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The Effect Of Oil Prices On The Food Industry

1204 words - 5 pages

When the oil price skyrocketed in 2011, most industries had to bear this price, and the food industry was no exception. The present food sector, including its price is highly transport and fuel dependant. The relationship between fuel and the food industry is systematic and independent. The rise in fuel prices leads to an increase in the price of food. It is important to note that most food-producing firms and farms use machines that hugely depend on fuel to function. They depend on fuel to transport crops and seedlings to farms, to transport food products to the market and to fuel farm equipments. Oil is also used as input in some farm chemicals. When oil price increases, pressure is put on the food system. When the price of oil increases, pressure is put on the entire food production process from production to supply, to the market. The dependency of food production on oil is imminent. In 2011, the food prices reached a new peak in terms of prices. This can hugely be attributed to the rise in oil prices. The food crisis was experienced globally and it led to serious impacts. In developing countries, riots broke out due to the rise of food prices. In these countries, several women and children slept hungry because they lacked finance to purchase food (Organization of the United Nations, 2011).
As oil prices increased, the demand for bio-fuel also increased, this made the prices of food to increase steadily. The rise of food prices increased as farm crops are used to make bio-fuels. Bio-fuels are attained from agricultural products mostly from corns. As the demand for bio-fuels increased in 2011, the prices of food increased, making food to be less affordable.
In 2011, the United Nations Food and Agricultural organization (FAO) reported that close to a hundred dollar a barrel, which was the price of oil in this year, had made food price to increase steadily. This led to an increase of global hunger. In developing countries, the price of food increased to an all time record of $ 230 billion (Organization of the United Nations, 2011). This was hugely attributed to the rising oil prices. Farmers could not afford the cost of buying oil to use in their farms, these farmers turned to bio-fuels. The hardest hit countries were those that were dependant on oil and those that imported foodstuff. In Sub-Saharan Africa where farmers are dependent on oil, the price of food had to increase due to the expense incurred. Increase in oil price was directly responsible for the increase in food products as farmers had to pay more to get oil.
Imported farm inputs such as fertilizers and pesticides prices rely on the oil price. When oil price is high, the importation of these products will also be high. This made farmers to increase the prices of their products for them to be able to buy these commodities. Food distribution is dependent on the transport system. The transport system had hiked its prices due to the increased price of fuel. Farmers directly filled...

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