The author Gioietta Kuo is advisor and senior fellow
at the American Center for International Policy Studies
As everyone in China knows, food prices have risen sharply over the past
year. If it gives any comfort to anyone, China is not the only country. Rising
food prices are a worldwide phenomenon.
The story goes back to the days after World War II. The Western industrial
nations went about developing their economy at a fast pace. The basis for this
development was cheap oil. From 1945 all the way to the present day, cheap oil
seemed to be a bonanza with no end in sight.
As a consequence of cheap oil, the society that developed was based on the
internal combustion engine - the motor car. Even though some Americans have been
aware of oil running out sometime in the future, the country still consumes oil
as if the supply will last forever.
In the US, transport is based on the individual automobile rather than public
transport like subways, trains. Even freight is carried by large trucks instead
Petroleum is fundamental to our modern life. From oil we make plastics,
fertilizers, medicine and chemicals. We burn oil to produce electricity.
countries like China and India began to industrialize, the global scene changed
because of increasing demand for oil.
In 2005, easily extracted oil from the oilfields peaked. From now on, the
flow will be at a reduced rate, eventually running dry. Oil extracted from the
more difficult oilfields, requiring more technology and consequently more
expense, is expected to peak in four years, according to some experts in the
United Kingdom. Since the global demand for oil exceeds supply, oil prices are
going to continue rising.
In the US, there is growing awareness that the country should not depend on
foreign oil from unstable regions like the Middle East. More importantly
investors have realized there is profit to be made by converting corn into
ethanol which can be used as motor fuel.
As more and more ethanol production distilleries come on line, 30 percent of
the US corn harvest next year will go into ethanol production.
The US is the world's biggest grain producer and exporter. Almost 70 percent
of all the grain imported by many nations around the world comes from the US.
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