Please can you explain to me in simple terms, what has caused the recent rise in world food and fuel prices?

Question

Please can you give me an explanation in layman terms not some economic theory?

Answer 1

ever expanding world population that require feeding, and the world price of oil makeing transportation very expensive, and no it is not gordon browns fault in case some one tries to blame him you can not blame this government for everything

Answer 2

the laws of supply and demand drive prices

Answer 3

The simple truth is that China is an emerging nation of 1 billion people - who were previously self-sufficient.

Since the opening up of China and the advent of the Olympics, China has been demanding more and more oil and other resources like rice and wheat.

Oil cannot be pumped out fast enough to meet demand - so it becomes a sellers market. This forces the price of everything else up.

The change in climate also caused food harvests to be poorer than usual in 2007, which has also had an effect.

Answer 4

we are running out of fuel so that goes up

the fuel goes up so the lorries have to buy more fuel to deliever the food

so the food goes up

hope it was simple and helped

:)

Answer 5

GREED

Answer 6

Vastly increased demand from developing countries, particularly China. As China's economy booms more and more of their population are getting cars and using existing ones more. Their industry is also expanding and has an insatiable demand for more fuel. The same can be said of India. Their populations are growing and getting more wealthy so they can afford more and better food, this coupled with a poor wheat harvest last year has meant a significant rise in the price of two major staples wheat and rice. Increased fuel costs have to be passed down to the end user and the food that we eat has to be transported from the farm to the supermarket, the increased price of fuel makes that journey more expensive and will show up as higher prices.

Answer 7

In the case of fuel, the demand for oil has increased much faster than the capacity to take petroleum from the earth and refine it into fuel and other petro products. Very simple.

In the case of food, so much grain has been diverted to making biofuels that the the demand for it has soared. This means that everything else that depends on grain (e.g. cattle) or can be substituted for it (e.g. soybeans) raises also.

Answer 8

One factor in the rising cost of food is the increased production of biofuels in an attempt to replace oil. As more agricultural land and crops are used for this there is less grain for food.

Answer 9

We are being told by the Press that the reason for the higher gas prices is based on speculation. Crude Oil is one of many commodities. Right now the market is causing the price to rise. The price of oil goes up and the price of transporting it to the consumer goes up. Another reason for the rising food prices is that corn is being grown not for food, but for ethanol. Ethanol can be used as a supplement or alone to fuel cars, trucks, etc.

Are oil speculators driving up gas prices?

By KEVIN G. HALLMcClatchy

WASHINGTON -- Almost all the economists studying today's high oil prices think that financial speculators are helping drive up those prices, but hard data is lacking as to whether they're a factor, and if so, how big.

Michael Greenberger said speculation is a major factor, and he knows a lot about the complex global oil market. He directed trading and markets for the Commodity Futures Trading Commission from 1997 to 1999. That body regulates the trading of contracts for future deliveries of commodities, including crude oil. The contracts, called futures, drive oil prices. Greenberger, a law professor at the University of Maryland, told McClatchy why he thinks financial speculation is driving up prices......

Answer 10

GREED, PLAIN AND SIMPLE. SUPPLY SIDE ECONOMICS STATE THAT, IF THERE IS A COMPULSORY NEED FOR ANY GIVEN PRODUCT, THE SUPPLIER CAN CHARGE ANY PRICE THAT HE CHOOSES. THE DEMAND MAY GO DOWN SLIGHTLY BUT REMEMBER THE COMMODITIES ARE A NECESSITY. ARTIFICIAL SHORTAGES CAN BE CREATED VIA PROPAGANDA, HOARDING, ETC.

Answer 11

that's simple. greedy barstuards called the government adding their bit on every 2 mins

Answer 12

In far too many cases the problem with food (and, correspondingly, its prices) is both human and natural. Politics is part of it. Consider that the Zimbabwean president is trying to keep control by racial and tribal suppression practices that turned "the breadbasket of Africa" into a landlocked island of poverty and starvation. Then too, Haiti had people eating mud to satisfy their hunger while aid shipments rotted on the docks while petty politicians were locked in turf wars. See this article from the Washington Post: http://www.washingtonpost.com/wp-dyn/con...

