Correspondence: Food and oil prices on the riseMarch 5th, 2011
The rocketing costs of fuel and foodstuffs are a major cause for concern for developing countries and the poorest members of society. Genitta Pascal, a 19-year-old from the Caribbean island of St Lucia, reports.
There is talk of a coming crisis like the one that produced riots in 2008 and 1974. Latest figures show that prices have already surpassed the peaks reached at the height of the crisis in 2008. For now, the world is not experiencing a repeat of those crises. But for how long?
Inflation is defined as an economic condition whereby prices of consumer goods rise, eroding purchasing power. All countries are being affected by this issue of inflation. Rising food prices are a worldwide reality.
Although this issue is a global one, some countries are currently more greatly affected than others and will continue to be affected. Those on fixed incomes and the poorest members of society, such as the elderly and those living on benefits, will suffer ghastly from increased food prices.
The Food and Agriculture Organization predicts that if prices continue to climb, the diets of poor people will deteriorate. Countries will also be vulnerable if they already have high inflation, limited foreign currency reserves and if their local currency is depreciating against the US dollar.
One must wonder, “Why is there such drastic food price inflation?” The price increase is because the wheel of agriculture is greased with oil.
In 2008, prices were driven partly by high oil prices that peaked at more than US$150 a barrel. The spiraling cost of oil has a direct impact on farming costs and transportation of food, which are both key factors in food price inflation.
I think we should be worried. High prices are a problem for any household that spends most of its income on food. In many countries, people spend 60-80% of their income on food. It is not just an issue of money. Escalation of prices have caused riots in some countries.
Now the crisis in Libya has caused a hike in oil prices. According to one recent news broadcast, Saint Lucia has begun to clamor for a cap to be placed on fuel prices in the event global oil prices keep rising.
It is evident that the current situation is likely to lead people to desperate means. In an attempt to resolve this crisis, governments around the world must try to control inflation through monetary policies. It is their job to try to keep inflation at the lowest.
Individuals can also explore the option of farming in order to decrease the amount of money being spent. Otherwise we will be forced to make painful decisions.