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BAC G1-G2 2010

Oral Test


The Impact of Oil Prices on the Cost of Food


There is a convergence of views on the need to abolish farm subsidies by developed countries, stop the diversion of corn for producing ethanol by America and the European Union, intensify agricultural research on high-yielding varieties of grain and develop necessary agro-related infrastructure. But what seems to have escaped the due notice of some experts is the contribution of oil prices to creating food scarcity, which has led to spiraling increase in the price of food grains across the world. Increased oil prices in the range of $120 to $125 per barrel have led to an increase in the prices of naphtha-b8sed nitrogenous fertilizers, pesticides, packaging material and transport.


There is an urgent need for a study in order to know precisely the share of oil in the market price of, say, wheat and rice. It must be remembered that diversion of irrigable land to growing corn for producing ethanol is also due to an increase in oil prices, which, too, needs to be factored into the study. In this connection, two statistics quoted by Michael Pollan in "How to Feed the World" are an eye-opener. He says it takes 10 calories of fossil energy to produce one calorie of food, while it takes 10 pounds of grain to feed cattle to produce one pound of beef. Chickens are also excessive grain consumers.


Adapted from Newsweek, July 21st, 2008

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