Japan has treaty obligations to buy rice, but local obligations to sell only Japanese rice and contractual obligations not to sell abroad the rice they had to buy from abroad. Whew! The President Bush wants to change the American farm policies, and of course, being an election year, politicians on Capitol Hill can't let him have his way too often, so that bottles up some of the flow of food from here to elsewhere in the world. Don't miss the third from last paragraph, where some 40 countries had closed off exports of food.

Monsanto and other producers of genetically modified seeds are kept from producing food crops, the "frankenfood" scares that are still alive and well, so they made their produce inedible and sold to producers for industrial uses (plastics, ethanol, and animal feed -- in those very few places where permitted). Yields are great, but they can't be used for human consumption in most of the world even if they hadn't changed their taste.

The old seeds are more susceptible to diseases, the wheat rust that is killing crops in Africa and Asia is because they are using old seeds that don't have a resistance to that fungus, and are afraid to use fungicides because of some times in the past when they imported seed from the US which had a fungicide coating. When they ate that grain which was intended for planting, tens of thousands got sick and died. Rather than change living practices and learn grain handling procedures, they would rather do with less than take the higher yielding seeds from us.

As for fuel prices, that is much easier because it is harder to produce the oil (let that paradox sink in). Much of the easy oil is owned by Middle Easterners that are culturally opposed to us, so they are charging the fullest prices. There are indications that they might be behind the ballooning (important word here) oil futures speculating that is going on. Because oil, as a commodity, is so well globalized, the oil futures markets essentially set world oil prices. We used to have two prices here in the US, just like a domestic sugar and international sugar price, they were distinctly different, as in domestic oil (and sugar) was much, much cheaper. With globalization the same price is applied to domestic oil as with foreign oil. American environmentalists would prefer that we not drill for oil in our own backyard, but drill elsewhere (where we are not as limited in pristine practices as we are here at home, by the way) where corrupt politicians make long term investments additionally chancy.  Then too, we have bottleneck in refining capacity (we are at, and sometimes slightly pushing the limits of this).

And we can't leave out the role of government in those prices. The oil companies are a cash cow for government. Exxon shelled out almost as much in government taxes and operating fees as they made in profits. Exxon also was a tax collector, gathering a similar number of dollars in gasoline taxes. Contrary to popular opinion, when you tax a company, the consumer ultimately pays the bill.

People gripe that Exxon made so much profit, but they had a 17% return on assets, a 35% return on equity, while Microsoft had higher numbers for the same yardsticks: 24 and 45, respectively. I did a sort of the S&P500 (which is only 499 at the moment, they are in the process of switching horses) and sorted them by return on equity (the money in them that the stockholders themselves own). These are the first fifteen: WIN, AZO, YUM, CL, AVP, DELL, ESRX, BUD, BA, GILD, WAT, AMZN, PBI, MHP, AKS. Not an oil company in the bunch, or should I say batch (BTW, their ROE ranges between 178 to 58, respectively).  Look it up for yourself.

There are reasons for high food and fuel prices. Many very legitimate, many quite stupid, though not often in the places popular opinion often expects.

Answer 13

Oligopoly is manipulating strategic economic factors.  Controlling production food and fuel can selectively cripple social groups or countries.

In basic terms a family farmer with access to land can survive if only at the subsistence level.

Complex societies with divisions of labor are exposed to  interdependence upon others for even subsistence.  In a worse case scenario or disaster urban groups have no access to elements of basic survival.  Land and the knowledge of agrarian production are out of urban purview.

Answer 14

The years 2007–2008 saw dramatic world food price rises, bringing a state of global crisis and causing political and economical instability and social unrest in both poor and developed nations.

