How Oil Prices Affect the Price of Food
How Oil Prices Affect the Price of Food
By Post Carbon | Wed, 21 December 2011 18:07
The current global food system is highly fuel- and transport-dependent. Fuels will almost certainly become less affordable in the near and medium term, making the current, highly fuel-dependent agricultural production system less secure and food less affordable. It is therefore necessary to promote food self-sufficiency and reduce the need for fuel inputs to the food system at all levels. The connection between food and oil is systemic, and the prices of both food and fuel have risen and fallen more or less in tandem in recent years (figure 1). Modern agriculture uses oil products to fuel farm machinery, to transport other inputs to the farm, and to transport farm output to the ultimate consumer. Oil is often also used as input in agricultural chemicals. Oil price increases therefore put pressure on all these aspects of commercial food systems.
Figure 1: Evolution of food and fuel prices, 2000 to 2009
Sources: US Energy Information Administration and FAO. Thus there is concern that high and volatile prices of crude oil may cause food prices to continue to increase (Bloomberg, 2011). Moreover, as oil prices rise, so does demand for bio-fuels, which are the only non-fossil liquid fuels able to replace petroleum products in existing combustion engines and motor vehicles. But bio-fuels are often made from corn and other agricultural products. As demand for these alternative fuels increases, crop prices are forced upwards, making food even less affordable. Export-led agricultural strategies also increase the world’s vulnerability to high oil prices. Most donor agencies have encouraged the less industrialized countries to focus on the production of cash crops at the expense of staples for local consumption. As a result, people in these countries are forced to rely increasingly on imports of often subsidized cereals or those funded by food aid programmes. However,
By Post Carbon | Wed, 21 December 2011 18:07
The current global food system is highly fuel- and transport-dependent. Fuels will almost certainly become less affordable in the near and medium term, making the current, highly fuel-dependent agricultural production system less secure and food less affordable. It is therefore necessary to promote food self-sufficiency and reduce the need for fuel inputs to the food system at all levels. The connection between food and oil is systemic, and the prices of both food and fuel have risen and fallen more or less in tandem in recent years (figure 1). Modern agriculture uses oil products to fuel farm machinery, to transport other inputs to the farm, and to transport farm output to the ultimate consumer. Oil is often also used as input in agricultural chemicals. Oil price increases therefore put pressure on all these aspects of commercial food systems.
Figure 1: Evolution of food and fuel prices, 2000 to 2009
Sources: US Energy Information Administration and FAO. Thus there is concern that high and volatile prices of crude oil may cause food prices to continue to increase (Bloomberg, 2011). Moreover, as oil prices rise, so does demand for bio-fuels, which are the only non-fossil liquid fuels able to replace petroleum products in existing combustion engines and motor vehicles. But bio-fuels are often made from corn and other agricultural products. As demand for these alternative fuels increases, crop prices are forced upwards, making food even less affordable. Export-led agricultural strategies also increase the world’s vulnerability to high oil prices. Most donor agencies have encouraged the less industrialized countries to focus on the production of cash crops at the expense of staples for local consumption. As a result, people in these countries are forced to rely increasingly on imports of often subsidized cereals or those funded by food aid programmes. However,