Common Tragedies

Thoughts on Environmental Economics

Will droughts make for expensive draughts?

Posted by Evan Herrnstadt on April 9, 2008

By now, most of us have heard about ethanol and its impacts on beer prices. As farmers dedicate more land to growing high-priced corn, they also dedicate less land to hops and barley. Now it is likely that this substitution effect will be/is being exacerbated by climate change as well. From MSNBC:

Jim Salinger, a climate scientist at New Zealand’s National Institute of Water and Atmospheric Research, said climate change likely will cause a decline in the production of malting barley in parts of New Zealand and Australia. Malting barley is a key ingredient of beer. “It will mean either there will be pubs without beer or the cost of beer will go up,” Salinger told the Institute of Brewing and Distilling convention…Similar effects could be expected worldwide, but Salinger spoke only of the effects on Australia and New Zealand. He said climate change could cause a drop in beer production within 30 years, especially in parts of Australia, as dry areas become drier and water shortages worsen.

This drought-induced price spike would perhaps mitigate or reverse some of the aforementioned substitution toward corn as barley prices become competitive for farmers again. However, as Salinger notes, the beer supply curve is likely to shift in at least initially until farming patterns change or the industry adapts to new varieties of malting barley.

Salinger is spot on when he points out the tradeoff between a price increase and a shortage. Let’s learn a lesson from the oil crisis of the late 70s. If that event taught us anything, it’s that a price ceiling would likely lead to the horrifying beer shortage that Salinger predicts. We’d have to endure a period of beer rationing: odd- and even-numbered license plate numbers birthdays alternate beer drinking days, and everyone rests his/her stein on Sunday (only wine allowed) to round out the seven-day week. I can see it now: mile-long lines outside bars, groceries, and liquor stores, each person waiting to take home their weekly 6-pack allocation.

More likely, we’ll just have to bear with the higher beer prices that come with the new supply schedule, at least for a while. Luckily, this development will not be as regressive as high fuel prices, as the cheapest beers (mmm…PBR) use far less hops and barley than most craft beers. Still, it’s unfortunate that as the planet warms, it’ll be harder than ever to find a cold beer.

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One Response to “Will droughts make for expensive draughts?”

  1. [...] details at the original post.  Also check out this link, which discusses the impacts of ethanol production on beer [...]

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