Systemic causes for the world-wide food price increase continue to be the subject of debate. Initial causes of the late 2006 price spikes included unseasonable droughts in grain producing nations and rising oil prices. Oil prices further heightened the costs of fertilizers, food transport, and industrial agriculture. Other causes may be the increasing use of biofuels in developed countries (see also Food vs fuel), and an increasing demand for a more varied diet (especially meat) across the expanding middle-class populations of Asia. These factors, coupled with falling world food stockpiles have all contributed to the dramatic world-wide rise in food prices. Long-term causes remain a topic of debate. These may include structural changes in trade and agricultural production, agricultural price supports and subsidies in developed nations, diversions of food commodities to high input foods and fuel, commodity market speculation, and climate change.

Several factors contributed to the rising food price. Analysts attributed the price rises to a perfect storm of poor harvests in various parts of the world, increasing biofuel usage, lower food reserves, the US Federal Reserve decreasing interest rates so that money is no longer a means to preserve wealth over the long term (people invest in food commodities which causes an increase in demand and therefore price), growing consumer demand in Asia, oil price rises, and changes to the world economy. Agricultural subsidies in developed nations are another long-term factor contributing to high global food prices

Impact of food for fuel

Food vs fuel

One systemic cause for the price rise is held to be the diversion of food crops (maize in particular) for making first-generation biofuels. An estimated 100 million tonnes of grain per year are being redirected from food to fuel.(Total worldwide grain production for 2007 was just over 2000 million tonnes.) As farmers devoted larger parts of their crops to fuel production than in previous years, land and resources available for food production were reduced correspondingly. This has resulted in less food available for human consumption, especially in developing and least developed countries, where a family's daily allowances for food purchases are extremely limited. The crisis can be seen, in a sense, to dichotomize rich and poor nations, since, for example, filling a tank of an average car with biofuel, amounts to as much maize (Africa's principal food staple) as an African person consumes in an entire year.

Since late 2007, "Agflation," caused by the increased diversion of maize harvests to biofuels, the tying of maize to rising oil prices by commodity traders, and a resulting price rise, has caused market substitution, with price rises cascading through other commodities: first wheat and soy prices, then later rice, soy oil, and a variety of cooking oils.

Brazil, the world's second largest producer of ethanol after the U.S., is considered to have the world's first sustainable biofuels economy and its government claims Brazil's sugar cane based ethanol industry has not contributed to the 2008 food crises.

German Chancellor Angela Merkel said the rise in food prices is due to poor agricultural policies and changing eating habits in developing nations, not biofuels as some critics claim. On April 29, 2008, U.S. President George W. Bush declared during a press conference that "85 percent of the world's food prices are caused by weather, increased demand and energy prices", and recognized that "15 percent has been caused by ethanol".  On July 4, 2008, The Guardian reported that a leaked world bank report estimated the rise in food prices caused by biofuels to be 75%.

Second- and third-generation biofuels (such as cellulosic ethanol and algae fuel, respectively) may someday ease the competition with food crops, as non food energy crops can grow on marginal lands unsuited for food crops, but these advanced biofuels require further development of farming practices and refining technology; in contrast, ethanol from maize uses mature technology and the maize crop can be shifted between food and fuel use quickly.

World population growth

Growth in food production has been greater than population growth. Food per person increased during the 1961-2005 period.

Growth in food production has been greater than population growth. Food per person increased during the 1961-2005 period.

Although some commentators have argued that this food crisis stems from unprecedented global population growth, others, however, point out that world population growth rates have dropped dramatically since the 1980s, and grain availability has continued to outpace population. Aggregate food production per capita has risen since the 1960s, and this trend has not changed dramatically with the 2006-2007 harvests. World population has grown from 1.6 billion in 1900 to an estimated 6.6 billion today. In Mexico, for example, population has grown from 13.6 million in 1900 to 107 million in 2007. Bureau figures show that the U.S. population grew by 2.8 million between July 1, 2004, and July 1, 2005.

