How Oil Prices Affect the Price of Food

Powerful Essays
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,

You May Also Find These Documents Helpful

  • Better Essays

    Oil price

    • 1163 Words
    • 4 Pages

    Syria and Ukraine, oil prices increased significantly as did the profit earned by many oil companies including PETRONAS. Politicians in Malaysia opposed the government policy to oil price increase by twenty cents and the withdrawal of oil subsidy. As a manager or policy implementer, discuss the pros and cons if this policy in the context of the various theories of profit. Introduction The government of Malaysia increased the price of oil by 20 cents and withdrawal of the oil subsidy causing the…

    • 1163 Words
    • 4 Pages
    Better Essays
  • Powerful Essays

    Oil Price

    • 1914 Words
    • 8 Pages

    AND CONs OF INCREASING OIL PRICE 1. INTRODUCTION In this decade, the price of oil has been raised 3 times. The era of President SBY has the record of increasing oil price (premium). The policy was made by SBY has become pro and con between the expert of economic. Some people said that increasing the oil price is just can’t be done because it’s contra with UU, but government said that if we don’t raise the oil price it will absorb the APBN because the import oil price is higher and higher time…

    • 1914 Words
    • 8 Pages
    Powerful Essays
  • Powerful Essays

    1. Introduction The price of oil becomes the bone of contention recently. Oil price seems to be hitting new highs with the regularity of a metronome. It is a bad news for customers who have to pay more on it. More frightening still, this situation may get worse before it come back to normal. No one can exactly predict when the pendulum will soon swing back again since all uncertain factors existing. From the supply side of view, the OPEC is the main producer, being prepared to add or subtract production…

    • 1299 Words
    • 6 Pages
    Powerful Essays
  • Powerful Essays

    Food Prices

    • 2418 Words
    • 10 Pages

    Why Did Global Food Prices Rise? For the last 25 years global food prices have been falling, driven by the increased productivity and output of the farm sector worldwide. In 2007, this came to an abrupt end as global food prices soared. By September 2007, the world price of wheat rose to over $400 a ton-the highest ever recorded and up from $200 a ton in May. The price of corn (maize) surged to $175 a ton, some 60 percent above its average for 2006. An index of food prices, adjusted for inflation…

    • 2418 Words
    • 10 Pages
    Powerful Essays
  • Better Essays

    Oil Price Analysis

    • 3265 Words
    • 9 Pages

    Oil Price Analysis: The Impact Of Supply & Demand By Greg McFarlane It’s easy to curse and moan when gas seems expensive. The oil companies are abusing the helpless customers who are effectively indentured to them, and can name their own prices thanks to a system of collusion and profiteering. Something, probably involving legislation, ought to be done. Except the truth lies elsewhere. In the long run, oil is about as purely elastic a commodity as there is, every movement on the production and consumption…

    • 3265 Words
    • 9 Pages
    Better Essays
  • Better Essays

    Oil Price Rise

    • 1522 Words
    • 7 Pages

    Why does oil prices rise and fall? Of all industries in the world, oil industry is indeed an international business which affects most countries in the world. As the oil is the most consumed energy, it plays a vital role in daily lives as well as economy and social development. Also, the oil industry leads to new technology development both directly and indirectly. It has been deployed as a means for economy and political negotiation. Nevertheless, “crude oil” when refined into various petroleum…

    • 1522 Words
    • 7 Pages
    Better Essays
  • Best Essays

    Fluctuating price of oil and how it affect the global economy Abstract: The oil prices have started rising significantly since the initiation of the twenty first century. Theoretically, one can judge the impact of an oil price shock. The immediate effect of the oil price shock is the increased cost of production due to increased fuel cost. This creates an inflationary effect (mainly cost push inflation which is accompanied by a situation of unemployment). Whenever there is an overall inflation…

    • 5262 Words
    • 22 Pages
    Best Essays
  • Good Essays

    gas and oil prices

    • 987 Words
    • 3 Pages

    Oil and Gas PricesOil and Gas 2There are many issues that cause the cost of oil and gas to increase. The main contributing issue to the increasing cost of oil and gas is supply and demand, when demand is greater than supply, the price of oil and gas will increase. The factors that affect supply include increased demand, problems with refineries and pipelines, and disruption to supply or threat of disruption to supply.With the increased demand for oil in the United States and other countries such…

    • 987 Words
    • 3 Pages
    Good Essays
  • Good Essays

    press, oil prices are at $126 to a barrel, more than double the April 2007 price of $63 a barrel. The future doesn't look too bright with prophets of doom predicting still higher prices. In India, we are yet to feel the real impact of the flaring international oil prices even though over 70 per cent of the country's requirements are met through imported oil. The oil prices in India and many Asian countries are subsidized by government and controlled through price ceiling rules. High oil prices are…

    • 1652 Words
    • 7 Pages
    Good Essays
  • Satisfactory Essays

    • How to Deal with High Oil Prices? • Multinational Corporations: Are they Devils in Disguise? • Are Indians Less Quality Conscious? • Ethics in Business are just a Passing Fad • Is the Consumer really the King in India? • Commercialization of Health Care: Good or Bad? • Is there any Point in having a Business Strategy when the World changes from Month to Month? • Is the Patents Bill Good for India? • Is the Business of Business only Business? • Public Sector being a Guarantor of Job Security…

    • 364 Words
    • 2 Pages
    Satisfactory Essays