less fuel," said Pam Kohn, Wal-Mart's general merchandise manager for grocery.

One example -- Wal-Mart now sources its peaches from 18 states, instead of only 2.

The lesson here? The prophets of slow food can preach its benefits all they want, and as eloquently as they want, but nothing will make the case for buying locally better than price.

I tried to read the Conservapedia entry on evolution a few moments ago, but after simultaneously breaking out in a cold sweat and hives I realized my body was experiencing a potentially deathly immune reaction, and I could actually feel my brain's synaptic activity slowing down.

To wit: from the self-declared "Trustworthy Encyclopedia":

Although the defenders of the theory of evolution contend there is evidence that supports the theory of evolution, there are many who are against the theory of evolution and state there is a multitude of serious problems with the theory of evolution. For example, an article by CBS News begins with the observation that, "Americans do not believe that humans evolved, and the vast majority says that even if they evolved, God guided the process. Just 13 percent say that God was not involved."

Why was I subjecting myself to such comedy? Well, thanks to DailyKos, I enjoyed the pleasure this morning of reading an exchange between Richard Lenski, an evolutionary biologist at Michigan State University, and Andrew Schlafly, the grand poobah of Conservapedia.

Earlier this spring, Lenski and several co-authors published in the Proceedings of the National Academy of Sciences the results of a long-running experiment involving many thousands of generations of E. coli that documented a striking example of evolution in action. After about 31,500 generations, a random mutation enabled a subpopulation of the E. coli to exploit citrate as a carbon source, something that the initial breeding population was incapable of achieving.

Schlafly and his Conservapedia followers were suspicious, and demanded access from Lenski to the "raw data" so that they could prove for themselves that he was, as a number of commenters posited, a "hack" perpetrating a "fraud." After some back and forth, Lenski unloaded a broadside against Schlafly that has to go down as one of the great, fact-based flames of all time.

Anyone who respects science and has been annoyed over the years by religious and culture-war motivated attacks on the theory of evolution will savor Lenski's response in full. But here's a taste:

Finally, let me now turn to our data. As I said before, the relevant methods and data about the evolution of the citrate-using bacteria are in our paper. In three places in our paper, we did say "data not shown," which is common in scientific papers owing to limitations in page length, especially for secondary or minor points. None of the places where we made such references concern the existence of the citrate-using bacteria; they concern only certain secondary properties of those bacteria. We will gladly post those additional data on my web site.

It is my impression that you seem to think we have only paper and electronic records of having seen some unusual E. coli. If we made serious errors or misrepresentations, you would surely like to find them in those records. If we did not, then -- as some of your acolytes have suggested -- you might assert that our records are themselves untrustworthy because, well, because you said so, I guess. But perhaps because you did not bother even to read our paper, or perhaps because you aren't very bright, you seem not to understand that we have the actual, living bacteria that exhibit the properties reported in our paper, including both the ancestral strain used to start this long-term experiment and its evolved citrate-using descendants. In other words, it's not that we claim to have glimpsed "a unicorn in the garden" -- we have a whole population of them living in my lab! [http://en.wikipedia.org/wiki/The_Unicorn_in_the_Garden] And lest you accuse me further of fraud, I do not literally mean that we have unicorns in the lab. Rather, I am making a literary allusion. [ http://en.wikipedia.org/wiki/Allusion]

For those interested in further discussion of the "data," the Conservapedia discussion page includes some additional informative back and forth between actual microbiologists and the skeptics. Which proves that even in a den of ignorance, enlightenment can be found.

The great, unanswerable question in "Electro-Shock Therapy," Jonathan Rauch's long and interesting look in the Atlantic at GM's efforts to transform the automobile industry with the über-hybrid Chevy Volt, is whether GM will pull it off. Americans have learned not to expect much from their car companies, and no amount of hype from GM executives, or "failure is not an option" assertions from GM engineers, will convince us differently.

Only the real thing -- a stylish, high-mileage automobile charging up from an ordinary electric socket -- will do the trick. If Volts start battling Priuses for Berkeley parking spots, then we can talk. But we won't get a glimmer of that reality until at least 2010. So while stories such as Rauch's make for good reading, they are ultimately a little unsatisfying -- something Rauch knows as well as anybody. His most telling line, near the end of the piece, "I was looking at the Barack Obama of automobiles -- everyone's hope for change," acknowledges as much. We can invest as much optimism as we want in the prospect of the truly revolutionary electric car -- but we're still forced to wait and see.

To me, the most promising hint about the future came not from the GM engineers frantically testing new battery designs, but from the reaction of the rest of the automobile industry to the Volt hype.

