G-7 blames ethanol expansion -- Expect high food prices

April 13, 2008

This weekend's combined meeting of the G-7, IMF and World Bank warned of the high price developing countries are paying for the dramatic expansion of production of ethanol and other biofuels. World Bank President Robert Zoellick said,

"In the U.S. and Europe over the last year we've been focused on the prices of gasoline at the pump. While many worry about filling their gas tanks, many others around the world are struggling to fill their stomachs. And it's getting more and more difficult every day."

Germany's development minister, Heidemarie Wieczorek-Zeul said that greater regulation of the global biofuels market is needed to prevent its expansion from driving up food prices. Furthermore,

It is unacceptable for the export of agrofuels to pose a threat to the supply situation of the very people already living in poverty. The world needs new rules that balance goals, including climate change mitigation, food security and social development.

Surprisingly, the joint meeting did not result in a coordinated program to head off the growing financial crisis and a possible global recession. (Source: WSJ, Paulson: 2008 to be a Difficult Year, April 13, 2008)

What the expansion of ethanol production means:
Concerns about global warming and the high price of oil has made the U.S. government mandate that ethanol production be expanded to cut carbon emissions and increase domestic security.

As a result, corn-based ethanol production is expected to double between 2005 and 2009, to 10 billion gallons. As the price of corn has increased, so has the price of other substitute grains, and the price of livestock, which is fed with corn. (Source: U.S.D.A., U.S. Ethanol Expansion Driving Changes Throughout Agricultural Sector, September 2007)

Action steps:
Expect that food prices will continue to be high as long as oil prices are high. To save money on your food bill, consider high-protein vegetable alternatives to meat, such as soy-based products or lentils.

To learn more about the causes of high oil prices, read the WorldMoneyWatch Special Report Oil's Hidden Threat.

See Ethanol Expansion Related Articles in:

Economic Effects of Global Warming

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