Drop in Oil Prices to Weaken Food Crisis: Foreign Experts

Azerbaijan, Baku, 12 May / corr. Trend A. Badalova/ The high oil prices is one of the reasons of the global food crisis, said experts interviewed by Trend . Robert Zellik, the President of the World Bank said last week that the world food crisis will continue up to 2015. Therefore, he called on to change their policy in agricultural industry in order to supply population with the key cereals.

According to Andrew Reed, the oil market expert of U.S. analytical company Energy Security Analysis (ESAI), lower oil prices would probably take some of the pressure off food prices and in that sense ease food crisis.

"I believe that there is a relationship between high oil prices and high food prices for two reasons. One is that money is flowing into commodities as a perceived safe investment. The second is that high fuel prices make alternative fuels more viable, meaning that there is increased demand for crops that can be used both to produce fuels and as food sources," Reed said.

Rod Hunter, a senior research fellow of U.S. Hudson Institute is of the same opinion. According to expert, if OPEC members were to expand oil production, which would bring down oil prices, there would be less pressure on agricultural commodities, and less unrest.

"While the energy market has some effect, the main cause for the high food prices is the strong global growth, especially in the developing world. As China, India and other countries have liberalized their economies; their people have prospered and been able to afford better diets, entailing more calories, including more grain-fed proteins. Global growth has also led to growing oil demand," Hunter said.

According to Hunter, while there is plenty of oil, OPEC countries have been slow to develop those resources, and have thus benefited from sharply higher prices. Those higher oil prices are also having an impact on the agricultural commodity market, Hunter said.

"Some bio-fuels are price competitive, even without subsidies and mandates, at current prices. Moreover, concerns about energy security are prompting countries such as the U.S. to support use of bio-fuels. Thus, high oil prices are drawing a percentage of agricultural production into the energy market," he said.

James Shikwati, Director of Inter Region Economic Network (IREN) scientific center of Kenya believes that the freezing of oil prices may not necessarily stop the food crisis.

"Because there are other factors that are contributing to this crisis. One such factor is the highly controlled food markets by developed nations that make it difficult for other countries to access such markets. Another reason for the food crisis especially in poor countries is poor policies that include high taxes on farm inputs, trade barriers that make it difficult for farmers to respond to market stimuli," Shikwati said.

According to Dennis T. Avery, the Director of the Center for Global Food Issues for the Hudson Institute, the food crisis will go on until bio-fuel will be used in transportation. 

"If we keep burning corn, wheat, and palm oil in our vehicles, there's no limit to the hunger, malnutrition, wildlife extinction and political disruption we can cause," Dennis said.

According to expert, bio-fuels could absorb the whole world's crop production without bringing down gasoline prices.

"We're banning coal and refusing to drill for oil. If we want to keep on eating, we'll have to scrap the false "fuel security" of the bio-fuels," said Dennis.

 The correspondent can be contacted at: [email protected]

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