The Environmental Food Crisis

The relationship between food prices and the oil price

Energy and agricultural commodity prices are increasingly correlated with each other. Rising oil prices increase fertil- izer costs and freight rates. The emerging biofuel market strengthens these interdependencies, while a higher oil price increases demand for biofuels. The agricultural com- modities used nowadays for biofuels were previously used for feed and fodder. As well demand for agricultural com- modities as for factor inputs increases in this case. Yields must increase by at least 43% by 2030 to meet de- mand, assuming all other factors constant (FAO, 2003). Fertilizer alone accounts for about 50% of historical in- creases in production (FAO, 2003). The projected increases required to sustain demand assume a substantial increase in the use of fertilizers by small-scale farmers in the region. As the cost of fertilizer is strongly correlated with oil prices, the future prices of oil will have a great influence on the ac- cessibility of farmers to commercial fertilizer. Current FAO projections (2015/2030) scenario assumed an average oil price of US$21/barrel, while the later 2030/2050 scenario assumed an average oil price of US$53.4/barrel. At the peak of the current food crisis, oil prices hit US$147/barrel. As the cost, and subsequent use, of fertilizer is strongly cor- related with price, a potentially higher oil price would lower the use of fertilizer or further increase the food price. Fuel price is one of the main determining factors for fisher- ies. Rising energy prices have a strong impact on capture as well as aquaculture (for the production and transport of fish feed) and lead to higher costs during the processing, transport (particularly air freight) and distribution of fish products. Small-scale fisheries, which depend on outboard motors and small diesel engines, have especially suffered from the spiralling rise in fuel prices.

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