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Tuesday, March 21, 2023
Analysis by Simba Russeau
CAIRO, Mar 30 2011 (IPS) - Linkages between the Libyan uprising and shelling out more money than usual at a local market in the West may not at first seem apparent but the common denominator is oil.
Muammar Gaddafi’s grip on power is not the sole interest of the international community. It is also the intense pressure on global food prices due to oil price inflation, which has skyrocketed to 108 U.S. dollar per barrel and could hit record levels of 147 dollar, a peak unseen since the July 2008 financial crash.
In a grim global financial climate, higher oil prices could have a negative impact on incomes in the UK, which is a small net oil importer, as well as other importers like the U.S., which consumes around 19 million barrels a day, or around 20 percent of global oil production.
Libya, which hosts Africa’s largest crude reserves and ranks twelfth in world oil exports at over a million barrels per day, has increased transport cost associated with getting basic food staples from farms to markets and to dinner tables in the West due to oil’s global economic impact causing strains in the global food supply chain.
“As a major oil exporter, Libya’s uprising has curtailed oil exports, which in turn means the price of oil increases prompting spending by speculators who drive prices up again, which ultimately feeds into transport costs leading to higher cost of fertilizers and the attractiveness of bio-fuels as a systematic way of getting away from fossil fuel dependency,” journalist, activist and former policy analyst with the advocacy group Food First, Raj Patel tells IPS.
“The moral here is to observe how precarious our energy and food economy is.”
According to the United Nations, there was a 25 percent jump in global food costs in 2010 with most countries shelling out nearly one trillion dollar on imports in comparison to a 20 percent spike for poorer nations in 2009.
The United States Department of Agriculture (USDA) predicts the pace of food inflation has surpassed 2008 levels and will rise another four percent this year. If unrest spreads to Saudi Arabia, a key oil producer in the Organisation of Petroleum Exporting Countries (OPEC), then basic staples in grocery aisles would definitely hit the pockets of U.S. consumers.
“Some of the most widely used necessities in the agricultural system like agricultural machinery, pesticides, herbicides and nitrogen fertilisers are all made from petroleum, which has a tremendous input into the food system and are major contributors in driving prices upward,” says Executive Director of Global Policy Forum, James Paul in an interview with IPS.
Diverting crops like corn, wheat and soybeans, which have more than doubled in the past six months, to use in bio-fuels, boosts the price of meats, eggs and milk.
Devastating droughts, fires and floods in Australia, China and Russia that are key wheat export countries has sent grain prices through the roof.
Grain stores that the U.S. once had were removed under the Clinton administration and the USDA warns that reserves could hit a fifteen year low by the end of 2011.
Critics argue that if a global famine were to break out even the United States would be unable to weather such a storm.
“Over the past twenty-five years one of the World Bank’s many terrible reforms has been to convince governments, this is true for the U.S., Western Europe and developing countries; to relinquish their reserves to allow big corporations that are involved in the speculation of food prices maintain food supplies, which in the long-term leaves many countries vulnerable,” adds Paul.
Paul Weber, an irrigation agronomist with the German Society for International Cooperation (GIZ) in Egypt, says: “Egypt is a high population country with over 80 million people that need to be fed and the water resources are enough to provide food for 60 million. So the rest needs to be imported.
“However, in order to pay the import cost, the country relies heavily on the tourism sector, income from the Suez canal or remittances from Egyptian labourers working abroad,” says Weber.
Patel adds that although Arab leaders tried furiously to slash food prices to quell growing unrest in the region, many have come to find out that it’s not just about food.
“Policymakers that are serious about tackling hunger and poverty have to do more than merely just opening their wallets and throwing money out of helicopters to the poor,” says Patel, adding: “This is about people demanding more dignity and accountability and this is something that governments find it hard to give but the people are unprepared to live without.”
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