Impact Of Petroleum Price Increases

The rise in the price of oil has heightened the costs of fertilizers (in some instances doubling the price within the six months before April, 2008), the majority of which require petroleum or natural gas to manufacture.Although the main fossil fuel input for fertilizer comes from natural gas to generate hydrogen for the Haber. Bosch process natural gas has its own supply problems similar to those for Because natural gas can substitute for petroleum in some uses (for example, natural gas liquids and electricity generation), increasing prices for petroleum lead to increasing prices for natural gas, and thus for fertilizer. Costs for fertilizer raw materials other than oil, such as potash, have themselves been increasing as increased production of staples increases demand. This is causing a boom (with associated volatility) in agriculture stocks. Oil also provides most energy for mechanised food production and transport. Higher prices for liquid fuels from petroleum increase the demand for biofuels, which may result in diverting some crops from food to energy. Even though per- capita petroleum consumption among the world’s poorest people is very low, what petroleum the poor do consume is disproportionately in the form of fossil fuel inputs to the food they eat, especially to any food imported from industrial agriculture powerhouses such as the United States. People who were already living at a subsistence level when oil was relatively cheap are extremely vulnerable when oil prices rise, and may simply lack the means to afford enough daily food calories to survive. Some farmers have mitigated the effect of oil on mechanized agriculture by actually using biofuels to power their farm equipment, such as tractors. Declining world food stockpiles In the past, nations tended to keep more sizable food stockpiles, but more recently, due to the pace at which food could be grown and the ease with which it could be imported, less emphasis was placed on keeping high stockpiles. Therefore, for example, in February 2008 wheat stockpiles hit a 60-year low in the United States Financial speculation Destabilizing influences, including indiscriminate lending and real estate speculation, led to a crisis in January 2008, and eroded investment in food commodities. The United States, specifically, has been facing an economic crisis which is likely to lead to recession. Financial speculation in commodity futures following the collapse of the financial derivatives markets has contributed to the crisis due to a “commodities super-cycle.” Financial speculators seeking quick returns have removed trillions of dollars from equities and mortgage bonds, some of which has been invested into food and raw materials. That American commodities speculation could have a worldwide impact on food prices is reflected in the globalization of food production. It represents the concentration of wealth throughout the world which Frances Moore Lappé equates to a weakening in fundamental democracy. In a recent article for The Nation, she suggests that there is no food shortage but that “as long as food is merely a commodity in societies that don’t protect people’s right to participate in the market, and as long as farming is left vulnerable to consolidated power off the farm, many will go hungry, farmers among them — no matter how big the harvests.”