World Must Choose Energy or Food Prices

Agence France-Presse
Singapore

The world must choose between higher energy prices or rising food costs, experts said Thursday, arguing that the use of farmland to make biofuels was likely to continue amid strong energy demand. Biofuels are among the factors blamed for escalating global prices of food stuffs including corn, rice and wheat. The rising cost of such staples has sparked protests in many countries, including in Asia.

Biofuels account for a substantial portion of the fuel produced in non-OPEC countries, so governments, businesses and individuals must decide if they want higher energy prices or more expensive food, the experts said at a Singapore conference.

Oil prices would be 15% higher if biofuel production was taken out, said Fransisco Blanch, global commodity strategist at Merril Lycnh, Pierce, Fenner and Smith Ltd.

Biofuels such as ethanol can be derived from foodstuffs including corn, soybeans and sugarcane.

Last year, on-third of oil production by countries outside of the Organization of the Petroleum Exporting Countries (OPEC) cartel came from biofuels and this is projected to increase to two-thirds this year, he sid at the conference.

"So if you think that in the next five years we can live without biofuels because governments decide that they are pushing up agricultural commodity prices, it's going to boil down to a decision between eating or moving around," he said.

Diverting farm products to produce biofuels, which power cars, has come under heavy criticism by environmental activists and some government officials, who it is one of the major reasons for rising global food prices.

Biouels were initially viewed as an environmentally-friendly alternative compared with dirty fossil fuels, but they are now under attack as some unintended consequences emerge.

Speakers at the conference said making a choice is not easy, especially in a market where crude oil supply is struggling to meet demand, and with oil and gas production costs soaring.

Michael Coleman, founder of the hedge fund Aisling Analytics, said that the issue of the choice between high food prices and higher fuel costs "has a moral dimension that everybody needs to wrestle with."

Paul Willows of LD Commodities Asia Pte Ltd added that "biofuels is here to stay if we think oil prices are going to remain over US$100 a barrel." Oil prices broke through the $100 per barrel level at the start of the year and are now trading above $120.