Despite its head start, GM will have to fight to be first. In January, after a year of watching GM bask in the Volt's publicity, Toyota reacted. At the 2008 Detroit auto show, Katsuaki Watanabe, the president, announced that Toyota would produce a lithium-ion plug-in car of its own, and would have it on the street in test fleets "not at the end of 2010, but earlier than that." Toyota was talking about a few hundred experimental cars in a controlled setting, not tens of thousands of cars in dealer showrooms, a much less ambitious goal than GM's. But Toyota is famous for under-promising and over-delivering.

In February, Tesla, the Silicon Valley company, announced plans for an electric sedan with a gasoline-powered generator, like the Volt -- but set to arrive a year earlier, in late 2009. In March, BMW said it might produce an electric car for the U.S. market, and in May, Nissan said it would have one in test fleets in 2010. The drumbeat seems likely to continue. Simply by announcing the Volt, GM has attracted a bevy of competitors, bringing the electric car's mass-market advent from over the horizon to around the corner.

GM might not save itself with the Volt, but electric cars are coming. And with the price of oil hitting a new intraday high record of $143.67 on Monday, it won't be a moment too soon.

Two news items from Reuters:

• Total U.S. ethanol capacity will hit 9.25 billion gallons in 2008. Six new ethanol plants opened this month alone.

• "About a dozen" biofuel plants have filed for bankruptcy, victims of high prices for corn and soybeans.

If ever we needed a real-life definition of the term "Catch-22," here it is: Federal ethanol mandates have contributed to record corn prices, which in turn make it almost impossible to turn a profit selling ethanol.

Or at least, that's how most people see the problem. But not the Renewable Fuels Association.

MarketWatch reports:

"Getting rid of the U.S. ethanol industry will have little impact on the price of corn," said Matt Hartwig, a spokesman at Renewable Fuels Association, the trade group for U.S. ethanol producers.

Oh really?

From the same MarketWatch article:

The USDA projects corn use for ethanol will reach 4 billion bushels in 2009, almost doubling the 2007 level and accounting for 34 percent of corn production. In comparison, U.S. corn production is projected to rise only 11 percent in the same period.

So demand will double, but supply will rise only 11 percent. But not to worry -- there will be "little impact" on the price.

Consumers may be spending their economic stimulus checks, as proven by a significant jump in spending in May, but they sure aren't whistling while they work.

The latest release of the University of Michigan's Consumer Confidence survey describes an American mood that is as miserable as it has ever been.

More consumers than any time since the first survey was conducted in 1946 reported that their financial situation had worsened (57 percent). When asked to explain the changes in their finances, the highest number of consumers cited higher prices for fuel and food, and the smallest number of consumers reported income gains than at any other time in the history of the surveys. "Consumers held the bleakest inflation-adjusted income expectations since the question was first asked nearly a half century ago," noted [Richard Curtin, the Director of the Reuters/University of Michigan Surveys of Consumers.].

Nine-in-ten consumers thought that the economy was in recession in June, with record numbers citing unfavorable news about rising prices, lost jobs, slowing economic growth, and the continuing fallout from the credit and housing crises. "Perhaps the most significant development in the past few months is that two-thirds of all consumers now expect the economic slump to extend into the next several years," said Curtin.

Most notable: The last time Americans felt this bad? May, 1980.

What else happened in 1980? The political party that did not occupy the White House won a landslide election and profoundly changed the course of American history.

Just sayin'.

When I first glanced at a headline in this morning's Financial Times, "Oil costs force P&G to rethink supply network," I thought, aha, another example of reverse globalization. In a world of sky-high transportation costs, outsourcing production to where labor is cheapest might not always make economic sense. As Procter & Gamble's head of global supply, Keith Harrison, says, "I could say that the supply chain design is now upside down. The environment has changed. Transportation cost is going to create an even more distributed sourcing network than we would have had otherwise."

An example of this more distributed network? Moving a factory from one city in China ... to another city in China!

[Harrison] said high energy costs were already changing the calculations affecting the siting of new production facilities. As an example, he cited a babycare facility being built to meet growing demand in China. It is being located at Xiqing in the northern province of Tianjin, rather than at an existing plant near Guangzhou in southern China.

In related news, an excellent cover story in the June 19 issue of BusinessWeek, "Can the U.S. Bring Jobs Back from China?," suggests that the reconfiguring of global production chains is not going to happen overnight, if ever.

A reader observed in an e-mail this morning that for him, and a lot of the people he has talked to recently, the sharp rise in the price of oil and gas over the past year seemed to have come out of nowhere, out of the blue. Why now, he wondered? What triggered this sudden upsetting of the apple cart?

