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Middle East unrest adds to pressure on world food prices

February 27, 2011

From The Guardian
By Jonathan Watts

The fate of Colonel Gaddafi in Libya and the price of a loaf of bread in Europe may not at first glance have an awful lot to do with one another. Similarly, not many people would link the fall of Hosni Mubarak with the cost of a bowl of rice in China.

But the revolts in Libya and Egypt are not just driving regime change in the Middle East, they may well add to the already intense pressure on global food prices.

The missing link is oil, which hit a has new two-and-a-half year high and today topped $108 (£67) a barrel due to the instability in Libya – which has Africa’s biggest crude reserves. The price is moving closer to the record levels of more than $147 (£91), reached just before the financial crash in 2008.

That will be of little surprise to car drivers, who in recent decades have grown used to the correlation between peace and conflict in the Arab world and the troughs and peaks of the price they pay at the pumps.

But in the longer term, the impact may also be evident on the dinner table because the zigs and zags of oil prices are increasingly being followed by grain.

Two links are apparent. First, modern agriculture is massively dependent on fossil fuels, which are used for farm machinery, fertiliser production and crop transportation. Secondly, the rise of biofuels means that many food crops are in direct competition for land with ethanol plantations.

From The Guardian

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One Comment leave one →
  1. Wendy Wang permalink
    March 3, 2011 3:49 pm

    It is worth to notice the link between the rise in food/energy prices and the devaluation of the dollar. Recalling from what Federal Reserve did with QE2 last Nov and 2 years before, millions dollars were printed out of thin air whcich means more dollars chasing commodities. So on top of what’s been said in the above article, the No 1 reason for increases in food prices is dollar debasement causing global price inflation.

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