Record oil prices, food riots
April 15th, 2008 by Jim JustFrom Bloomberg.com:
“Crude oil rose to a record above $113 a barrel in New York on supply disruptions in Nigeria and Mexico and rising fuel demand in China.”
And, from CNN one consequence of diverting farm land to biofuels production:
“Riots from Haiti to Bangladesh to Egypt over the soaring costs of basic foods have brought the issue to a boiling point and catapulted it to the forefront of the world’s attention . . . There are riots all over the world in the poor countries … and, of course, our own poor are feeling it in the United States . . . While many are worrying about filling their gas tanks, many others around the world are struggling to fill their stomachs.”
The United Nations is warning that, as food prices continue to escalate worldwide, some of the poorest nations in the developing world are set to explode. In many of the world’s poorest countries, families already spend 50 to 60% of their income on food.
High food prices are one result of high oil prices. Price increases are caused in large part by rising fuel and fertilizer costs and the conversion of food crops to biofuels. Climate change is also a factor, as many countries have suffered from floods, droughts, and other weather conditions that have hurt crops.
“Liberalization” of agriculture over the last few decades, encouraged by international financial institutions backed by rich countries like the U.S. and by the E.U., has resulted in developing countries specializing in exportable cash crops such as coffee, cocoa, cotton, and even flowers. Removal of tariff barriers has allowed a handful of Northern countries to capture Third World markets by dumping heavily subsidized commodities while undermining local food production. As a result, developing countries have turned from net exporters to large importers of food.
The situation has been worsened by the dismantling of institutions such as marketing boards that kept a reserve of commodities to hedge against bad harvests and to protect both producers and consumers against price volatility.
The world has seen an increased demand for food as a result of both increased population and increased income. As incomes increase, people tend to consume more meats than before. Consequently, some food stocks are diverted for animal feed.