It's a sentiment I encounter frequently in the HTWW comments section from people who are (usually angrily) reacting to my posts on energy issues. If the law of global supply and demand is the true determining factor in the cost of oil, then why has the price more than doubled in just the last year? What's changed?

It's not just the hoi polloi who are suspicious. Economist Arnold Kling, who believes speculation must be part of the explanation, posed a variation of this exact question to economist Paul Krugman, who is convinced speculation isn't the culprit. If "fundamentals" justify the current cost of oil, then why was the price so low last year? Global economic growth certainly didn't double in the same time frame. Quite the contrary: It slowed down.

Let me preface my attempt to take a stab at this by acknowledging that I really don't know how much speculation has to do with the current price of oil -- and judging by the vigor with which the question is currently being debated by economists and politicians, I don't think anybody knows. I also would not be surprised in the least if declining global demand for oil, brought on by high prices, results in a sudden dramatic plunge. I would argue that any such plunge would likely be temporary, but I wouldn't dream of suggesting that such a thing would be impossible.

The first point that I think needs stressing is that oil and gas prices have been on a sustained upward trajectory for years. A gallon of unleaded regular was $1.55 in November 2000, and has more or less risen steadily ever since -- people were making a big fuss about $2.00 a gallon oil in 2004! The price of oil in 2000 was about 25 bucks a barrel, and it too, obviously, has risen relentlessly. Remember, in 2000, $60 dollar a barrel an oil would have seemed sky-high! Now it seems cheap. So what we are currently experiencing isn't a sudden break from past trends, but the rapid acceleration of a trend already well in place.

And as mighty as that acceleration might be, and as much as I wince, like everyone else, each time I have to visit a filling station, deep down, oddly enough, I just don't find myself that shocked. It seems to me that oil should be expensive. Perhaps I feel this way because my ecological consciousness was formed as a kid in the 1970s, when the first serious discussion of resource constraints began to permeate society. The belief that we would ultimately be forced to reckon with the planet's limited stocks of oil latched hold of me and never let go. I was more startled when the price of oil dropped below $10 a barrel in 1986 than I am by its rise all the way up to $140. Oh sure, I understood the price mechanics of how it happened: how the oil shocks of 1970s encouraged the rapid development of new oil fields that weren't controlled by OPEC, with a consequent undercutting of the cartel's pricing power. But it always seemed bound to be a short-term solution. Oil wells eventually run dry. Oil -- the lifeblood of the global economy, of modern agriculture and industry and transportation -- was thus inherently precious.

Here's one way to think about what's currently happening. As has been well-documented, the historical response to high oil prices has been an increase in production.

Until now.

And by that I don't mean just with respect to the most recent price surge. Six months or a year is too short a time period to bring significant new sources of oil production online. I'm referring to the long-term run-up of demand and price over the last eight years. Broadly speaking, growth in supply has more or less plateaued even as demand has continued to rise.

Perhaps we're just stuck in a transitional period before a slew of new oil production comes online, in Saudi Arabia and elsewhere (even, eventually, in ANWR and off the coast of California and Florida). But as I noted in my last post it's getting harder and harder just to replace the declining oil production of aging oil fields, and the newer sources of oil are generally more expensive to develop than the older ones. So we're replacing cheap, abundant oil with expensive, harder-to-find oil. That's a recipe for a sustained price rise.

It's also the basic premise of "peak oil" -- a theory much mocked by right-wingers who trust in the market to provide, but now also attacked from the left by those who are convinced that the real villain isn't limited resources but greedy traders.

Try this thought experiment on for size. What do you think would happen to global oil markets if a critical mass of the people buying and selling oil became convinced that yes, whaddya know, there are fundamental constraints on how much cheap oil can be pumped out of the planet and burned?

Wouldn't that realization, in and of itself, contribute to a dramatic change in market psychology? I submit that a possible explanation for the dramatic events of the past year is that a tipping point has been reached. Enough people now believe that the era of cheap oil is over to ensure a significant, and ongoing, adjustment upward in the real price. Modern civilization as we know it is dependent on cheap oil, and cheap oil is becoming scarce. Voilà -- time to panic. And a bit of a self-fulfilling prophecy dynamic kicks in. The higher the price of oil goes without encouraging dramatic increases in production, the more worried the market gets.

