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By Robert Rapier on Jan 19, 2008 with no responses

The NYT on Food versus Fuel

The New York Times weighed in today with an article on the food versus fuel issue, with emphasis on what’s going on in the 3rd world:

An Oil Quandary: Costly Fuel, Costly Calories

Definitely worth a read. Some excerpts:

KUANTAN, Malaysia — Rising prices for cooking oil are forcing residents of Asia’s largest slum, in Mumbai, India, to ration every drop. Bakeries in the United States are fretting over higher shortening costs. And here in Malaysia, brand-new factories built to convert vegetable oil into diesel sit idle, their owners unable to afford the raw material.

This is the other oil shock. From India to Indiana, shortages and soaring prices for palm oil, soybean oil and many other types of vegetable oils are the latest, most striking example of a developing global problem: costly food.

No category of food prices has risen as quickly this winter as so-called edible oils — with sometimes tragic results. When a Carrefour store in Chongqing, China, announced a limited-time cooking oil promotion in November, a stampede of would-be buyers left 3 people dead and 31 injured.

Cooking oil may seem a trifling expense in the West. But in the developing world, cooking oil is an important source of calories and represents one of the biggest cash outlays for poor families, which grow much of their own food but have to buy oil in which to cook it.

American farmers have been planting more corn and less soy because demand for corn-based ethanol has pushed up corn prices. American soybean acreage plunged 19 percent last year, producing a drop in soybean oil output and inventories.

The growth of biodiesel, which can be mixed with regular diesel, has been controversial, not only because it competes with food uses of oil but also because of environmental concerns. European conservation groups have been warning that tropical forests are being leveled to make way for oil palm plantations, destroying habitat for orangutans and Sumatran rhinoceroses while also releasing greenhouse gases.

The European Union has moved to restrict imports of palm oil grown in unsustainable ways. The measure has incensed the Malaysian palm oil industry, which had plunged into biofuel production in part to satisfy European demand.

I do not foresee a happy ending here. No doubt some of the reason for increased food costs is because energy prices have gone up. That’s primarily because of a very tight supply/demand balance. But the mandates that we use fuel made from food rest squarely on the shoulders of our political leaders. Shouldn’t they have seen this coming? And will they act to reverse their actions? In Europe, they are starting to see the light. In the U.S., we seem determined to expand upon this insane policy.