Global Trends by Martin Khor
Monday 23 June 2008
The prices of some foods and of oil moved to new record levels last week, which is bad news for consumers and producers alike. There is a dispute as to the causes and thus also the solutions.
There is so far no limit to the rise in food and oil prices, a situation that is leading many consumers and also producers to a point of where they are carrying an unbearable burden.
Last week saw more bad news on the price front. The prices of soyabean, corn and some meats jumped further to all-time high levels. The oil price had slipped earlier in the week but on Friday it rebounded by US$4 a barrel to its record US$140 a barrel.
Food is the most important consumer item, and price increases hit poorer people especially hard since a higher share of their household budget is spent on food.
Food prices have shot up due to many reasons, and the rise in oil prices last week will put even more pressure as oil is an important input in producing and transporting food.
Public protests have spread to even more countries as prices of imported and local food have jumped, and now many new protests have been held over the rise in petrol prices, including due to the reduction of government subsidies.
The article quoted an unnamed Washington official as saying: “What we have been watching is behaviour that indicates China, India, Vietnam and Malaysia simply can’t bear the burden on the central budget and that the medium to long term confluence of oil and food prices is just too much….It is leading to a real security issue where the streets are talking to the president.”
The Western leaders are now upgrading the food and oil crises to the status of a security concern since the record prices are destabilizing key developing regions, said the Financial Times.
As families struggle to make ends meet, and firms face rising production costs that may threaten their competitiveness or survival, raging battles are being waged over the factors causing the rise in prices of both food and oil.
At the recent FAO food conference
But while the leaders of
many countries pointed to the displacement of crops for food by crops
for biofuels, some countries like
Some American leaders seemed
to point to people in
Many developing countries also criticized speculation in the commodity markets for driving up the food prices.
There is even more contention
over the factors driving up oil prices. The
Many members of the US Congress are also sponsoring a bill to declare the activities of OPEC (the organization of oil exporting countries) illegal.
There is a feeling among the developed countries’ politicians that oil exporters are somehow deliberately keeping the oil price high so that they get more revenue.
However the exporters say
this is an unfair accusation. Some countries, like
To counter the attack on
OPEC and to explore the real causes of the oil prices increase,
At the meeting, a clash of views on the causes of the crisis can be expected. Whether the meeting leads to some concrete action remains to be seen.
One good thing arising from the spectacular jump in the oil price (more than doubling in the past year) is that it induces firms to be more energy-efficient, and it makes the promotion of alternative energy sources such as wind and solar easier.
That is important. Meanwhile, however, the protests against more costly food have now spread to protests against more costly oil. There are excessive profits being made by oil companies and speculators, while oil exporters are also reaping super benefits.
Speculation should be curbed now, through better regulation. The oil companies could be subjected to a tax on windfall profits. And the oil exporting countries should be prepared to use some of their increased wealth in helping poorer developing countries that import oil to ease their extra burden. They can also increase their spending on developing renewable energy.