The actual annual growth in the number of humans fell from its peak of 87 million per annum in the late 1980s, to a low of 75 million per annum in 2002, at which it stabilised and has started to slowly rise again to 77 million per annum in 2007.The world's population, on its current growth trajectory, is expected to reach nearly 9 billion by the year 2042.

Increased demand across Asia

Middle-class populations have grown through Asia over the last 20 years. Although the vast majority of the population in Asia remains rural and poor, the growth of the middle class in the region has been dramatic, and is projected to continue to be so. For comparison, in 1990, the middle class grew by 9.7 in India and 8.6 in China, as a percentage of their populations; whereas in 2008 it has reached a growth rate of nearly 30 percent and 70 percent, respectively. The corresponding increase in affluence has also brought with it a change in lifestyle and eating habits, particularly a demand for greater variety and more meat in the diet,( hamburgers replacing rice bowls) leading to greater demand for agricultural resources. This demand has also been responsible for dramatic increases in commodity prices, as well as the oil price increases since 2003.

2005/1990 ratios of per capita consumptionIndia China Brazil Nigeria

Cereals 1.0 0.8 1.2 1.0

Meat 1.2 2.4 1.7 1.0

Milk 1.2 3.0 1.2 1.3

Fish 1.2 2.3 0.9 0.8

Fruits 1.3 3.5 0.8 1.1

Vegetables 1.3 2.9 1.3 1.3

Joachim von Braun, head of the International Food Policy Research Institute, has stated that the gradual change in diet among newly prosperous populations is the most important factor underpinning the rise in global food prices. However, the World Bank lists changing diet as secondary to the effect of biofuels.

April 2008 analyses from the United Nations' Food and Agriculture Organization maintained that while food consumption of grains has gone up one percent since 2006, most of this increase has gone to developed countries   Where food utilization has increased, it has largely been in value added (processed) foods, sold in developing and developed nations. Total grain utilization growth since 2006 (up three precent, over the 2000-2006 per annum average of two percent) has been greatest in non-food usage, especially in feed and biofuels.one kilogram of beef requires seven kilograms of feed grain.[hese reports, therefore, conclude that usage in industrial, feed, and input intensive foods, not population growth among poor consumers of simple grains, has contributed to the price increases.

Impact of petroleum price increases

The rise in the price of oil has heightened the costs of fertilizers (in some instances doubling the price within the six months before April, 2008), the majority of which require petroleum or natural gas to manufacture. Although the main fossil fuel input for fertilizer comes from natural gas to generate hydrogen for the Haber-Bosch process , natural gas has its own supply problems similar to those for oil. Because natural gas can substitute for petroleum in some uses (for example, natural gas liquids and electricity generation), increasing prices for petroleum lead to increasing prices for natural gas, and thus for fertilizer.

Costs for fertilizer raw materials other than oil, such as potash, have themselves been increasing as increased production of staples increases demand. This is causing a boom (with associated volatility) in agriculture stocks.

Oil also provides most energy for mechanized food production and transport. Higher prices for liquid fuels from petroleum increase the demand for biofuels, which may result in diverting some crops from food to energy. Even though per-capita petroleum consumption among the world's poorest people is very low, what petroleum the poor do consume is disproportionately in the form of fossil fuel inputs to the food they eat, especially to any food imported from industrial agriculture powerhouses such as the United States. People who were already living at a subsistence level when oil was relatively cheap are extremely vulnerable when oil prices rise, and may simply lack the means to afford enough daily food calories to survive. Some farmers have mitigated the effect of oil on mechanized agriculture by actually using biofuels to power their farm equipment, such as tractors.

Declining world food stockpiles

In the past, nations tended to keep more sizable food stockpiles, but more recently, due to the pace at which food could be grown a

Answer 15

Human beings are suffering form greed, hatred and ignorance.