JEDDAH, 11 April 2008 — As the world enters a new era, with commodities — from oil to grains — experiencing new price peaks, analysts are beginning to reemphasize the long forgotten aspects of Malthusian economy. Rising staple prices throughout the world have generated unintended consequences, with the issue of biofuels — mainly derived from crops such as corn, sugarcane and soya beans — coming under increasing focus.
Biofuels were initially viewed as an environmentally friendly alternative with no geopolitical risk compared to ‘dirty’ fossil fuels. However, the euphoria seems to be rapidly fading now. Instead, some sort of gloom has taken over the pundits. The issue is now being looked at closely and indeed with real reasons, with many saying this was not sustainable in the longer run.
Opposition to biofuels is growing, even from environmentalists and scientists, claiming that these alternatives are not the right answer to global energy woes and in fact could make the issue of climate change even murkier.
There are real fears now that carbon-absorbing rainforest in countries, such as Brazil, is being cut down to provide land for fuel crops such as soya and palm, and that biofuel crops are displacing land used for food, forcing up the price of staples. Global food prices, based on United Nations records, rose 35 percent in the year to the end of January, markedly accelerating an upturn that began, gently at first, in 2002. Since then, prices have risen 65 percent. In 2007 alone, according to the UN Food and Agriculture Organization’s world food index, dairy prices rose nearly 80 percent and grain 42 percent. This has resulted in disastrous social consequences for the billions below the poverty line in the impoverished, underdeveloped world.
Consequences, the world over, have been startling and difficult. In this era of IMF and World Bank-led growth and economic emancipation, waves of discontent are already being felt from all around. Egypt is in the midst of ‘bread riots.’ Reports of protests are pouring in from Haiti. Violent protests hit Cameroon and Burkina Faso in February. Protesters rallied in Indonesia recently and media reported deaths by starvation. In the Philippines, fast-food chains were urged to cut rice portions to counter a surge in prices.
In Saudi Arabia too, the government had to intervene to tame the rising grain prices — the bull is yet far from being tamed. Since January, thousands of troops have been deployed in Pakistan to guard trucks carrying wheat and flour. Sharp protests were registered against the shipment of some of these staples into nearby impoverished Afghanistan. Protests have erupted in Indonesia over soybean shortages, and China has put price controls on cooking oil, grain, meat, milk and eggs.
India has banned exports of staple rice to meet local requirements. Food riots have erupted in recent months in Guinea, Mauritania, Morocco, Senegal, Uzbekistan and Yemen. In Mexico, tens of thousands took to the streets last year over the cost of tortillas, a national staple whose price rocketed in tandem with the price of corn (maize).
The World Bank estimates that 33 countries around the world face potential political and social unrest, because of the acute hike in food and energy prices.
There is now a genuine concern all around that the use of farmland to grow fuel has contributed to growing global food woes. It is estimated that one in four bushels of corn from this year’s US corn crop will be diverted to make fuel ethanol.
“Turning food into fuel for cars is a major mistake on many fronts,” said Janet Larsen, director of research at the Earth Policy Institute, an environmental group based in Washington.
Indian Finance Minister P. Chidambaram last week criticized major grain producing nations of the world for diverting farm products to produce biofuels, saying this had led to soaring global food prices globally.
While growing demand was one reason for skyrocketing food prices, the use of agricultural products to make biofuels was another cause, he told a public lecture organized by the Lee Kuan Yew School Public Policy in Singapore. “It has been estimated that nearly 20 percent of corn grown in the United States is diverted for producing biofuels,” he said in his speech to academics, students and diplomats. “As citizens of the world, we ought to be concerned about the foolishness of growing food and converting it into fuel,” he said, slamming the “lopsided priorities of certain countries” that produce fuel at a cheaper cost to meet the transport needs of a certain section of their population, even if it leads to higher food prices elsewhere.
Speaking at a forum after his speech, the Indian finance chief termed the approach to convert food into fuel, as very selfish. “I think it is the most foolish thing that humanity can do,” he said. “I think it’s outrageous and it must be condemned.”
Indeed, Chidambaram and others have a point. Despite the euphoria revolving around biofuels, it is not turning out to be the panacea of the woes of the energy world.
The conversion of staple grains, from corn to soya, into fuel, so as to ensure continuity and stability of energy supplies to the world, is resulting in unintended consequences.
For this to continue would mean compromising global food security, unbearable hikes in prices of staple foods, and the resultant law and order situation in many parts of the world. This cannot be allowed under any circumstances.
The world definitely needs to look at other ways and, for the time being it seems, fossil fuel will have to remain under demand pressure — unless a comfortable, sustainable source of alternative energy is developed. A long way to go indeed!