This thesis is only strengthened by the reality of what's happening in the world's emerging economies. I wonder if some of the Americans currently furious at speculators understand deep down the significance of the economic growth occurring in China and India. The Associated Press reported today that China has added 44 million mobile phone accounts since the beginning of this year, bringing the total number of such accounts in China to well over half a billion. Almost twice as many Chinese have mobile phones as there are American citizens. India is experiencing a similarly torrid growth rate. Not every mobile phone user in China or India drives an SUV or runs the air conditioner full blast, of course, but symbolically, that dramatic expansion of state-of-the-art connectivity is enough to tell us exactly what is going on -- we are witnessing a vast, globally distributed increase in the number of people with access to the means to consume petroleum-based resources. When economies that are already the size of China and India continue to grow at rates of 9 or 10 percent a year, extrapolations into the very near future become daunting. We can't possibly pump enough oil to slake China's thirst if it continues to grow at its current rate. Something's got to give -- and the most obvious weak point is the price of oil.

From that perspective, what's surprising is not that oil costs $140 a barrel, but how long it took for us to get to that point.

CIBC's new report predicting $200 a barrel oil by 2010, 7 dollar-a-gallon gas, and a massive decrease in the number of cars cruising along American highways over the next ten years is worth reading just for the inherent shock value. (Thanks to Environmental Capital for the tip.) But I was most taken by the first two lines:

Recent announcements from OPEC and China won't be sufficient to hold oil prices in check. The additional 200,000 barrels per day pledged from Saudi Arabia is a pittance compared to the four million barrels per day that depletion will hive off world production this year.

That observation jibes very closely with the argument made in a post I had read just moments earlier from energy analyst Jim Kingsdale, courtesy of a link from The Oil Drum.

We commonly hear that the reason oil prices have risen is rapid demand growth in developing countries, particularly China and India. But the decline of mature oil fields throughout the world is a much greater source of demand for new oil supplies than the growth of end user demand.

End-user demand growth -- new Chinese and Indian car drivers, etc -- is projected at about 800,000 barrels per day for 2008. Measured against the Saudi promise of 200,000 new barrels a day that might seem like not that much. But when you add the four million barrels a day that are lost every year because of declining production in existing wells, you're looking at a pretty significant gap to make up. It's like trying to fill a bucket with a hole in the bottom. It's a losing proposition.

If you're looking for a handy metaphor to understand why oil prices are so high that doesn't require any position at all on the question of how much speculation by energy traders should be blamed, here it is: We're running faster and faster not just to stay in place, but to keep from falling further behind.

And the award for most strained metaphor to emerge from the housing bust goes to.... the Manteca Bulletin!

It's REO Speedwagon, Manteca-real estate style.

REOs -- or foreclosed real estate owned by banks -- are rocking the Manteca housing market just like the Midwestern band of the same name did the power ballad rock scene of the 1970s.

I don't know which is worse, the idea that America's housing crisis, bad as it is, has reached anywhere near the awful depths of the power ballad rock scene of the 1970s, or the horror I just experienced of having the song "Keep On Loving' You" run through my head over and over again, as I read the legal complaint filed on Wednesday by California State Attorney General Jerry Brown against Countrywide, alleging "deceptive advertising and unfair competition."

And I'm gonna keep on lovin' you
Cause it's the only thing I wanna do
I don't wanna sleep
I just wanna keep on lovin' you

Say what you want about the unseemly spectacle of California piling on to kick Countrywide after Illinois already got the party started with its lawsuit against America's biggest lender, the text of the complaint still makes for an entertaining summary of how the housing mess blew up. And it reinforces a point that How the World Works has long stressed: The incentives for creating all those loans that homeowners would never be able to pay back came from the third parties who were gobbling up shares in the securitized pools of such loans in the secondary market. Countrywide's business wasn't really making loans so that Americans could buy homes. It was making loans that it could then repackage and sell to investors hungry for the high premiums that came with risky loans. The worse the loans were, the more profits there were to be made.

From the complaint:

Defendants' deceptive scheme had one primary goal -- to supply the secondary market with as many loans as possible, ideally loans that would earn the highest premiums. Over a period of several years, Defendants constantly expanded Countrywide's share of the consumer market for mortgage loans through a wide variety of deceptive practices, undertaken with the direction, authorization, and ratification of defendants Sambol and Mozilo, in order to maximize its profits from the sale of those loan to the secondary market...

In addition, Countrywide directly and indirectly motivated its branch managers, loan officers and brokers to market the loans that would earn the highest premiums on the secondary market without regard to borrower ability to repay.

Countrywide certainly deserves some of the blame for pushing loans on people they knew wouldn't be able to repay them. But what about the investment banks that gobbled up the repackaged loans? Come on, Jerry, Countrywide's small fry. The Big Apple is where the action's at.