Friday, March 11, 2011

Rising Fuel and Food Prices….The Real Cost

In the past few months we have been hit with rising fuel and food prices in North America. We have watched the riots and revolutions break out in North Africa and the Middle East which has escalated the price of oil even more than the rate it was rising prior to that. Our generation, in North America and much of the Western World we have had probably had the highest standard of living in human history. North Americans have been blessed with relatively cheap fuel and cheap food. Are we seeing the end of that? I believe there is a storm ahead. I am not sure how bad things will be in Canada and the US, but our standard of living will be affected in a negative way in the coming years ahead.

The Middle East crisis shows the extreme fragility of the global energy system. Riots and revolutions across the Middle East and Africa are like a double edged sword. These riots are partly to blame on the rising cost of food in these nations. When people have a hard time feeding themselves or their families tensions mount. However, these riots are partly to blame for rising oil prices and commodity prices throughout the world, which of course leads to higher food prices. There are many factors that contribute to the price of oil. Speculation on world financial markets is certainly one of them. There is no doubt that the oil industry has a lot of power. They can raise prices as they see fit and also can suppress any alternative energy sources that threaten their monopoly. It is interesting how some oil companies have invested in cleaner energy sources so they can control that sector too. The most powerful people in the world have a hand in the oil companies, and therefore they will never allow free energy to cut into their profits, so they do everything they can in order to keep this type of energy suppressed. We as citizens must break the chains of the rich and powerful oil companies or else we will always be held hostage by price fluctuations of oil and having no real energy alternatives.

All humans need food to survive. That is a common necessity for every human on this planet which is approaching 7 billion. According to World Hunger statistics, every 3.6 seconds someone dies of hunger. 75% of them are children. 24,000 people die every day from starvation or malnutrition. That is tragic. The higher food prices rise, the higher the number of people that go hungry. Rising food prices are harder on the world’s poor than it is on the wealthier nations. A recent study showed that citizens of Canada and the US spend less than 15 percent of their income on food on average. In contrast, many citizens of third world countries spend over half their income on average on food. There are many reasons for the increase in food prices. The expanding population growth, especially in Asia, adds to the demand of food. Weather patterns affect food commodity prices, when droughts, floods and other abnormal weather patterns occur. Speculation on global stock markets can also drive prices higher. Oil is the backbone of economies, especially in the western world. When the price of oil goes up it costs us more to put gas in our cars. It also costs more to supply food to citizens. Farmers up to delivery services that supply our food have to pay more for fuel and that eventually gets passed on to consumers.

The planet is heading for difficult times if the proper decisions are not made. In 1950 the population of the planet was less than three billion. Sixty years later the population is approaching seven billion. That is a phenomenal growth and although technology has advanced in many areas including food production, of the over six billion people, about half live in poverty and at least one fifth are severely undernourished. We in the wealthy nations will be affected with food shortages if action is not taken soon! Will we allow greed and ignorance to stand in the way of securing the future of this planet?

1 comment:

  1. Inflation is a problem worldwide, but Food inflation would have a greater impact on the developing markets. I'd be watching this space closely going forward.

    The Intrinsic Value: Food Inflation Problem