World Bank Paper Blames Commodity Price Boom on Energy Prices

A new report has been released by the World Bank on the 2006-2008 commodity price boom. The paper, which is co-authored by DG Agri economics chief Tassos Haniotis, highlights higher energy prices as the main factor in driving up food prices.

The 2006-2008 commodity price spikes were identified by the World Bank publication to be different from previous spikes of this kind as they simultaneously involved all three main commodity groups: metals, energy and agriculture. Initial reactions as to the cause of increased prices cited adverse weather conditions, a growing demand for biofuels and a growth in demand from expanding middle class populations in Asia wishing to vary their diet. However, strong links between agriculture and energy prices have now been suggested by the paper to be the “dominant influence on developments in commodity, and especially food, markets”. Price increases for one crop type then had clear knock-on effects on other agricultural products, leading to price increases spreading across the different groups of agriculture commodities.

Other reports on the subject place different factors such as uncertainties surrounding projected global stocks of wheat, maize and other agricultural commodities as the main cause of the crisis. A UK Government publication on the price spikes, for example, recognised the role of energy prices, but also attributed the exacerbation of commodity prices to the strength of the US dollar, and the increase in demand for biofuels.

2 comments posted

  • Roger Martin Optimum Population Trust September 9th, 2010

    Current intensive agriculture, which alone can feed (most of) a world of 6.8 billion consumers, increasing by some 75 million per year or 10,000 per hour, consists essentially of turning oil into food. Peak oil is here or imminent. Thereafter, the long-term trend of energy prices can only be relentlessly upward. Unfortunately, switching to less energy-intensive, more sustainable agriculture, providing more public goods and fewer external cost than current methods, will also produce less food, raise prices further, and reduce food security. There is thus a conflict between short and long-term needs; and whatever balance is struck between them, constantly rising populations will ultimately overwhelm any production system on a finite planet, and end population growth by mass starvation, unless we act to end it it sooner by sound family planning and other policies. Malthus was, alas, right that “There cannot be more people than can be fed”, even if he was wrong about much else.

    Population growth is a central driver, along with consumption per head and technology, of all environmental problems including food provision. The authors of this, and all the other reports, do the world no favours by constantly, and consciously, omitting to mention this important fact.

  • Aleksei Lotman MP, Estonian Greens September 30th, 2010

    The previous comment is only partly true. The production of the intensive agriculture goes only to the limited extent “to feed the hungry” in the regions of high population grouth. Most of it goes to feed the affluent middle class in rich coutries where population grouth is not the case, but economic growth (temporarily interrupted by current crisis) is. And even in India and China the quick growth of consumption during last pre-crisis years was fuelled not by their (already slowing) population growth but by the quick growth of relative size of their middle classes. Therefore the consumption per head and technology must be put ahead of population growth, even if the latter cannot be ignored.

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PUBLICATION DATE

18 Aug 2010

AUTHOR

IEEP

FURTHER INFORMATION

The Institute for European Environmental Policy coordinates CAP2020. It is an independent not for profit institute which undertakes research in a number of policy areas including agriculture and rural development.


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