Global Renewable Fuels Alliance

Undeniable Evidence Oil Prices Biggest Driver of Food Cost

An article published in the Canadian newspaper The Globe and Mail on May 20th entitled “Where are food costs heading? Try looking at the price of crude” concluded that energy costs are the single biggest factor in global food cost volatility. The author, Carl Mortished, examined a number of factors including the impact of national currency values, weather systems and food staple stockpiling, and found an undeniable “correlation between the cost of energy and the cost of food.”

The article reviews figures from the food price index published monthly by the United Nation’s Food and Agriculture Organization (FAO) and finds that “the sharp declines of recent years have almost entirely reversed the sudden food price surges of 2008 and 2011.” At the time, these surges in food prices were blamed on ethanol production.

Global Renewable Fuels Alliance (GRFA) President Bliss Baker commented on these findings and noted that the GRFA has argued for several years that the price of oil and energy inputs are the most influential drivers of food and commodity prices.

“These multi-year downturns in the food price index have occurred during a period of sustained declines in the price of crude.” Baker said. “More recently, crude prices have been steadily recovering since January 2016 and have been closely mirrored by incremental increases in the food price index“ he added.

These latest findings are consistent with the 2013 World Bank publication, “Long-Term Drivers of Food Prices”, that concluded that almost two thirds of food price increases are caused by rising oil prices. The report states that between 1997-2012 the price of crude oil caused maize and wheat prices to increase by 52 percent and 64 percent, respectively.

In sharp contrast to the significant changes in food and crude prices since 2008, over the same period ethanol production has trended steadily upwards from 65 billion litres in 2008 to 94 billion litres in 2014. This clearly demonstrates that increased ethanol production has not driven up food prices.

“A number of international institutions including the World Bank, International Energy Agency (IEA) and the United Nations FAO have already recognized the strong relationship between oil prices and food prices.” Baker said. “It’s long past time to stop blaming ethanol for food price volatility that the evidence plainly shows is caused by crude prices” he concluded.

The Global Renewable Fuels Alliance is a non-profit organization dedicated to promoting biofuel friendly policies internationally. Alliance members represent over 90% of global biofuels productions. Through the development of new technologies and best practices, Alliance members are committed to producing renewable fuels with the smallest possible footprint.

For more information please contact:

Bliss Baker, President, Global Renewable Fuels Alliance

Telephone: (Country Code “1”) 647 309-0058

Email: info@globalrfa.org

Please visit our website at: www.globalrfa.org


Comments

There are currently no comments on this article.

Enter your comment below. Fields marked * are required. You must preview your comment before submitting it.