BIZCHINA / Weekly Roundup
Food vs fuel wars just beginning
By Gioietta Kuo (China Daily)
Updated: 2007-07-06 16:21
The author Gioietta Kuo is advisor and senior fellow at the American
Center for International Policy Studies
As everyone in China knows, food prices have risen sharply over the past
year. If it gives any comfort to anyone, China is not the only country.
Rising food prices are a worldwide phenomenon.
The story goes back to the days after World War II. The Western
industrial nations went about developing their economy at a fast pace.
The basis for this development was cheap oil. From 1945 all the way to
the present day, cheap oil seemed to be a bonanza with no end in sight.
As a consequence of cheap oil, the society that developed was based on
the internal combustion engine - the motor car. Even though some
Americans have been aware of oil running out sometime in the future, the
country still consumes oil as if the supply will last forever.
In the US, transport is based on the individual automobile rather than
public transport like subways, trains. Even freight is carried by large
trucks instead of trains.
Petroleum is fundamental to our modern life. From oil we make plastics,
fertilizers, medicine and chemicals. We burn oil to produce electricity.
Related readings:
Crop bases to feed biofuel production Ban on use of corn for ethanol
lauded Imports of oil will rise by 10m tons Energy consumption up 8.4% in
2006
When countries like China and India began to industrialize, the global
scene changed because of increasing demand for oil.
In 2005, easily extracted oil from the oilfields peaked. From now on, the
flow will be at a reduced rate, eventually running dry. Oil extracted
from the more difficult oilfields, requiring more technology and
consequently more expense, is expected to peak in four years, according
to some experts in the United Kingdom. Since the global demand for oil
exceeds supply, oil prices are going to continue rising.
In the US, there is growing awareness that the country should not depend
on foreign oil from unstable regions like the Middle East. More
importantly investors have realized there is profit to be made by
converting corn into ethanol which can be used as motor fuel.
As more and more ethanol production distilleries come on line, 30 percent
of the US corn harvest next year will go into ethanol production.
The US is the world's biggest grain producer and exporter. Almost 70
percent of all the grain imported by many nations around the world comes
from the US.
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