Thursday, May 15, 2008

World faces choice between higher energy, food costs: experts

by Staff Writers
Singapore (AFP) May 15, 2008
The world must choose between higher energy prices or rising food costs, experts said Thursday, arguing that the use of farm land to make biofuels was likely to continue amid strong energy demand.

Biofuels are among the factors blamed for escalating global prices of foodstuffs including corn, rice and wheat. The rising cost of such staples has sparked protests in many countries, including in Asia.

Biofuels account for a substantial portion of the fuel produced in non-OPEC countries, so governments, businesses and individuals must decide if they want higher energy prices or more expensive food, the experts said at a Singapore conference.

Oil prices would be 15 percent higher if biofuel production was taken out, said Francisco Blanch, global commodity strategist at Merrill Lynch, Pierce, Fenner and Smith Ltd.

Biofuels such as ethanol can be derived from foodstuffs including corn, soybeans and sugarcane.

Last year, one-third of oil production by countries outside of the Organisation of the Petroleum Exporting Countries (OPEC) cartel came from biofuels and this is projected to increase to two-thirds this year, he said at the conference.

"So if you think that in the next five years we can live without biofuels because governments decide that they are pushing up agricultural commodity prices, it's going to boil down to a decision between eating or moving around," he said.

Diverting farm products to produce biofuels, which power cars, has come under heavy criticism by environmental activists and some government officials, who said it is one of the major reasons for rising global food prices.