What’s fueling the food crisis?

Why is food so expensive right now? Ask 10 experts and you might get 10 different answers. Bad weather, export restrictions, hoarding and speculation are all popular explanations for the continuing rise in the cost of basic food staples. But it is hard to argue that the price of fuel, in particular oil, is not playing a significant role.

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The graph above makes a pretty convincing case for the relationship between food and fuel prices, with the painful peaks in food and oil prices coinciding in the summer of 2008 and recent surges occurring almost uniformly for food and fuel.

What explains this uncanny correlation? The obvious answer is that it takes fuel to make food. In particular, producing the nitrogen-based fertilizers that are essential in pushing up crop yields takes large amounts of energy, and thus fuel. Transporting food, whether by land, sea or air, also requires fuel, as do a number of other farm inputs, from pesticides to tractors.

There is also controversy over the role of biofuels in rising food prices. When conventional fuel becomes more expensive, it is more economically appealing to find other fuel sources such as biofuels made from maize and sugar. This may cause farmers to divert land away from food crops to plant lucrative biofuel crops. In the US and the EU, government mandates requiring a certain level of biofuel production can divert land even when fuel prices are low.

Over the long term, the loss of arable land for food production could be a major contributor to rising prices, with a July 2008 World Bank report concluding that when trying to explain the 2008 food crisis, “the most important factor was the large increase in biofuels production in the US and the EU.” Several prominent figures have recently joined the chorus of those blaming biofuels for the current price increases, including Princeton professor Tim Searchinger and Bill Clinton. The biofuel lobby has aggressively denied these allegations.

Whether or not biofuels are part of the problem, it seems that food will not start getting cheaper until oil prices — which are being driven higher by jitters over Libya — fall again. In the meantime, investing in sustainable, locally appropriate agriculture in developing countries can ensure that the world’s poorest — many of whom live in food-importing countries — are at least partially insulated from these dangerous price swings.